As president-elect Obama continues to move rapidly to designate team members and deal with the various aspects of our current economic recession, it is time for Americans to consider carefully the various tax proposals he has put forward. Which should be put into place, which delayed, which reconsidered?
CCH has put together a good overview of the various proposals that the Obama team has supported. it's available for download here: Download CCH. 120508. Tax-Brief_web_TADS
There have been suggestions of late that any "increase" in taxes--Obama's proposal to let the Bush tax cuts die for those above about $200,000--should be delayed because of the recession. Any further tax burden, the idea goes, might increase the difficulties of coming out of a recession. In fact, Obama suggested that would be his policy as far back as early September. See this post on the Huffington Post.
I don't think I agree. I still think that most Americans who are making more than $150,000 are well off and could carry a slightly heavier tax burden, perhaps especially in times of economic distress. With more tax revenues, the government could pay for even larger public infrastructure projects or could extend more significant assistance to low-income taxpayers, thus helping rather than hurting the economy.
Robert Frank agrees: Why Wait to Repeal Tax Cuts for the Rich?, New York Times, Dec. 7, 2008. Frank points out that it is unlikely that letting taxes go back to the 2001 level for high-income Americans will have a negative impact on the economy. The main effect, in fact, would be a good one--they would have a little less left to bequeath to their heirs in the future.
With few exceptions, high-income taxpayers earn substantially more during their lifetimes than they spend, generally bequeathing the surplus to heirs or charities. If these taxpayers faced slightly higher rates, they would have ample resources to maintain their current lifestyles, so most would keep spending as before. The only consequence would be that, years from now, they would leave smaller bequests. Id.