Tax Cut Bill Passes!

Congress approved the most significant tax bill in nearly a decade late Thursday, overcoming liberal resistance to continue for two more years tax breaks enacted under president George W. Bush and to provide a fresh boost of federal support to the tepid economic recovery.

The package, brokered by President Obama and Republican leaders in the wake of the November elections, angered many Democrats, who have long argued that the Bush tax cuts were skewed to benefit the wealthy. But their last-minute campaign to scale back the bill's benefits for taxpayers at the highest income levels failed, and the House passed the measure 277 to 148, with 112 Democrats and 36 Republicans voting "no."

Obama signs bill to extend Bush-era tax cuts for two more years

What are people opinions? Will this lead us into a glorious new age of magical unicorns and ice cream for all, or will we be doomed to working for our new Communist Chinese overlords? You decide!

 

I'm excited for a few components of it (carried interest, social security temporary reduction, etc.) I'm just glad they passed SOMETHING rather than sitting on it into the new year.

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The tax cut is good and bad. Full disclosure I am neither a republican or democrat I think the majority of politicians are incompetent leaders who failed to put the country first.... I digress, but what message does this send to the country when we cant even get deficit reduction into the senate for a discussion then a week later turn around and pass a tax cut?

Most people on this cite will understand the need to keep as much money as possible circulating through the economy now. However, my fear is that the average american with little finance training/education/experience/care the will see this as the government saying the deficit isn't that big of a deal so it is ok to kick the can down the road - again. I believe the phrase is "Moral Hazard".

 

While I hate the debt, I am glad to see taxes decrease.

I think these cuts will probably be made permanent. They will expire in an election year, so any Republican that wants the backing of the GOP establishment will have to promise to keep them. Obama would also most likely make them permanent; he needs the support of the wealthy for his re-election campaign, not to mention that running on a platform of raising taxes is basically impossible.

Deficit reduction is impossible without decreasing government expenditures. Historically, taxes have stayed a relatively fixed % of GDP regardless of the current rate. No matter how much we would raise rates, SS and medicare/caid would keep us in the red.

If anything, these tax cuts will just push us to the crisis point where the government MUST cut spending a little faster.

 
IlliniProgrammer:
Long-term bad news, short term good news.

Taxes are pretty darned low on a historical basis- max tax rates were actually 50% under Reagan. What we really needed was a phase-in of the entire Clinton tax schedule.

The real spending problem is Medicare, Medicaid, and defense spending. We need to start making some tough political choices.

I'm as right-wing as they come, but I tend to agree with this. I'm becoming more of a deficit hawk (full disclosure--I do seek public office in the next 10 years out of Kansas so my opinion might eventually matter. Haha.). We need to get the entitlement system reformed and we really need to re-evaluate how we allocate money to defense (as a native Washingtonian, I can't even begin to describe the wealth that has been created in the DC area by defense contracting--the expenses are out of control. It made me ill when I met a 27-year-old defense contractor driving a brand new BMW on his ridiculous salary paid for by the American public).

By world and historical standards, our debt isn't yet out of control, but Congress reminds me of myself dealing with my weight--I was at 155 lbs (perfect weight for me) in August. I put on some weight to 160 by having a poor few months. Depressed about that, I binged and put on 25 more lbs in 2 months. And if I'm not careful, it'll get into unmanageable levels. This is Congress. Things are beginning to spiral out of control--and the Republicans, with their obsession with arbitrary tax rates (Clinton-era rates didn't stymie innovation), and Democrats, with their obsession with the welfare state, have gotten together and agreed to add an additional $1 trillion to the deficit over the next 2 years in a single bill, a bill that's estimated to add 1% to the GDP or about $135 billion--that's just bad economics.

I think we need real tax reform--a massive simplification of the tax code, which is more than 1 million words! Just complying with the U.S. tax code will cost Americans $338 billion in 2010. What a waste! Tax reform, tort reform, entitlement reform, the eventual balancing of the budget, and the reduction or freeze in the insane regulatory bureaucracy will go a very long way in fixing America's stagnation.

Array
 
Best Response

Does it matter. The rebates for the middle class will be eaten up by rising gasoline prices. So this won't do anything for consumption (or even savings) for that group. Sure, the "wealthy" get pretty big rebates, but you really think it will "trickle down". It'll be a good year for Tiffany's. Do you really see the "wealthy" using this rebate to invest in new businesses or create jobs, when they have an EXPLICIT GUARANTEE by the Federal Reserve that everything is being done in the Fed's power to keep asset prices (particularly equities) afloat.

In what way will these help GDP? In what way will this close the output gap? In what way will this curb deflation risks? In what way will this bring down the unemployment rate?

looking for that pick-me-up to power through an all-nighter?
 
<span class=keyword_link><a href=//www.wallstreetoasis.com/finance-dictionary/what-is-london-interbank-offer-rate-libor>LIBOR</a></span>:
Does it matter. The rebates for the middle class will be eaten up by rising gasoline prices. So this won't do anything for consumption (or even savings) for that group. Sure, the "wealthy" get pretty big rebates, but you really think it will "trickle down". It'll be a good year for Tiffany's. Do you really see the "wealthy" using this rebate to invest in new businesses or create jobs, when they have an EXPLICIT GUARANTEE by the Federal Reserve that everything is being done in the Fed's power to keep asset prices (particularly equities) afloat.

In what way will these help GDP? In what way will this close the output gap? In what way will this curb deflation risks? In what way will this bring down the unemployment rate?

This.

 
<span class=keyword_link><a href=//www.wallstreetoasis.com/finance-dictionary/what-is-london-interbank-offer-rate-libor>LIBOR</a></span>:
Do you really see the "wealthy" using this rebate to invest in new businesses or create jobs, when they have an EXPLICIT GUARANTEE by the Federal Reserve that everything is being done in the Fed's power to keep asset prices (particularly equities) afloat.

Could you elaborate that, please?

That just means equities are overvalued, look how much they've gone up recently.

 
absinthe:
<span class=keyword_link><a href=//www.wallstreetoasis.com/finance-dictionary/what-is-london-interbank-offer-rate-libor>LIBOR</a></span>:
Do you really see the "wealthy" using this rebate to invest in new businesses or create jobs, when they have an EXPLICIT GUARANTEE by the Federal Reserve that everything is being done in the Fed's power to keep asset prices (particularly equities) afloat.

Could you elaborate that, please?

That just means equities are overvalued, look how much they've gone up recently.

  1. Equities are overvalued. Take a look at PE relative to historic norms. Remember, when all the experts are bullish, thats when the market changes direction.

  2. The Fed has made clear in recent FedSpeak (in particular see Bernanke's 60 Minutes Interview) that he wants to keep equity prices high as a way of stimulating growth. Thus, tax "rebates" will find their way into equities, as the rich know that the Fed is pushing higher equity and home prices (though in my opinion both should eventually decline in value). The rich will plow into equities or commodities or some other investment fund way before they put that money to work in the form of new investment (which generates jobs and increases output).

looking for that pick-me-up to power through an all-nighter?
 
MSFHQ:
The deficit is not a tax problem, it is a government waste problem. The budget will not get balanced with increased taxes, but by a combination of less spending and less waste.

Exactly...if anything lower marginal tax rates..stimulate the economy.

Maybe we'll have a bit less tax revenue, but economic growth should offset much of it. I think giving up $1 of tax revenue for $1.50 post-tax earnings ($1 less tax, .50 growth) is well worth it.

 

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