Tax policy

In the face of a stubborn recession, Republicans want to leave taxes essentially where they are, supporting the extension of the Bush-era tax cuts, perhaps permanently.

Barack Obama and the Democrats agree on extending the current tax rates for the middle class — along with “reverse income tax” handouts to the poor. But the president insists the nation “can’t afford tax cuts for the rich,” by which he actually means he wants to raise taxes — the real alternative being to leave them right where they are — on the high-wage earners who are able to invest in businesses and create jobs.

The compromise offer will be to extend current tax rates for “the rich,” but only for a shorter time.

Republicans, who will form the House majority come January, may finally find the backbone this month to demand all or nothing — daring the president to veto a comprehensive bill that holds taxes where they are, come January, which would require him to either concede or accept the blame for raising taxes on everyone during a recession.

The problem is that Americans sitting down to do their taxes in January and February need to know the rules of the game. There are several tax questions now in limbo on which the Congress ought to be able to reach bipartisan accord, even if they have to be handled in stand-alone bills.

For starters, Nevadans and residents of other states without state income taxes wonder whether they’re going to be able to write off millions of dollars in state sales taxes next year, as they have in the past.

This provision was inserted in the tax law as a simple matter of equity for residents of states that fund their governments primarily through sales and property taxes, rather than income taxes. (State income tax payments have long been deductible on federal income tax forms.)

According to the IRS, 345,244 Nevadans claimed more than $546 million in deductions for sales taxes in 2008.

Other targeted tax benefits that are expiring include a deduction for teachers who buy classroom supplies, deductions for college tuition and certain contributions to charity. Expiring business deductions include research tax credits.

Yes, broader tax reform, combining enormous simplification with lower rates or even the elimination of whole classes of taxes that make America less competitive for business expansion, is needed. But that’s not likely to be done by Christmas. These are all non-controversial, nonpartisan provisions that the lame duck Congress should re-authorize during the next month, even if each has to handled piecemeal.

Republicans should also propose a real incentive for those wondering whether to continue investing in family businesses — extending the current “zero” death tax rate indefinitely, as well.

If Democrats want to punish family-owned businesses and farms, let them explain why.