July 24, 2014

Senate Approves Extension of Some Tax Cuts

  • 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...

Senate Democrats last week approved a one-year extension of the Bush-era tax cuts for families with incomes of up to $250,000, rejecting a Republican plan to extend the cuts for higher incomes as well.

The Senate defeated the Republican plan on a 45-54 vote, then approved the Democratic legislation 51-48. The Senate action was widely viewed as primarily designed for election-year positioning by both parties. The Democratic plan is not expected to win approval in the House, which plans its own tax votes later this week.

The Concord Coalition has encouraged the two parties to develop comprehensive fiscal reforms, including an overhaul of the tax code that would dramatically reduce special tax breaks that are essentially spending programs in disguise. While this would allow tax rates to be lowered, some of the additional revenue should be used for deficit reduction.

The Senate action last week indicates that the two parties, unfortunately, are no closer to agreement on responsible long-term tax policies. For the short-term, however, it is encouraging that lawmakers have decided to seek only a one-year extension of the 2001 and 2003 tax cuts.