Extending the Bush tax cuts would represent a positive action to spark the sluggish economy, says John Taylor, who was Treasury undersecretary during the (George W.) Bush administration.
“A statement that taxes will not increase on Jan. 1 would be a good stimulus,” Taylor, now an economics professor at Stanford University, told Bloomberg.
If Congress does nothing, the tax cuts of 2001 and 2003 will be reversed Jan. 1. President Barack Obama and many Democrats in Congress want to extend the cuts only for those with income of less than $200,000, while Republicans want to extend them for everyone.
Taylor is concerned about the partisan gridlock over fiscal policy in Congress and the uncertainty about Federal Reserve policy amid disagreements among officials at the central bank.
“One of the things that’s holding back the economy is the considerable degree of uncertainty on what policy will be, including monetary policy,” he said.
“It would be a good stimulus, if you like, to remove a lot of that uncertainty, to clarify what policy is going to be, remove some of the disagreements.”
On the tax front, even if Obama has his way, the wealthy won’t necessarily be paying more taxes, says Andrew Friedman, a former partner at big-time law firm Covington & Burling
“People have not understood the effects of the Alternative Minimum Tax here,” he told CNBC. The effects would be to lower the tax bill of the wealthy.
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