The national debate over the extension of the Bush-era tax cuts has become an issue of contention locally, with U.S. Rep. Paul Tonko, D-Amsterdam, and U.S. Rep.-elect Chris Gibson, R-Kinderhook, disagreeing on the threshold for future tax rates.
A compromise that would have extended the tax cuts, poised to expire at the end of the month, was rejected by Democrats in the House of Representatives on Thursday. The main area of disagreement is the extension of tax rates for individuals making more than $200,000 a year and families making more than $250,000 a year, with most parties agreeing that all income below these cutoff points should be taxed at the lower rate established by the Bush-era tax cuts.
“We should not revisit the failed policies of the past,” said Tonko, who argued that the lower rate for wealthy Americans did not help the economy under President Bush and only added to the budget deficit.
Gibson rejected that view and argued that extending the rates would be good for the country’s recovery process.
“I support the extension of the tax cuts for everyone because [they] will help create jobs and grow the economy, ultimately increasing revenue,” he said.
That sentiment was echoed by the Schenectady Chamber of Commerce, as its president, Charles Steiner, said the cuts will have a positive impact on the area.
“The American personal income taxpayer will not be subjected to yet another tax increase that limits the expendable income they have for their quality of life,” he said.
It is hard to gauge the local effect of extending the rates for the upper tax bracket in Schenectady, since the 2000 census suggests that fewer than 350 of more than 26,000 households in Schenectady could be affected.
Tonko said his district, which includes all of Albany, Montgomery, Schenectady and Schoharie counties and parts of Fulton, Rensselaer and Saratoga counties, would be virtually untouched by limiting the Bush-era tax cuts only to the first $200,000 earned by an individual and $250,000 earned by a family.
Tonko said 98.1 percent of his district is below the $200,000 bracket. He added that there are about 342,590 people in his district that make less than $200,000 a year.
Steiner suggested that the number of people affected didn’t matter because the real issue is the need to draw a line in the sand against constantly increasing taxes.
Outgoing U.S. Rep. Scott Murphy, D-Glens Falls, who voted with Tonko earlier in the month to limit the Bush-era tax rates, now supports a compromise created by Congressional Republicans and President Barack Obama, which would apply the tax rates across the board.
Murphy said, “As with any compromise, there are provisions that I do not agree with, but I firmly believe that in this package the good outweighs the bad.”
The debate over this issue has been complicated by the status of other pending legislation before the lame-duck Congress, with Tonko contending that Senate Republicans have taken the legislative process hostage over the future of the Bush-era tax cuts.
As a result, issues such as the extension of unemployment benefits, which have broader support, have been put on hold until there is a resolution to the tax-cut issue.
In an attempt to establish a coalition around the future of the tax cuts in both chambers, an omnibus package was assembled that would include a two-year extension of the tax rates, but also a payroll holiday and a 13-month extension of unemployment benefits.
That proposal was rejected Thursday by a vote of the House Democratic Caucus, which excluded Murphy from the vote. As a result, the proposal, which probably would have had bipartisan support, is not likely to receive a floor vote.