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Potential Tax Increases Following the New Debt Ceiling

August 8th

Despite Republican claims that tax hikes are “impossible” under the recent deal struck with the White House to raise the debt ceiling in exchange for reductions in spending, there are a number of indications that such increases might not be far away.

There are plans presently for the formation of a bipartisan committee for the discovery of roughly $1.5 trillion in deficit savings by Thanksgiving. This committee will be empowered to look at virtually anything, including revenue.

What Will This Mean?

Chiefly, President Obama has been emphasizing the need for greater taxes for the wealthy elite. In his June 29 press conference, President Obama put pressure on congressional Republicans who resist efforts to raise taxes.

Obama called for a “balanced approach” that would eliminate “tax breaks for millionaires and billionaires.”

However, some critics claim that this plan also includes a proposal to end the last-in first-out accounting method (LIFO) that many manufacturers use. While the administration considers this part of merely simplifying the tax code others are concerned that it could result in an almost $72 billion tax hike.

Concern among Obama’s critics is reinforced by the knowledge that the Bush tax cuts for high-earners expire at the end of 2012, making it possible to reevaluate such policies. Despite the implications of many Republican critics that the White House intends to raise taxes for the middle classes, Obama and his Democratic supporters remain firm that such policy changes would purely affect existing inequities in the tax code.

 
 
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