On Wednesday night as I drove Spencer to visit his grandparents, I was listening to an NPR program. The segment included an interview with members of the President’s commission on the budget deficit and the debate over tax policy.
I think that we all can agree that saving money, not spending foolishly and living within our means are good starting points for long-term financial success whether for governments, businesses and individuals. These are values that I hope to instill in my toddler and teach my clients.
I applaud the effort to put on the table controversial ideas to at least begin an adult conversation. As I noted in a different post on the topic, if we do nothing to get our financial house in order, we risk economic growth, prosperity and national security for ourselves and our posterity.
Reality is a whole lot different than made-for-radio or -TV soundbites. During the interview, Senator Judd Gregg (R-NH) noted that it’s not a good time to raise taxes. In the context of the debate over the extension of the Bush-era tax cuts, Gregg was pretty clear about his stand: raising taxes during this fragile recovery while lots of folks are out of work will not help the economy.
OK. I’ll buy that even though I still believe that only through shared sacrifice making tough and sometimes unpopular policy or tax changes will we as a nation get our financial house in order on our time frame as opposed to being forced during some crisis like the folks in Greece to make drastic cuts in a short time frame.
But if that is what the Senator believes than why is that he and members of his party have no regard for the “tax uncertainty” of their inaction on the estate tax? After December 1, the exemption level drops from the $3.5 million level in 2009 (right now there is no estate tax for 2010) to $1 million. And the tax rate will go up from 0% in 2010 to 55%. This was what existed before these cuts were put into place in 2001.
And what about the Alternative Minimum Tax? The average American will likely see his tax bill go up between $3,000 to $5,000 next year by Congress doing nothing. This parallel and stealth tax system will ensnare more than 21 million households of average income Americans if the AMT exemption amount drops as is scheduled after December 31 if there is no action by Congress. This means that households filing jointly with income as low as $45,000 will lose out on many deductions and exemptions and end up paying a higher flat rate tax instead of the graduated income tax rates that everyone is now fighting over.
I guess that such moves regarding the estate tax will help gain someone political points. And by ignoring the AMT, no one and everyone can take the blame without singling out anyone for a particular vote.
Maybe it’s OK when living and working inside the Beltway of Washington to do this. Saying one thing and doing another or simply ignoring reality are probably good skills for politicians of every stripe and party. But for the rest of us, this kind of rhetoric on the one hand coupled with hypocritical actions (or inactions as the case may be) on the other just makes no sense in the real world.
During WWII there was a saying: Loose lips sink ships. In Washington these days, loose lips cause more than hot air. The rest of us simply catch a cold and end up paying more.
Now how is that going to help consumers stimulate the economy?