Treasury Secretary Geithner says tax cuts for rich should expire
Friday, July 23, 2010
Treasury Secretary Timothy F. Geithner on Thursday rejected calls from some Democrats to extend tax cuts for the nation's top earners past their 2010 expiration date, saying the fragile recovery is no reason to avoid raising taxes on the wealthy.
Speaking at a breakfast for reporters hosted by the Christian Science Monitor, Geithner said the White House wants to extend Bush-era tax cuts that benefit families earning less than $250,000 a year. But he said President Obama believes cuts affecting the top tax brackets should be allowed to expire on Jan. 1 to help reduce the nation's bloated budget deficit.
"We believe that it is appropriate to let those tax cuts that go to the most fortunate 2 to 3 percent of Americans to expire on their current schedule," Geithner said, adding that Obama expects to undertake a broader overhaul of the tax system next year.
Geithner's comments come as a small but vocal group of Democratic lawmakers has begun to argue that the feeble economic recovery suggests that no taxes should be raised right now -- not even taxes on the approximately 3 million high earners who have been frequent Democratic targets. In the past few years, Democrats have offered a flurry of plans to raise taxes on that group, and they followed through in the recent health-care overhaul.
Obama and many Democrats campaigned on promises to repeal tax cuts for high earners, though they haven't done so. In the past two weeks, Obama and Democratic leaders have fiercely criticized the cuts, noting that most Republicans declined to extend jobless benefits due to deficit concerns but are eager to extend tax cuts for the rich that would increase deficits by nearly 20 times as much.
"My stance is that the Bush-era tax cuts contributed to the deficit, did not create any jobs, and that they should be repealed," House Speaker Nancy Pelosi (D-Calif.) said Thursday.
Some conservative Democrats have wavered from that orthodoxy in recent days, including Senate Budget Committee Chairman Kent Conrad (D-N.D.), who is influential on economic issues. He said it is never wise to raise taxes in a down economy, adding that extending middle-class tax cuts should be a top priority.
Meanwhile, Federal Reserve Chairman Ben S. Bernanke told lawmakers Thursday that if they want to extend any of the tax cuts, "you need to find other ways to offset them" -- a tall order, given that extending the middle-class cuts over the next decade would cost about $1.4 trillion, according to congressional tax analysts. Extending tax cuts for high-earners as well would bring the total price tag to more than $2 trillion.
Late Thursday, the Senate Finance Committee held a bipartisan meeting to discuss the tax cuts and their impending expiration. Aides said lawmakers left open the possibility that cuts for the wealthy could be extended, at least temporarily.
"We're the Senate Finance Committee," Chairman Max Baucus (D-Mont.) told reporters when the meeting broke. "We're going to figure out what works best."
Staff writers Neil Irwin and Brady Dennis contributed to this report.