Industry News - Regulatory Updates

May 1, 2012

Tax cut debate proceeds as lawmakers consider offsets

Lawmakers who want to extend the Bush-era tax cuts further as their expiration date approaches recently indicated they do not believe such a measure would need to be offset by budget cuts.

Some favor an extension of the entire tax cut package, but opponents argue that would be too costly. Lower rates on capital gains and income were intended to become permanent, some supporters told The Hill. They also say that projections which show these tax cuts adding to the deficit are flawed on the grounds that they do not take into account the economic impact. Tax cuts encourage growth, they argue, but analysts in the Congressional Budget Office and the Joint Committee on Taxation do not consider those effects.

Some economists have warned lawmakers that combining spending cuts and tax increases simultaneously could, depending on their size, slow economic growth substantially. The debate over tax policy is likely to continue through the next election and beyond, according to the news source, with the voters' decisions influencing, if not outright determining, what approach the government ends up pursuing.

Day traders should keep apprised of the situation, since the renewal of the current tax rate on capital gains has been a chronic issue among lawmakers and is likely to remain one for now. That particular tax provision may be a point of contention in any attempt to reach a compromise.