The Bush tax cuts of 2001 and 2003 widened the gap between rich and poor: the top 20 percent of households received 67 percent of their benefits (with 15 percent of their benefits going to the top 0.1 percent of households). Eliminating the tax cuts will help counteract growing inequality.
Letting the tax cuts expire will cut the federal government’s long-term budget gap in half, buying us about twenty more years to solve our national debt problem.
Higher taxes today mean more money to pay for Social Security, Medicare and Medicaid in the future. We cannot maintain these and other important programs without higher tax revenues. Conservative proposals to privatize Social Security or voucherize Medicare are only taken seriously when tax revenues fall and budget deficits rise.
Most importantly, in today’s political climate, there is no other practical way to address these problems. We know that Republicans will never vote for significant tax increases; the few measures they might support, such as limiting deductions, will barely affect the super-rich. The opportunity we have today is that we can eliminate the Bush tax cuts by doing nothing.
Many people are justifiably concerned with the short-term economic effects of such a large tax “increase.” Once the Bush tax cuts are history, we can decide what stimulus measures, such as temporary payroll tax cuts, will best reduce unemployment. But our first priority should be to ensure the long-term funding necessary to preserve the government programs that ordinary families rely on.
James Kwak is an associate professor at the University of Connecticut School of Law and the co-author of 13 Bankers with economist Simon Johnson. The two run and write for the economics blog Baseline Scenario.