Could Bush Tax Cuts Survive?
GUY RAZ, host:
We're back with ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.
As April 15th came and went, some in Congress were reminded that soon enough, they'll have to make some politically sensitive decisions about next year's taxes and whether to extend the tax cuts introduced by President George W. Bush in 2001. Now, back then, he signed a bill that lowered taxes for 10 years.
(Soundbite of archival recording)
President GEORGE W. BUSH: We recognize loud and clear the surplus is not the government's money. The surplus is the people's money, and we ought to trust them with their own money.
(Soundbite of applause)
RAZ: Now, at the end of this year, the Bush era tax cuts expire, and before he left office, Mr. Bush urged Congress to make his tax structure permanent.
Now, Republicans say that at the very least, those tax cuts should be extended. But with a high deficit gap, Democrats say the richest Americans should get ready to pay more, starting next year.
In a moment, we'll hear from a top Republican on the issue, but first to Michigan Congressman Sander Levin. He's a Democrat who heads up the House Ways and Means Committee.
Representative SANDER LEVIN (Democrat, Michigan; Chairman, House Ways ad Means Committee): We believe that those middle-income tax cuts should continue. At the same time, we would let the tax reductions that were passed in the Bush years for the higher income, really the quite or very wealthy families, we would let those expire.
RAZ: When we talk about the top two percent of earners in the country, we're talking about individuals who earn about $200,000 or more, couples who earn or families who earn about $250,000 or more. Should those people expect to pay more in taxes beginning next year?
Rep. LEVIN: It's not always easy to make sure that there are the votes here, but yes, I think so.
RAZ: Under President Bush, the top tax rate was cut to roughly 35 percent. Can we expect to see that top tax rate go back up to 39 percent, roughly where it was in the 1990s?
Rep. LEVIN: I think the answer is yes. I mean, that's the position of the president. It's been his consistent position. It's also the position of the Democrats here, and I think that's the position of the American people.
RAZ: If those taxes are not increased on the upper earners, how much money could the federal government forfeit?
Rep. LEVIN: The projection is that if you end the tax cuts for the very wealthy, it would add, between now and 2020, almost $700 billion. And it really shows the amount of income that is concentrated in a very small percentage of the people of this country.
RAZ: Congressman Levin, isn't it politically risky for Democrats to be associated with what will amount in the minds of many to a tax increase beginning next year, advocating for that position this year, in an election year? Isn't that politically risky?
Rep. LEVIN: No, I think Democrats are really very willing to go out and say as we try to be fiscally responsible, we want to make sure we have an equitable, fair tax structure in this country, and we'll take that back home any day.
RAZ: That's Michigan Congressman Sander Levin. He's a Democrat and the chairman of the House Ways and Means Committee. Sander Levin, thank you so much.
Rep. LEVIN: Thank you very much for having me.
RAZ: Now, Republicans argue that in the middle of tough economic times, there is no reason to raise taxes on anyone. And New Hampshire Senator Judd Gregg, the ranking Republican on the Senate Budget Committee, says his party will fight any tax increase.
Senator JUDD GREGG (Republican, New Hampshire): I think we've learned pretty definitively through having had the tax rates go up, down and up and down, that if you raise taxes too high, you end up disincentivizing people to be productive because they either: A, start investing for the purposes of avoiding taxes, which is a very inefficient use of dollars; or B, they simply reduce their productivity because they'd rather not work for the government, you know, 60, 70 percent of the day.
Alternatively, of course, if your tax rates are too low, you don't generate enough revenue for the government to do what it's supposed to do. So you've got to reach balance, and if you look at the historical numbers, which are pretty well in now relative to the proposals that were put in place during the Bush administration, they were generating, for the government, very robust revenues, very, very robust revenues, well above the historic norm.
RAZ: Senator Gregg, do you believe in principle that eventually, there has to be some kind of tax increase, let's say just on the wealthiest segment of the American population, maybe not now, maybe not next year but eventually?
Sen. GREGG: Well, let's look at the statistics. Today, 86 percent or just prior to the recession occurring. I don't have the latest numbers on this. Eighty-six percent of the income taxes were being paid by the top 20 percent of people receiving income in our country, 86 percent. The bottom 40 percent of people relatives to their incomes don't pay taxes. They were actually getting money back.
So we have an extremely progressive system in tax policy. It's extremely progressive, and so I don't subscribe to the view that you should constantly raise the tax level on the higher-income individuals.
RAZ: How long, in your view, should those Bush era tax breaks last?
Sen. GREGG: Well, I don't have a timeframe, but let's be realistic about this. We're coming out of a recession, and it was one of the most severe recessions we've been in, and it was a time when people have gone through very hard and difficult periods. And we're trying to get the economy going. We're trying to have it to be more robust and obviously create more jobs.
Well, probably the quickest way to slow an economy down is to increase the tax burden on the economy as it comes out of a recession. So clearly in the foreseeable horizon, raising rates is a really bad idea if you want to get this economy moving.
RAZ: That's New Hampshire Senator Judd Gregg. He's the ranking Republican on the Senate's Budget Committee. Senator Gregg, thank you so much.
Sen. GREGG: Appreciate your time.
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