Whether Taxpayers Face Tax Hikes or Tax Cuts in January is A Matter of Perspective

J.D. Foster / August 17, 2010

Unless Congress and the President intervene legislatively, federal income taxes will soar on January 1, 2011 for millions of middle- and upper-income Americans. Tax relief enacted in 2001 and 2003 is set to expire. Whose money is this?

Is it the taxpayer’s money taken by government, or government’s money left with the taxpayer as a benefit? If current policy is preserved, is it a tax cut, are tax cuts extended, or has Congress prevented a tax hike? As a recent Brookings report reveals, one’s core view of government determines how one refers to these events.

Current policy has been the law of the land for 10 years. A tax cut then arises if a change in tax policy causes tax burdens to fall. A tax increase arises if taxes go up due to a change in policy. Conservatives would call the jump in tax revenues a tax hike, and the proposals in Obama’s budget allowing current policy to expire are the Obama tax increases. (more…)