Carolina Journal’s Barry Smith reports today on the negative impact on the economy, should the U.S. Congress decide not to extend the Bush-era tax rates and not fix the alternative minimum tax problem. The consequences could be huge. This story is a must-read.
North Carolina taxpayers could be out almost $9 billion if the Bush-era tax rates and a patch for the Alternative Minimum Tax aren’t extended, a report by the Tax Foundation says. Nationwide, the total tax relief is estimated to be $403 billion, or about 2.7 percent of the economy.
The Democratic-controlled U.S. Senate and Republican-controlled U.S. House have approved differing versions of an extension, which would have to be reconciled by the end of the year to prevent the tax cuts from expiring.
Congress is in recess now and isn’t expected back until after Labor Day. A public policy expert at The University of North Carolina at Chapel Hill expects that Congress won’t act then, but instead will wait until a lame duck session after the November election.
“It’s become a campaign issue, so you really cant, as a matter of policy, know what’s going to happen until after the election,” said John Scott, an assistant professor of public policy at the university.
Supporters of extending the cuts have labeled the potential fallout of not extending them “Taxmageddon.” Scott said that higher taxes could have a detrimental effect on the economy, which is still trying to recover from the Great Recession.
“On average, higher tax rates will affect the economy negatively,” Scott said.