November 22, 2014

Tentative Deal on Tax Cuts Underscores Need for Tax Reform

  • The nation's fiscal future depends on the balance between the spending in the federal budget and the revenues flowing into the treasury. Tax policy...
On Monday President Obama announced a “framework for a bipartisan agreement” on extending the Bush tax cuts for two years, extending unemployment benefits for 13 months, and reducing the Social Security payroll tax for a year.

The Concord Coalition said today that if the expiring tax cuts are extended for two years, that decision should be quickly followed by a major push to reform the tax code.

“If the President and Congress pursue this goal in the upcoming budget cycle," said Concord Executive Director Robert L. Bixby, "it would be good for both short-term economic recovery and long-term deficit reduction, which is exactly what is needed.”

The tentative agreement would increase the deficit by hundreds of billions of dollars in the next two years. Concord has argued that if elected officials extend deficit-financed tax cuts, they should do so only on a temporary basis.

The tentative agreement would extend all of the Bush tax cuts for taxpayers at all income levels for two years. In return for the tax cuts for high earners, Republicans agreed to extend unemployment benefits and other tax cuts favored by Obama.

Workers could also see the 6.2 percent Social Security payroll tax they pay reduced for a year by 2 percentage points. The estate tax would have an exemption of $5 million per person and a maximum rate of 35 percent.