In a proud American tradition, the majority party in Congress is poised to hold a series of votes designed to damage the minority party's electoral hopes. First up? A bill that extends President Bush's middle-class tax cuts while restoring higher income-tax brackets to Clinton administration levels. Policy-wise, it's a so-so move: A moderate tax increase on the upper-income brackets is a good deficit reduction, and keeping taxes low on the middle-class is good stimulus, but it won't substitute for real tax reform that would create new higher-income brackets and rates and broaden the tax base.
The politics, though, puts Republicans in a bind: They obviously want to vote to keep the tax cuts, but they don't want to vote for a moderate increase in taxes on the wealthy, even though it is wildly popular -- as to why, see this graph. (Some Democrats are suggesting that we should temporarily extend even the upper-bracket tax cuts as a mode of economic stimulus, but it's not very effective stimulus, as Jon Chait notes.)
Now Republicans are going to face a dilemma: Do they vote against the package, and against making a middle-class tax cut permanent? Or do they vote for it, and raise taxes on the rich, likely angering the anti-tax purists on the Republican side? Either way, their Democratic opponents will gain a talking point, and Republican incumbents will have some 'splainin' to do.
-- Tim Fernholz
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