With Bush tax cuts expiring at the end of the year, taxpayers nationwide could be looking at a bigger chunk missing from their paychecks, and the issue itself looks like it will take center stage in the 2012 presidential race.
The picture of just how much the Bush tax cuts expiring will affect Americans came a bit clearer this week with a state-by-state analysis by the non-profit Tax Foundation.
The Tax Foundation’s analysis shows that the traditionally blue states will be hit hardest by the Bush tax cuts expiring with Connecticut taking the biggest hit. Connecticut residents would pay an average of $5,783 more in taxes next year is the cuts aren’t renewed by President Obama and Congress, the New York Post reported. The next-biggest hit comes in New York, where residents would pay $5,542 more on average.
Though some states see less of an impact from the Bush tax cuts expiring, the overall effect would be great, said Will McBride, an economist with the Tax Foundation.
“It’s pretty dramatic,” he said. “This is the biggest tax increase that would happen since World War II.”
The bigger tax bills would also threaten to erase economic growth, McBride added.
“This sort of domestic policy would immediately impact demand and really shock investors. I would expect the stock market to take a real hit in September if something like this is not passed [to extend the tax cuts],” he said.
President Obama has made the Bush tax cuts expiring an election-year issue, as he and congressional Democrats have vowed to stop the tax cuts for the richest Americans. Obama and Democrats want to keep the tax cuts for the middle class but allow the Bush tax cuts to expire for those in the upper income ranges.
As the Jacksonville Business Journal pointed out, Obama has been pressing the issue during campaign stops in Florida and other swing states. He noted that under Mitt Romney’s economic plan, people who make more than $3 million a year will see their tax bills reduced by $250,000 and asked audiences: Who will pay for the cuts?