Congress returned to DC this week and will likely take up a continuing resolution that will fund critical public functions past October 1st. What is unlikely to be deliberated at this point is what to do with the tax cuts that were put in place during the Bush and Obama administrations. The tax cuts on income over $250,000 have presented one of the sticking points for Congressional agreement. The House voted to extend them this summer and the Senate voted to end them.
In North Carolina, as a new infographic shows, just 1.4% of North Carolinians would benefit from continuing the tax cuts on income over $250,000. Those North Carolinians would see $30,000 more in tax cuts under the House plan which extends them while lower-income North Carolinians under the same plan would actually see their tax cut shrink to just $500.
Beyond the impact on North Carolinians of different means, though, the decision about the Bush Tax Cuts on income over $250,000 is also about the best allocation of resources during a slow economic recovery. And the evidence shows that for every dollar lost by the federal government for making the Bush Tax Cuts permanent, just $0.35 in economic output would be gained, far behind the significant boost provided by unemployment insurance benefits, food stamp payments and infrastructure spending.
It is also important to note that the expiration of all the Bush Tax Cuts would usher in tax rates in place during the 1990s, a time when the economy was performing better than it is today. Moreover, the Senate plan passed this summer would actually extend the tax cuts for 98 percent of Americans and partially extend the tax cuts for the richest 2% of Americans.