Geithner Looks At Compromise On Taxes

by Mike Godfrey, Tax-News.com, Washington

18 November 2010

As the lame-duck session of Congress gets under way following the mid-term elections this month, the United States Treasury Secretary, Timothy Geithner, said, in a speech to The Wall Street Journal's CEO Council in Washington, that he foresaw an agreement on the Bush tax cuts before the end of the year.

The main point of contention between the White House and the Republicans, who regained control of the House of Representatives, in the intervening period before the new Congress begins in January, is whether it will be possible to extend some or all of the individual tax cuts enacted under the presidency of George W. Bush and which are due to expire at the end of this year.

While Republicans have proposed extending the tax cuts in their entirety, President Obama has recently re-confirmed his view that Congress should only “permanently extend" the Bush tax cuts for all families making less than USD250,000 a year.

In his speech, Geithner repeated that view in the same terms – that the government is still opposed to a “permanent” extension of the tax cuts for the wealthiest taxpayers, due to the fiscal cost that it would entail. However, he said that it was extremely important that the uncertainty surrounding the tax cuts should be ended before the end of the year.

He thus left room for a compromise, and added that he was sure that the dispute could be resolved, as it was not a complex problem. It has been reported elsewhere that all parties are likely, after a period of politicking, to settle for a temporary extension of all of the tax cuts for two years.

In a recent letter to Congress, the United States Chamber of Commerce also urged it to “end the tax uncertainty plaguing the business community by extending the expiring 2001 and 2003 tax rates.”

The letter said that “a long term extension, preferably permanent, of all current tax rates would, in one bold stroke, boost investor, business, and consumer confidence by taking the uncertainty of tax policy off the table. It would leave hard-earned income in the hands of the individuals and businesses that earned it and allow them to spur investment, boost consumption, promote economic growth, and create jobs.”

“Further, without expeditious Congressional action to extend current marginal tax rates, millions of Americans will face greater withholding for taxes from their hard-earned paychecks in six weeks,” it concluded. “If these tax increases kick in, they will hit small business disproportionately, at a time when the economy is still pretty fragile.”

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