Expiring Bush Tax Cuts Will Kill Any Economic Recovery In 2011

By Julie Smith on July 30, 2010, 12:15 pm

One of least reported issues that the American economy will face in 2011 is the slow down in economic activity and tax receipts to the Federal Government, unless the Bush tax cuts are extended or renewed. Unfortunately the Democrat controlled Congress has shown no inclination to extend this vital piece of tax legislation, which many economists say is critical for the American economy to continue to improve.

Business Response To The Expiration Of The Tax Cuts

Businesses will attempt to book as much revenue as possible into the 2010 tax year to avoid the increase in taxes in 2011 as the Bush tax cuts expire on December 31st, 2010. This economic bookkeeping activity will artificially increase the GDP and give a false impression of economic growth through the 4th quarter of 2010. Businesses will also accelerate purchasing big ticket items, to take advantage of the some of the provisions in the tax code that are set to expire at the end of the year.

Personal Response To The Expiration Of The Tax Cuts

Individual taxpayers will, wherever possible, move salary or bonus income into the 2010 tax year to avoid paying income tax at a higher rate in 2011, when the Bush tax cuts expire. Stock sales and real estate transactions may be accelerated this year to avoid paying higher taxes next year.

 

Affect On The Economy In 2011

The result of businesses and individuals accelerating economic activity into this year will be a reduction in economic activity in 2011. The economic growth next year will be slowed because of the artificial increase in 2010 activity and the resulting tax increases set for 2011, which will hinder business expansion. (as higher taxes always do). The expiration of the Bush tax cuts, when the economy is still struggling to grow, will create the perfect scenario for a ‘double-dip’ recession in 2011.

Related posts:

1. Bush Tax Cuts: How They Will Affect The Wealthy & Middle Class
2. Bush Tax Cuts Expiring: Dems Way To Pay For Their Overspending
3. Unemployment And Economy: Boehner Says Dem Move On Taxes Irresponsible
4. Bush Tax Cuts Out – Payroll Tax Holiday…Maybe
5. Obama Asked to Extend Multi-National Business Tax Cuts