There’s no such thing as ‘permanent’ tax rates
September 19, 2012 11 Comments
The concept of ‘temporary tax cuts’, or tax cuts that are scheduled to sunset, is one of the most damaging aspects of Bush’s legacy. Essentially for the short-term gain of getting a tax cut bill through, in a maneuver that I never even understood why it was necessary, he threw us a ticking time bomb that now has everyone scrambling what to do about the so-called ‘Bush tax cuts’ (i.e. tax rates being what they are right now but scheduled to change to something else under current law). The two sides battling over whether to go ahead and let them sunset and create a weird ‘cliff’, or ‘renew’/extend them, or some clever benchmarking/triggering mechanism.
There appears to be a general confusion and muddleheadedness about the way all this is discussed, so I propose that everyone remind themselves that all tax rates are always ‘temporary’. There’s just no such thing as a ‘permanent’ set of tax rates. As far as I can tell Congress could revisit and alter tax rates every single year, or whenever they felt like. They could take the current tax rate percents and add 2*(rand()-.5) to each number. They could flip some coins. They could use a Ouija board. If they then passed the new set of tax rates, those would be the new tax rates. Why do people ever think of any of these numbers as ‘permanent’?
A ‘temporary’ tax change, then, is a law that says ‘let’s make the tax rates X for the next few years, but then back to Y after that’. Needless to say, that’s a dumb law. Why ever do that? If you want the tax rates to be X just change them to X. If, in a few years, changing them back to Y seems like a good idea, sure, go ahead. But why bind yourself to it beforehand?
So: If there’s a good reason for the tax rates to change from what they are now, to what they are scheduled to become, then by all means let’s just let it happen. Is there? I don’t think there is one. So essentially we have a law in place that binds our economy to a dumb shock for no good reason that anyone can justify. Um, let’s just remove the law (=make the tax rates next year what they are this year, or in the IDIOTIC parlance of our times, make the ‘Bush tax cuts’ ‘permanent’) and remove the unnecessary shock? Anyone?
I mean, if we don’t want any such shock or ‘cliff’ – which, of course, would also be an ‘austerity’ policy! – and see it as a problem, there’s really no cleverness needed, all Congress need do is pass a normal tax-rate law just making the tax rates what they are currently. Or if they want, use their smartness to figure out a more ideal set of tax rates and make the tax rates be those. Whatever.
But can we please stop talking about ‘Bush tax cuts’ and how/whether to ‘extend’ them or let them ‘sunset’? Whatever the taxes were in 1999 and then became over the course of the years 2000-2002 really has no more to do with our life today than what all those numbers and brackets were in 1961.