Economy Held Hostage by Future of Tax Cuts

Since the Democrats have taken over both Houses of Congress in 1996, there has been a great deal of discussion on the future of the tax cuts that many economists believe drove this economy through much of the 1990s. The situation is simple. When the original tax cuts were passed early in the Bush Administration, the President was unable to make those cut permanent. The votes weren't there. These cuts had to be passed by every Congress and now they are facing expiration because the current leadership won't even allow them to be voted on.

We can now hear the clock ticking on the tax cuts and the impact on 43 million American families could be significant. Failure to keep those cuts on the books will translate into the "biggest tax increase in history" according to the President.

CNN has reported that "allowing the cuts to expire would add $1,900 to the tax bill of a family of four with an annual income of $60,000, Bush said. All told, he added, 43 million families with kids would have to pay an average tax increase of $2,323." As damaging as the policy will be on families, the effects on Main Street and Wall Street could prove even more profound.

"It turns out that 75% of taxpayers who benefited from the reduction of the top bracket were small business owners," Bush said, noting that small businesses pay taxes at individual income tax rates. "So when you hear 'tax the rich' you're really talking about taxing Mom and Pop businesses."

Many capital investments of business of all sizes (be it a new machine, more office space, or vehicles, etc.), the hiring of new employees, and other expenditures that lead to greater economic growth -- and even increased revenue for the government in taxes -- have been held hostage by a Congress unwilling to take action. The result of this procrastination could be further economic down turn. It is time to stop playing politics and make this tax cuts permanent. Tax cuts have worked for decades, as seen in the video going back to the early 1960s. We need these tax cuts to continue today.

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Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.