RENEE MONTAGNE, host:
And now to the question of tax cuts. At the end of this year, the tax cuts that were a centerpiece of George W. Bush's presidency will expire. Unless Congress acts, taxes will go up for nearly all taxpayers. To extend or not to extend the tax cuts is an issue roiling Congress right now.
And to find out more, we called David Wessel. He's economics editor of The Wall Street Journal.
Mr. DAVID WESSEL (The Wall Street Journal): Good morning, Renee.
MONTAGNE: Now, you have called Bush's tax cuts a ticking time bomb.
Mr. WESSEL: Correct.
MONTAGNE: How so?
Mr. WESSEL: Well, at the end of this year, if Congress does nothing, taxes on wages, on capital gains, on dividends will leap. The estate tax will be resurrected at a 55 percent rate, and a pesky tax called the alternative minimum tax will hit 21 million more Americans. It would be like a tax increase equal to 2.5 percent of the annual output of the U.S. And nobody wants that to happen, neither Democrats nor Republicans nor President Obama.
MONTAGNE: So what's going on? How is the debate shaping up if no one wants that to happen?
Mr. WESSEL: Well, the question really is which tax cuts to extend? President Obama and most of the Democrats want to extend the Bush tax cuts for everyone except those people who make more $250,000 a year. Republicans and a few Democrats want to extend them for everyone, at least temporarily, and for now both sides seem to be enjoying the argument. No prospect of immediate action.
The House would love to embrace the Obama plan, as he's proposed it, but as we've seen before, it doesn't look like there's 60 votes to do that in the Senate.
MONTAGNE: Well, given the state of the economy, would this not be a tough time to raise taxes?
Mr. WESSEL: Oh, absolutely. In fact, John Boehner, the House Republican leader, is calling the Obama proposal a job killer, and a few Democrats agree with him. Basically, the Democrats say we won't do much harm to the economy by raising these taxes. People at the very top are going to keep spending, and given the size of the deficit, it's important to do something to show that we intend to get this under control in the United States and letting these tax cuts on the best-off Americans expire is one very good way to do this.
MONTAGNE: So where do you see this all ending? I mean taxes on the affluent the better off they can be popular.
Mr. WESSEL: Well, not with the people who have to pay them.
MARTIN: Well, right.
(Soundbite of laughter)
Mr. WESSEL: I mean look, what's happening in the House is that there a number of people who would like to vote on this now so they can tell their constituents before Election Day: I voted to prevent your taxes from going up. But a number of them represent suburban districts and they'd just as soon not vote on this before the election and wait until a lame duck session.
So I think the best guess now, despite some talk by the Senate Majority Leader's office that they would have a vote in September, the best guess is this is an argument right through the election. After the election we have a lame duck session, they come back, they extend all or some of the tax cuts, but they only do it for a year or two, saying, we'll have to revisit this thing after the 2012 presidential election, when we deal with tax reform and deficits and everything else, and we'll go on along our ways.
MONTAGNE: So in a sense, the easy way out (unintelligible) put it like that.
Mr. WESSEL: Easy for you to say. You don't have to vote raise anybody's taxes.
(Soundbite of laughter)
Mr. WESSEL: It's a politically expedient way out, but it has one big cost, which is there will be continued uncertainty about what the tax (unintelligible) is going to look like, and that probably won't be helpful.
MONTAGNE: David, thanks much.
Mr. WESSEL: You're welcome.
MONTAGNE: David Wessel is economics editor of the Wall Street Journal.
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