As the Economy Sinks, So Do Odds of a Tax Cut

[dweller]

By Rick Newman

One of the riskiest financial moves you make this year could be listening to the presidential candidates--and banking on a tax cut after the November elections.

John McCain and Barack Obama both promise that widespread tax cuts will be one major way they'll revive the economy and help lift consumers' sagging spirits. They differ, of course, on who should enjoy the largesse. McCain wants to cut estate and corporate income taxes, and extend broad-based tax cuts that were enacted earlier this decade. Obama agrees about extending some of those Bush era tax cuts, while offering lots of other relief to people earning less than $250,000 and raising taxes on the wealthy.

But here's what you're not likely to hear either candidate say before Election Day on November 4: There's no money left for tax cuts. And a slumping economy--now almost certainly in recession--will make it hard to pass tax cuts for the next couple of years, and maybe longer.

One obvious reason is the huge, unexpected bill for bailing out banks and other firms saddled with bad debts. All told, the government has committed more than $1 trillion in public funds to help the financial sector get back on its feet. That's more than one third of the government's entire budget in a given year. The feds (and the taxpayers) might get some of the money back--but nobody will know for years.

Meanwhile, the Congressional Budget Office recently took a much gloomier view of the future, casting a cloud over both candidates' tax-cut plans. For most of the year, CBO had been projecting that government revenues would be more or less in line with spending over the next 10 years. But with the economy spiraling into recession, CBO now projects that the government will spend $2.3 trillion more than it brings in over the next decade. And that's before accounting for any bailout costs.

Such huge deficits will make it hard for Congress to justify any additional funding for tax cuts. "The next president is going to be strongly tied by what's happened over the last year," says Tom Cooley, dean of New York University's Stern School of Business. "It's dubious that any of these tax-cut plans will get through."

http://biz.yahoo.com/usnews/081009/09_as_the_economy_sinks_so_do_odds_of_a_tax_cut.html">Here are the prospects for a variety of scenarios:


dp

[RadicalTexan]

1. As someone who makes $30K and has student debt and no savings...

I would GLADLY pay MORE in taxes to get single payer health care, such as I enjoyed while living as a temporary resident in the UK for four years, while paying the same income tax rate I am now.

Too bad people who have considerably more money than I do don't feel the same.

[SammyWinstonJack]

2. No money left for tax cuts. Fine, no problem. But those tax cuts the

wealthiest among us have received under bu$hco should be rescinded and their tax rates increased. And corpoRATe America needs to pay up, too. NO MORE FREE RIDES FOR RICH GREED BASTARDS!

[charlie]

3. S'funny how Republicans fetishize the 1950s

as the golden-hued ideal of American life. None of them seem to realize we taxed the fucking daylights out of big business and the rich back then.