To extend or not to extend: That’s the question for Democrats and Republicans, who are facing off over the Bush-era tax “cuts,” which mostly benefited a very small slice of very wealthy Americans. Republicans want to keep the whole thing going. Democrats want to keep the tax rates that help “middle class” people [defined, these days, as families who earn less than $250,000 per year!], and cut the cuts for the wealthiest.
Who’s got it right, and who benefits most from each plan? The Washington Post recently published a helpful graph that says it all. Take a look:
One thing we might learn from this visual representation is that the “ideological” battle, as is often the case in Washington, has very little to do with lower-income people and a lot to do with the people who need tax cuts the least. In fact, looking at the bubbles on the chart, it’s clear that there’s almost no difference, for lower-income individuals and families, between the Democratic and the Republican scenario. The differences are, in some cases, in the single digits.
But when you get to the top income levels, there’s a dramatic spread between the Republican plan to keep tax rates low for upper-income people and the Democratic plan to expect a fairer share from the top tier.
What’s the right way to go? Both plans are controversial. According to a report from the House Ways and Means Committee, keeping tax rates as they were set during the Bush years will cost the US Treasury $238 billion in 2011. The Washington Post article says,
Given the soaring national debt, many economists deem both proposals unaffordable. Even some Republicans, including Reagan administration budget chief David Stockman and former Fed chairman Alan Greenspan, have urged lawmakers to let them expire and allow income tax rates to pop back up to their levels during the Clinton administration.