We’ve all heard the old adage, “There are only two constants in life: death and taxes.” The only problem with that adage is one has the ability to increase significantly. For college students, the increase will soon become reality if Congress doesn’t act soon.
Most of the media coverage of the Bush-era tax cuts has focused on the top-tier rate for those making more than $250,000. If that rate were to revert to the Clinton rate of 39.6 percent, then it would only be an increase of 13 percent. Ending the lower-tier tax cuts, however, would be cataclysmic for UA students.
Bear with me through this example, as it deals with a lot of numbers. Assume for a moment that you are holding a small, part-time job making $7.50 an hour—just a quarter over the minimum wage—and that you work 20 hours a week. This comes out to $7,200 a year. Under the current system, there are six tiers, with the highest at 35 percent and the lowest at 10 percent, the one in which you would belong, translating to a tax bill of $720.
The tax cuts also allowed for significant deductions for marriage and a child tax credit. But under the Clinton-era structure, the 10 percent bracket disappears, raising your taxes to 15 percent, causing your tax payments to rise to $1,080, and those deductions also disappear. Keep in mind that this only deals with the income tax increases, never mind other taxes that will also rise.
Realizing this, there has been great interest in Congress to extend the tax reductions for those making less than $250,000. But this plan has hit major snags as Republicans and some Democrats have insisted on keeping all of the tax cuts, including the top tier.
While many on the Hill have adopted supply-side economics as a religion, stopping the prevention of tax increases for over 90 percent of Americans because one bracket is getting left out is complete stupidity in action. This is like opening five gifts for Christmas, and rejecting them all because you didn’t get a Benz for the sixth gift.
Unfortunately, common sense in this debate has completely gone out the window due to ideological purity along with a “my way or the highway” attitude. Obstructionism by both the Democratic and Republican parties will lead to all the tax cuts expiring, creating a nightmare for UA students trying to pay for tuition, housing and food. My message to all members of Congress: take the deal being offered by the Obama Administration and run.
Of course, this will not satisfy the rabid supply-side economists insistent on keeping all the cuts, come hell or high water, saying that they boosts production and increase investment. While this is partially true, it’s important to remember that a temporary glut of inventories means nothing if there’s no one left to buy it up due to higher taxes.
In fact, an overwhelming number of economic textbooks show that cutting taxes for the middle class and low-wage earners like college students is a much better stimulus than upper-level tax cuts. So from this standpoint, it looks like they should go back to reading the textbooks instead of going on television shows.
I encourage every student voter to get in touch with their Congressman or woman and demand an extension of the tax cuts associated with college students and recent college graduates. After all, we don’t stay in school forever. Inform them that if they continue this maddening obstruction, then you will promptly vote for their opponent, whether they be a Republican or Democrat. Sanity and beneficial compromise must be restored in this tax debate, and that means at a minimum the postponement of a terrible tax increase on the poor and middle class in times of recession and desperation.
Now the only challenge is to find a few good public servants who will actually find their spines and deliver on their promises to vote for the people.
Gregory Poole is a graduate student in metallurgical engineering. His column runs biweekly on Wednesdays.
