Tax Cut Compromise Flawed but Necessary

After months of uncertainty, the tax compromise announced last week by President Obama was welcome news -- and not a moment too soon. With tax rates set to increase for all taxpayers on January 1, time is running short for Congress to act to avert tax hikes. The agreement reached between Obama and Congressional leaders is far from perfect, but it is considerably better than allowing taxes to go up for every American. Belatedly acknowledging that raising taxes during a recession is a sure job-killer, the president agreed to maintain the Republican-passed tax cuts for two years for all tax brackets. Additionally, the proposal extends unemployment benefits for 13 months, caps the death tax at 35 percent, and cuts payroll taxes by 2 percent for two years.

While I'm not satisfied with every aspect of the agreement, this bipartisan compromise ensures that no American will experience a tax hike for the next two years and provides additional unemployment assistance to those who need it.

In this time of severe economic challenges, all of this comes at a cost. Both the tax cuts and additional unemployment extensions will exacerbate the debt crisis the federal government is facing. I also have serious reservations about the payroll tax holiday at a time when Social Security and Medicare both face serious financial challenges and long-term insolvency.

This additional spending makes it even more imperative that Congress and the president act in the next budget year to address the deficit. We can no longer delay making tough choices on deficit spending, entitlement reform, and a rational tax system to encourage economic growth.

Republicans are prepared to accept the flawed but reasonable compromise and move on to tackle these significant economic and budgetary challenges. Democrats, however, have rejected the agreement. Just days after the compromise was announced, House Democrats approved a resolution in their caucus meeting advising Speaker Pelosi to refuse to even bring the proposal up for a vote in the House unless it includes tax hikes for the upper income brackets.

Business leaders have consistently warned that raising taxes will hurt small businesses, and the facts prove them right. Many small business owners pay taxes at individual rates, and the Joint Committee on Taxation projects that 50 percent of all small business income would be affected if the top rate rises from 35 percent to 39.6 percent. Considering small businesses accounted for 65 percent of new jobs created between 1993 and 2009, raising their tax rates during a time of 9.8 percent unemployment is indefensible.

Incoming Speaker of the House John Boehner has pledged, "If the lame duck Congress is unable or unwilling to cut spending and stop all the coming tax hikes, the new majority in January will." By undermining the tax compromise, Democrats are needlessly prolonging financial uncertainty for families and employers. With such serious economic challenges facing the country, House Democrats should drop their opposition to tax relief so that the Republican majority can begin the urgent process of restoring balance to the federal budget without delay.

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