Middle-Class Tax Cuts

Congress faces critical decisions about middle-class tax relief in the next two years. Most provisions of the Bush tax cuts are scheduled to expire at the end of 2010, as are the income tax cuts provided in the recent stimulus package. President Obama has proposed permanent extension of the Bush tax cuts, except for households with the highest incomes, as well as permanent extension of the stimulus tax cuts.

The concept of middle-class tax relief enjoys strong political support. Notably, the concept was endorsed by both President Obama and his Republican opponent during the 2008 presidential campaign. Nevertheless, I recommend that Congress not adopt a significant package of permanent middle-class tax relief at this time. Middle-class tax cuts provide limited incentives for the work and saving that drive economic growth while imposing substantial revenue costs. Adoption of a large package of permanent middle-class tax relief would add to the long-run fiscal imbalance and impede capital formation, increasing the fiscal burdens on future middleclass taxpayers and reducing wages for middle-class workers.

Click here to view this document as an Adobe Acrobat PDF.

Alan D. Viard is a resident scholar at AEI.


Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Alan D.
Viard

What's new on AEI

The Federal Reserve's policy dilemma
image Unemployment benefits barely soften the blow of joblessness
image Stop the US-China bilateral investment treaty talks
image US still has time to stake out a position of strength on Ukraine
AEI on Facebook
Events Calendar
  • 18
    MON
  • 19
    TUE
  • 20
    WED
  • 21
    THU
  • 22
    FRI
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.