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NC Budget and Tax Center

Over the last three months of this year, Congress faces the critical challenge of addressing the scheduled expiration of $5 trillion in tax cuts passed under Presidents Obama and Bush, currently slated for January 2013.  In addressing this challenge, Congress will have to decide who needs the most help. So the real question is:  Who will have a better 2013, moms or millionaires?

A study released today from the Center on Budget & Policy Priorities lays out the perils of helping millionaires at the expense of helping moms.  Eliminating the expansion of middle-class tax credits like the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Credit will increase the burden for half a million families and over 1 million children. Moms rely on these credits to meet the needs of their families.

Congressional proposals geared towards helping millionaires instead would increase the deficit by over $1 trillion while providing enormous benefits for just a handful of the state’s residents. Only 1.4% of the state’s families and 2.5% of the state’s small businesses will benefit from the extension of the Bush-era tax breaks. Only 140 families—less than 0.2% of the state’s population—would benefit from the proposed inheritance tax cut. Their average tax cut would exceed $1 million, in contrast to the $2,000 in tax credits a poverty-line family of three would receive under the Senate plan.

Given the state’s rising unemployment and a stagnating economic recovery, eliminating these credit expansions and increasing the burden on working moms and families would be the worst possible policy to pursue. Let’s help moms instead of millionaires.

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In case you missed it last week, the wonks at the Center on Budget and Policy Priorities had the latest math on which factors are principally responsible for U.S. debt and deficits. And while it comes as little surprise that the #1 cause remains George W. Bush’s  massive tax cuts, the starkness of it all is still impressive to behold. See that graphs below. 

Helluva’ job  Bushie! Read More

NC Budget and Tax Center

Earlier this week, the New York Times reported the efforts of a new bipartisan “gang” in the U.S. Senate to hammer out a framework for federal deficit reduction prior to the upcoming lame duck session of Congress. Along with grappling with long-term federal deficits, the gang is looking to address the looming fiscal challenges associated with the expiration of tax cuts passed under Presidents Bush and Obama and the threat of sequestration, the across-the-board spending cuts to critical defense and non-defense programs set to begin taking effect in January.

While the broad outlines seem encouraging, particularly the commitment to finding new revenues through tax reform, there are some concerns in the emerging framework that need to be addressed.  Along with ensuring that Medicare and Social Security benefits remain stable, perhaps the most pressing issue involves the ways in which the gang actually plans to find these new revenues.

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NC Budget and Tax Center

In their appearance at Wake Forest last night, Erskine Bowles and former Senator Alan Simpson presented their long-standing plan for federal deficit reduction and joined their voices to the growing bipartisan chorus reiterating the importance of finding a balanced approach to long-term federal deficit reduction that includes new revenues and targeted spending cuts.

While the Simpson-Bowles plan isn’t perfect, it represents a reasonable starting point for “putting everything on the table” when it comes to federal deficit reduction, and especially the importance of including new revenues.  It opens the door to a fiscally responsible alternative to the spending-cuts only approach to budgeting embodied in sequestration—the looming $1.2 trillion in across-the-board spending cuts to federal programs like Head Start, education, R&D, and our nation’s military projected to cost North Carolina thousands of jobs.

Congress should build upon the Simpson-Bowles plan by replacing these sequestration cuts with new revenues created by allowing the Bush tax cuts on incomes over $250,000 per year to expire in January. This approach will negatively affect just 1.4% of North Carolina’s families by reducing their tax cut and will generate more than $1 trillion in new revenues by 2023—an important down-payment on reducing the Federal budget deficit.

NC Budget and Tax Center

When Congress finally returns from its August recess 10 days from now, it will face the critical issue of addressing the looming expiration of the tax policies enacted under President Bush and President Obama.

In this debate, we’ve heard a lot about the effect of tax changes on small businesses, job creation, and long-term economic growth.  Fortunately, the overwhelming weight of evidence makes it clear that ending tax breaks on income over $250,000 will not harm small businesses or North Carolina’s economy.  Middle-class consumption drives job creation far more than relatively minimal changes in marginal tax rates, and most importantly, there just aren’t that many small businesses in North Carolina that would even be affected by these tax changes.

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