Michael d. goodman

Nation can ill afford repeal of ‘Bush tax cuts’

Physicians take the Hippocratic oath upon entry to their profession and famously promise to “First, do no harm.” National policy makers and lawmakers, unfortunately, make no such pledge.

The question now is whether Washington will get tangled up in politics and let the so-called Bush tax-cuts expire next year, effectively raising taxes at a time when the fragile recovery can least afford it. Last week, President Obama proposed temporarily extending the tax cuts for the first $250,000 of annual income, a full extension for approximately 98 percent of American taxpayers.

Unsurprisingly, this proposal was met with opposition from Republicans in Congress, who contend that these tax cuts should be extended to all American households regardless of income, and from some Democrats, who argue that all but those taxpayers earning more than $1 million a year should be spared a tax increase.


Implementing the Obama administration’s proposal would ensure that the overwhelming majority of US taxpayers avoid what in effect would be a significant pay cut next January. The typical Massachusetts household earns about $65,000 per year and, according to the nonpartisan Tax Policy Center, would see its taxes rise by about $2,000 in 2013 if no action is taken.

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This would represent a whopping 4 percent cut in after-tax income, which is pretty much the last thing cash-strapped families and the businesses that rely on their spending need at this point.

The higher rates would have a bigger impact here in Massachusetts, which has a higher share of wealthier families. Taxpayers earning more than $200,000 a year account for 5 percent of income tax filers in the state, compared to 3 percent nationally. But Obama’s proposal is still a better deal than inaction for these high-income households since the higher tax rates they would be required to pay would apply only to the income they earn above $250,000, rather than to their entire income (as would be the case if all the tax cuts are allowed to expire at year’s end).

The stakes here are not small. Extending the Bush tax cuts and preserving the current exemptions from the alternative minimum tax for taxpayers earning less than $250,000 for a single year would cost the Treasury an estimated $175 billion. Including the fortunate other 2 percent would add an estimated $46 billion to the annual price tag and a bit more than that to the nation’s budget deficit (thanks to interest and debt service costs).

Given the fragile state of the national recovery, temporarily extending the cuts on the first $250,000 of income is something that can and should be done quickly. But make no mistake: Such action may keep the short-term economic outlook from worsening, but it will not, in any meaningful sense, make conditions better.


In June, more than 20 million Americans were either unemployed or working part time because they couldn’t find full-time work. Beyond the profound personal impact on these workers and their families, the sheer scale of our labor market problems is a major reason why our economy has recovered so slowly.

Let’s remember that at worst, Republicans and Democrats, Congress and the administration, are in 98 percent agreement over the future of the Bush tax cuts. And in these difficult times, lawmakers and policy makers can ill afford to allow themselves to be distracted by an extended discussion over something that everyone agrees must be done.

There is an urgent need for lawmakers to take serious action to address our most pressing problems. Particular attention should be paid to spurring job growth in the near-term, preferably in concert with serious actions designed to address our long-term fiscal and budgetary challenges.

But first, they must do no harm.

Michael D. Goodman is associate professor and chairman of the department of public policy at the University of Massachusetts Dartmouth.