Budget Watch: Time to Weigh in on Taxes

What do you spend your money on? The essentials and the things you care about, right? Government is the same way. Its spending reflects our values. So by looking at the budget, we can see the country’s top priorities.

And those priorities are shifting. President Bush’s philosophy was to provide tax relief for businesses so that they could expand and hire more workers, thereby improving the economy. Most of these tax cuts are set to expire at the end of 2010.

The issue of whether to extend some or all of the tax cuts is especially tricky because taxes are an economic issue with very powerful political consequences.

The decisions that our representatives are making right now about how to collect and use our tax dollars will affect the economy -- and each of our lives, for years to come.

Money Matters

Shifting government spending to reflect a new set of values can happen two ways: adding new money to the Budget (usually by raising taxes), or changing spending priorities.

The Democrats have come out and said that while their party is in power, any shift in values cannot and will not require more taxes. Instead, new spending will be offset by a pay-as-you-go-rule passed in early 2007 will offset new spending.

Under this law, Congress must make up mandatory spending increases by bringing in more tax dollars or by cutting spending somewhere else. This strategy prevents Congress from deepening the deficit, but will almost certainly result in higher taxes.

Significantly, Democrats plan to extend middle class-friendly tax laws, like the child tax credit and credits for small businesses; and adjust the Alternative Minimum Tax (AMT) so as not to burden the middle class (to whom it was never intended to apply).

Doing so will all but eliminate a centerpiece of President Bush’s tax agenda: tax cuts which have primarily benefited people earning more than $200,000. Up for discussion is whether capital gains from the sale of stock will be taxed for everyone or only the wealthy.

The Budget priorities reflect not only philosophical values, but also economic realities. Making decisions about the budget requires stepping back and looking ahead at the big picture.

The Sticking Point

Taxes are the main sticking point of this budget – especially because a presidential election is coming up.

Candidates and parties need to get elected- but the promises they make to do so create trade-offs once they do. Our electoral system makes it hard for candidates and professional politicians to look too far ahead – even while our economy requires it.

For example, despite great concern across the country that because of an aging population, Medicare and Social Security will run out of money in the relatively near future, the Democrat’s budget doesn’t adjust spending on these expensive programs.

We Americans wince at the idea of paying taxes, but at the same time there are some programs that we know we want our government to be responsible for.

If Democrats left even a part of the Bush tax cuts in place, they would have less money to spend on plans for addressing health care, education, energy and other priorities than they would if they allowed all the tax cuts to expire.

When it comes to talking about tax reform, it’s important that we know the facts on the budget, so each of us can weigh the trade-offs for ourselves.

What do you think?

What budget priorities would you like to see your tax dollars spent on?

And tell your representatives what you think!

You can also discuss details with other WomenMatter readers on our blog.

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Article Posted on: 2/11/2007