High-Income Tax Cuts Should Expire on Schedule

Extending Tax Cuts for One of Two Years or Exempting "Small Business" Income Would Be Ill-Advised

By Chuck Marr and Gillian Brunet

"Allowing the 2001 and 2003 tax cuts for couples making over $250,000 (and singles over $200,000) to expire on schedule on December 31 represents the best course of action for the budget and the economy. Extending those tax cuts for one or two years, as some have proposed, would be highly ill-advised. It would make it much more likely that Congress would ultimately act to extend the tax cuts indefinitely, increasing deficits and the debt for as far as the eye can see — and thereby adding to the long-term risks that deficits and debt pose to the economy.

"Exempting small business income from the scheduled increase in the top tax rates, as some may also propose, would do little for the economy in the short term; only the top 3 percent of people with any business income would benefit. Over the long term, such an exemption would likely harm the economy and the budget by encouraging tax avoidance and reducing revenues."

View the full report:
http://www.cbpp.org/cms/index.cfm?fa=view&id=3140
http://www.cbpp.org/files/4-1-10tax.pdf (6pp.)