© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
August 5, 2010 12:01 am
Tim Geithner, US treasury secretary, on Wednesday suggested there was little room for compromise on the Obama administration’s plans to let tax cuts for wealthy Americans enacted under George W. Bush expire at the end of the year, saying even a delay until 2011 would hurt the economic recovery.
“The world is likely to view any temporary extension of the income tax cuts for the top two percent as a prelude to a long-term or permanent extension,” Mr Geithner said. “That would hurt economic recovery by undermining confidence that we are prepared to make a commitment today to bring down our future deficits.”
The US government plans to renew the Bush tax cuts for Americans earning less than $250,000 per year, but has faced criticism from Republicans and some centrist Democrats over its push for increases in higher-income tax rates to take effect immediately.
The fight over the tax cuts is expected to be a significant point of friction between Republicans and Democrats in the run-up to the midterm congressional elections, scheduled for November. In an interview with the FT last month, Paul Ryan, a leading Republican in the House of Representatives, said the battle over the Bush tax cuts was also a “dress rehearsal” for the 2012 presidential election.
Mr Geithner, speaking at the Center for American Progress, a liberal think-tank close to the administration, sought to frame his insistence on the expiry of the tax cuts for rich Americans in the context of “difficult choices” necessary to rein in the deficit. “Asking the top earners in our society to forgo an extension of recent tax cuts must be part of the compact that restores fiscal responsibility,” he said.
The tax cuts for high earners account for about a quarter of the $3,000bn in relief offered to all Americans in 2001 and 2003 by the Bush administration, and Mr Geithner said the US would have to borrow more than $700bn over the next decade if the provisions were extended permanently. “That would be a mistake,” he said.
Senate finance committee members are expected to begin hashing out their differences on the Bush tax cuts in September, but a vote may not come until after the November elections.
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.