TAX NEWS - June 2010

US Tax: Top House Democrat says permanent middle-class tax cuts too costly

WASHINGTON — A top House Democrat said yesterday that tax increases will eventually be necessary to address the nation's mounting debt, raising a difficult election-year issue as Democrats fight to retain control of Congress.

In the near term, Steny Hoyer, House majority leader, raised the possibility that Congress will only temporarily extend middle-class tax cuts set to expire at the end of the year. He pointedly suggested that making them permanent would be too costly.

Tax cuts enacted under President George W. Bush are scheduled to expire at the end of the year, affecting taxpayers at every income level. President Obama proposes to extend them permanently for individuals making less than $200,000 a year and families making less than $250,000 — at a cost of about $2.5 trillion over the next decade.

"As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks, we need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction," Hoyer, a Maryland Democrat, said at a forum on deficit reduction.

In the short term, deficit spending has been necessary to stimulate the economy, Hoyer said.

"I don't think this is the time to increase taxes," Hoyer told reporters after the forum.

But in the longer term — after the economy has improved — Congress will have to rein in spending and raise taxes to tackle the debt, Hoyer added.

"Raising revenue is part of the deficit solution, too," Hoyer said.

Obama has appointed a bipartisan commission to come up with ideas to reduce the budget deficit and has said that all options must be on the table, including spending cuts and tax increases. The commission is scheduled to release its recommendations Dec. 1.

Republicans, however, have refused to embrace any talk of tax increases.

"It's now official," Mitch McConnell, the Senate Republican leader, said yesterday. "Top Democrats on Capitol Hill are starting to signal their intention to raise taxes on the middle class."