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House Speaker Nancy Pelosi conceded today that the fate of the Bush-era tax cuts probably will not be decided before the November midterm elections. Democrats want to let the tax cuts lapse for the wealthiest Americans, but the decision is a controversial one in some districts, and congressional leaders were under pressure to defer a vote until later this year.
The delay comes at a time when the U.S. economy is still limping out of recession, and it increases the air of uncertainty now facing many businesses.
NPR's Jim Zarroli reports.
JIM ZARROLI: The House speaker said today that the fate of the Bush tax cuts would be decided during the current session of Congress.
Representative NANCY PELOSI (Democrat, California; House Speaker): There isn't a person in our caucus that isn't for tax cuts for the middle class, and it's not about the election. It's about the policy, and we're all very strong on that.
ZARROLI: But other congressional leaders have made clear that a bill won't be pushed through before the election. That means Congress will have to wait until its lame-duck session to vote, right before the cuts expire at the end of the year.
At issue is the fate of a broad range of cuts in capital gains, income and estate taxes. Republicans are pushing to extend the cuts for all income brackets. But the issue is a controversial one in some places, especially suburban swing districts, and some endangered Democrats have blanched at the prospect of taking up the contentious matter before the election. Meanwhile, the cuts have a direct impact on the bottom line for many companies, especially small businesses that operate as S corporations.
Barry Melancon, who heads the American Institute of Certified Public Accountants, says many businesses will be left hanging about whether to invest or hire.
Mr. BARRY MELANCON (President and CEO, American Institute of Certified Public Accountants): And those are the types of decisions that I think drive people to say, well, I'll just wait it out. I don't have to do it right now because, you know, not a lot of things are happening in the economy, and I can sort of defer by not making the decision.
ZARROLI: That's the predicament for Craig Dunaway, president of Penn Station, a chain of 220 sandwich shops in the Midwest. Dunaway wants to see the Bush tax cuts extended permanently for all income groups, but whatever happens, he says, he at least wants to see the uncertainty resolved.
Mr. CRAIG DUNAWAY (President, Penn Station, Inc.): Right now, I will not grow because of the uncertainty. Personally, I will not open any more restaurants until I better understand what the ramifications will be of either increasing tax rates or keeping them the same.
ZARROLI: Dunaway says it's not just tax cuts he's worried about. He's also unsure about the impact of the health care bill signed into law by President Obama this year. But at a time when the U.S. economy remains so weak, the uncertainty over taxes isn't helping matters much, says Nigel Gault, chief U.S. economist at IHS Global Insight.
Mr. NIGEL GAULT (Chief U.S. Economist, IHS Global Insight): This is not something that's going to, on its own, take the economy into a double dip, but it's going to help make sure that the economy goes very, very slowly over the next few months.
ZARROLI: For businesses, the uncertainty about tax cuts is compounded by the fact that many states are in deep financial distress and are contemplating tax increases of their own. That leaves many companies unsure about what their bottom line will look like next year, and it leaves them wondering whether they can afford to hire.
Jim Zarroli, NPR News.
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