This was the hill to die on.
If you have any desire to cut the deficit, you don’t extend these cuts.
For months, Obama has fought off attacks from the right, saying that he has exploded the deficit. Of course, part of this is due to the current economic conditions and much of it has been inherited. I used to think that this was a sign of stupidity on the part of the teapartiers, but it is worse than that. Their support of these tax cut extensions shows them to be disinterested in actually controlling of the deficit and debt. Rather, they just want tax cuts, no matter the cost to their precious grandchildren.
If you want to promote business investment and job creation, you don’t extend these cuts.
There has been a lot of bullshit in the past few weeks about how we were killing jobs by taxing S-Corp “Job Creators”. This tax cut extension will only further the hoarding of wealth by these individuals. Let me explain:
If a business generated $2M in sales and paid out $1M in raw materials, employees, expenses, etc. it has made $1M in profit. That profit is what the owner is taxed on. You will note that he has already paid his employees. So if his taxes are lower on that million in profit, it makes sense for him to pay the taxes and put that money in the bank. And for the next 2 years, that tax difference is around 2.5%/year (or about $25,000). However, a higher tax rate on his profits, makes it marginally more advantageous to reinvest some of those profits in employees, raw materials, supplies, etc. to avoid the higher tax rate.
We can argue and have an adult discussion about whether it is morally right to tax the wealthy, but let’s not have a bullshit discussion that the taxes are job killing as some disingenuous business interests are trying to peddle.
For now, I am left in the unenjoyable position of hoping that Nancy Pelosi stands her ground and saves the country. I think she’s up to it, but for how long can she hold out?