The Economic Growth And Tax Relief Reconciliation Act was passed in 2001 and effective January 1, 2002. To push the legislation through, the then-Republican Senate inserted a sunset provision. The Act expires on December 31, 2010. The Byrd Rule (adopted in 1985) allows Senators to block legislation that would significantly increase the federal deficit beyond a ten-year period of time. To avoid the use of the Byrd Rule by Democrats, Republicans agreed to the ten-year sunset provision. The sunset provision also allowed the legislation to adhere to the PAYGO law, which is a “pay as you go” requirement that expenditures be financed with available funds rather than borrowed funds.
Extending the EGTRRA at this time would be in violation of the PAYGO law, as the funds necessary to finance the continuation of tax cuts will require the borrowing of funds since we are currently operating in a deficit. In addition, the only spending cuts Republicans are willing to make at this time are in Social Security Benefits and Medicare. Social Security and Medicare are meant to be funded by the contributions made by the currently employed plus the amounts already accrued. Unfortunately, the Social Security and Medicare piggy bank has been raided over the past ten years to fund the tax breaks enjoyed mainly by the upper 5% of the taxpayers in the US.
I especially love when Glenn Beck expounds to his minions about the wickedness of the capital gains tax. I guarantee the vast majority of his listeners do not pay capital gains tax. A capital gain is the profit you receive when you sell an investment. The investment can be stocks, bonds, property, art work, anything that is sold for more than the amount you paid for it. Some people ask: Why should I pay tax on this money? Well, when a person works at his job, he is investing his talent, time, body, energy, and receiving a paycheck. This person is taxed on the earnings he receives for his efforts. If an artist paints a painting and sells it, he pays tax on the proceeds from the sale. If a musician writes a song, he pays tax on the royalties. If, instead of effort a person uses money, the same should apply.
What is particularly upsetting about this issue is how the Republicans are using it as a way to manipulate their followers, making them feel this is something that will affect them all intimately. Logic dictates that if the majority of the people do not have jobs and a disposable income to spend on goods, then business will suffer. Business does not suffer if the incredibly wealthy have to pay 3% more in income tax annually.
Obama is not raising the taxes. EGTRRA expires on December 31, 2010 because the legislation was written that way in 2001. George W. Bush was president then, and I’m not blaming him for this. It’s certainly not his fault. But I do blame the members of Congress who were there in 2001 crafting this act and who today seem to have a case of selective amnesia.