This is a year when advisors and their clients will be watching developments in Washington on taxes, as many of the cuts embodied in the Bush Administration’s two big tax initiatives in 2001 and 2003–known by their acronyms of EGTRRA and JGTRRA–sunset at the end of 2010. The most recent such development came Wednesday, July 14, with the Senate Finance Committee holding a hearing on individual tax rates.
In his opening statement lauding those Bush-era tax cuts, Committee Chairman Max Baucus (D-Montana) began by quoting Arthur Godfrey, who famously said, “I’m proud to be paying taxes in the United States. The only thing is–I could be just as proud for half the money,” before arguing that those tax cuts made in 2001 “have very broad support.”
However, Baucus said the growing Federal deficit–”the nonpartisan Congressional Budget Office expects the deficit to exceed $1 trillion in 2010,” that CBO projects that deficits “will remain high for the rest of the decade,” and that by the end of 2010, “economists expect Federal debt held by the public to reach 62% of the GDP”–would amount to the highest share of GDP “since right after World War II.”
The ranking Republican member of the Finance Committee, Senator Chuck Grassley (R-Iowa), took the opportunity in his opening statement to contrast the across-the-board, simple tax cuts in EGTRRA and JGTRRA with the Obama Administration’s complicated, effective tax increases as embodied in the healthcare reform bill. “The policy in these two tax bills was straight-forward,” Grassley said in his opening statement, referring to the Bush-era tax bills. “Cut rates for everyone. Enhance the child tax credit. Provide some marriage penalty relief. Enhance tax incentives for education.”