A tax controversy that shouldn't be

It's hard to believe that the proposal before Congress to extend the Bush-era tax cuts to everyone with an income below $200,000 a year ($250,000 for couples) has become so controversial. President Obama, in keeping with his 2008 campaign promise, has proposed extending the tax cuts for 98 percent of Americans. He would eliminate the 2001-2003 tax cuts for the top 2 percent of wage earners. Restoring the old tax rates (misleadingly referred to by opponents as raising taxes) would help reduce the menacing federal budget deficit.

The Republican leadership in Congress has taken an all-or-nothing approach to extending the tax cuts — either the rich get theirs along with the poor and middle class or everyone will suffer. A recent poll found about half of Americans support the Republican position. I'm old enough to remember (and it wasn't so many years ago) that the Republicans touted themselves deficit hawks — they wanted to balance the federal budget, even if it was painful. Fully extending the Bush era tax cuts would cost the federal government four times what the economic stimulus package and health care reform — packages roundly criticized by Republicans for exploding the federal deficit — would cost combined!

Politicians (and voters) have short memories. One of President Bush's reasons for the 2001 tax cuts was that the federal deficit was running a surplus — it was taking in more money than it was spending. Budget surpluses were projected decades into the future. Bush argued that Washington should let the taxpayers keep the money the government didn't need.

To say the least, things have changed since then. A terrorist attack, two wars and an economic collapse later, the federal government is spending about a trillion dollars more than it takes in each year. A federal commission is looking into ways to reduce that deficit. Sen. Mitch McConnell, the Republican Senate leader, says the problem is government spending, not taxation. But the real problem, as with any business or family budget, is the combination of the two. If Congress cannot find a practical way to curtail spending — and it has been powerless to do that in the past decade — then increased revenues are the only available solution.

Allowing tax rates for the wealthiest Americans to return to normal levels and reinstating the estate tax at a reasonable, fixed level would have no impact whatsoever on more than 98 percent of Americans. It would also begin the process of addressing budget deficits and signal financial markets that Washington can do something about the deficit.

What is amazing is that this proposal is so controversial.