Former GOP presidential candidate and U.S. Sen. Fred Thompson warns that not extending the Bush tax cuts could have "devastating" and "catastrophic" consequences for the American economy.
"We must urge Congress and the president to renew the Bush tax cuts early, before they expire and before investors lose confidence in the U.S. economy," Thompson stated in a letter he signed on behalf of the League of American Voters, a nonpartisan organization that advocates conservative principles.
Beginning Tuesday, Thompson will be promoting the proposed tax-cut renewal in a national TV ad campaign and petition drive the league is funding.
[See the TV ad with Fred Thompson and his petition — Click Here Now.
The former actor is joining forces with the League of American Voters as spokesman for a campaign to pressure members of Congress to renew the Bush tax cuts.
The Bush tax cuts were passed in 2001 and 2003 after the dot-com recession and 9/11. The cuts slashed income tax rates at every level, and later reduced capital gains and dividend taxes.
The Bush cuts will expire en masse on Dec. 31, unless Congress renews them.
"Our nation faces a massive automatic tax increase at the end of this year when the Bush tax cuts expire," Thompson warns in the ad, which can be viewed at RenewTheTaxCuts.com
The league is encouraging Congress to renew the Bush cuts fully, including those for the highest-earning Americans, which the Obama administration defines as those making more than $250,000 a year.
Bob Adams, executive director of the league, tells Newsmax the organization is delighted to have Thompson's support on the issue.
"He's an incredible expert on tax reform, and he was in Congress to pass the 2001 and 2003 tax cuts. So he knows how important these are to our economy. He's very well thought of within the conservative movement and even by the media," Adams said.
Extending the tax cuts, Adams says, will help the economy in two ways: It will increase demand for goods and services by keeping money in taxpayers' pockets, while encouraging small-business owners to increase their payrolls and hire more workers.
"Not renewing the Bush tax cuts is a death wish for the American economy," Adams says. "It's really that serious."
Federal Reserve Chairman Ben Bernanke has testified before Congress that the economic recovery is too fragile to sustain any tax increase. Last week, he urged Congress to renew the Bush tax cuts.
The U.S. economy has been wracked by 9.5 percent unemployment, despite Obama administration economists' estimate that passing the $862 billion stimulus package would keep unemployment below 8 percent.
There have been additional signals in recent weeks that the economy may be sputtering.
Thompson asks voters to sign the "Petition to Renew the Bush Tax Cuts," which is posted on the league's website. He encourages them to use social networking tools such as Twitter and Facebook to share the petition with others and to support the league financially so it can buy more airtime for the commercials.
If the Bush tax credits expire, the top income-tax rate for the wealthiest Americans – a category that includes many small-business owners – would increase from 35 to 39.6 percent. Taxes on capital gains would increase from 15 to 20 percent, and taxes on dividends would jump as well.
With only about 100 days left before the midterm elections, the debate over whether to extend the Bush tax cuts has triggered a schism of sorts within the Democratic Party.
Democrats who want to eliminate the tax cuts include President Barack Obama, who campaigned to end them, as well as Treasury Secretary Timothy Geithner and House Speaker Nancy Pelosi.
Former Fed Chairman Alan Greenspan also favors expiration of the Bush tax cuts, although he concedes doing so probably will be a drag on the economy.
But two other Senate Democrats — Kent Conrad of North Dakota and Ben Nelson of Nebraska — broke ranks with the administration last week and urged the tax breaks be extended to counter the ongoing economic weakness and high unemployment.
"As a general rule, you don't want to be cutting spending or raising taxes in the midst of a downturn," Conrad said. "We know that very soon we've got to pivot and focus on the deficit. But it probably is too soon to cut spending or raise taxes."
Democratic Sen. Evan Bayh of Indiana also supports extending the tax breaks, as do at least half a dozen House Democrats who also have come out in favor of delaying the scheduled tax increases.
Republicans have been arguing for months that raising taxes amid a struggling economy wracked by high unemployment would be a major mistake. They point out that letting the tax breaks expire would hit hardest those earning $250,000 or more annually — a demographic that consists of many small-business owners who play a key role in job creation.
Extending the tax breaks could help stave off a double-dip recession. But it would also increase the budget deficit. The Congressional Budget Office has estimated that extending the tax breaks for households earning $250,000 or more per year would cost about $115 billion per year. Other sources estimate the real cost at closer to $55 billion.
There is no indication from the White House that it will consider backing off of the president's pledge made during the 2008 campaign to eliminate the tax breaks, which he characterized as a windfall for the rich at the expense of the poor.
"The problem with this administration is they see everything in reverse," Adams tells Newsmax. "It's like Alice in Wonderland. What is practical and beneficial never seems to cross the mind of the Obama administration, especially when it comes to economic policy."
Asked about the growing Democratic split on the issue, Adams says: "There's probably a lot going on behind the scenes. You're having liberal ideology crashing with reality. And the ideology, of course, is coming out and it's pure from the White House.
"The reality, though, and this is what members of Congress are seeing, is that these taxes are going to be devastating. It's hard to believe someone would vote against renewing these tax cuts, knowing how beneficial they've been to the economy in the past, and knowing how beneficial they'll continue to be, and what an absolute detriment it would be if they're allowed to expire."
The latest heavy hitter to advocate a tax-cut extension: Former GOP House Speaker Newt Gingrich.
Gingrich, appearing on “Fox News Sunday” with host Chris Wallace, said uncertainty is discouraging business owners from investing in new employees. "The safest thing" for the American economy "would be to have a provision passed this fall that said no tax increase of any kind in 2011," Gingrich said.
"So you're saying extend all the Bush tax cuts?" Wallace asked.
"I'd extend — I would simply say no tax increase next year," Gingrich replied. "Keep current law as it is, and extend no tax — have no tax increase next year."
[Editor's Note: See Fred Thompson's TV ad and the Petition to Renew the Bush Tax Cuts — Click Here Now.
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