Heartland Institute Experts on Obama, GOP Tax Compromise

December 07, 2010
Jim Lakely

Tax policy experts at The Heartland Institute offer the following comments for attribution on the tax deal President Obama and congressional Republicans reached Monday night.

John Nothdurft, director of government relations at The Heartland Institute:

"Taxpayers across the country should be thankful that Congress is likely to take action and stop us from ringing in the new year with trillions of dollars in tax hikes.

"Americans are still struggling to pay their mortgages, and businesses have been hesitant about hiring more employees because they haven’t known if their tax costs were going to skyrocket after the first of the year. It would have been foolish for Congress to let this happen when the country is possibly at the eve of real economic 'recovery.' And while it would have been ideal to have these tax cuts extended longer, or even made permanent, the two-year window does allow for some rate predictability.

"Most importantly this extension will allow capital to flow more freely into the economy and help generate economic growth. Without long sustainable economic growth and a commitment to reducing spending and reforming entitlements, the country will continue to face increased deficits."

Steve Stanek, Heartland Institute research fellow and managing editor of Budget & Tax News:

"It's good that no one's taxes will go up in the next two years. It's bad that we'll apparently have this fight again in two years.

"Raising taxes now would have been terrible for individuals and the economy. Every dollar government takes is a dollar that businesses and individuals do not have to spend and invest. Unfortunately, businesses and individuals usually make important spending and investment decisions based on what they expect years ahead, and this agreement does not allow us to look more than two years ahead with any certainty.

"How many people are going to want to make decisions that might not pay off until five or 10 years from now if they have no idea what the tax climate will be five or 10 years from now? And until government decides to cut spending, no amount of tax revenue will be enough to fix the budget.

Eli Lehrer, senior fellow at The Heartland Institute and national director of Heartland’s Center on Finance, Insurance, and Real Estate:

"I see this as a good omen. A two-year extension of the Bush tax cuts is absolutely necessary to stop deflation. The extension of unemployment benefits, which will discourage job-seeking, is a problem. But, in all probability, opposing extended unemployment benefits would have been a political loser anyway.

"The promised resumption of the estate tax is a loss. But, given that the tax is more symbolic than anything else, it was a good place for the Republicans to give and probably won’t hurt the economy. The deal looks so good for the GOP, in fact, that I have some doubts it will actually muster enough votes to become law without some more give-aways to the Democrats.

"For now, however, it’s a good deal and a good sign for the country. It shows Obama can compromise and House Republicans know how to drive a hard bargain."

Nothdurft can be reached for further comment at 662/801-2707 or jnothdurft@heartland.org Stanek can be reached for further comment at 815/385-5602 or sstanek@heartland.org. Lehrer can be reached for further comment at 202/615-0586 or elehrer@heartland.org.

The Heartland Institute is a 26-year-old national nonprofit organization based in Chicago. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site at http://www.heartland.org/ or call 312/377-4000.