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Republicans Sound Warning Over Expiration of Bush Tax Cuts

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With the economy still sputtering, Republicans are drawing renewed attention to the looming expiration of Bush-era tax cuts and warning that the rollback will "clobber" everyone from small business owners to middle-class families. 

Though the tax cuts passed by Congress with the encouragement of former President George W. Bush are often described as a boon for the wealthy, the changes passed in 2001 and 2003 lowered taxes for every income bracket. 

Democrats have pledged to shield middle-class taxpayers from the Dec. 31 expiration though no action has been taken yet. Democratic leaders reportedly have suggested holding off taking up extending the cuts until after the November election and a report released by President Obama's debt commission.

To allow the expiration would be devastating, says Senate Minority Whip Jon Kyl.

"That's going to be a huge hit to the economy," Kyl, R-Ariz., told "Fox News Sunday." 

Asked where Congress is going to find the hundreds of billions of dollars it would take to finance a continuation of the cuts, Kyl said it's not a matter of finding more dollars for spending that hasn't occurred yet.

"You should never raise taxes in order to cut taxes," he said.

The No. 2 Senate Republican continued to pitch tax relief as a way to spur the economy as indicators across the spectrum suggest the recovery will be lumbering for months to come. The unemployment rate in June edged back down to 9.5 percent -- exactly where it was a year ago this time. 

The Obama administration has been trying to make the case that the February 2009 stimulus package, while not holding unemployment to the levels the White House initially predicted, nevertheless prevented the economy from spiraling out of control.

Kyl's comments triggered a swift reaction from the White House over the weekend, which accused Kyl of favoring the wealthy over the jobless. 

"Kyl says wealthy need big Bush tax cuts while middle class families are on their own to fend for themselves as a result of Bush economy," Press Secretary Roberts Gibbs said in a Tweet - a reference to Democrats' failed attempts to pass a jobless benefits extension before going on recess. 

Gibbs said Monday that it was "interesting" that Kyl insisted on offsetting the cost of the jobless benefits extension but has not made a similar demand over the Bush tax cuts "for the wealthy." 

But Kyl said the tax increases on the upper-income brackets will "clobber" small business owners too and said it's not just the "wealthy" who stand to lose. 

If no changes are made, the expiration of the tax policy will raise the lowest 10 percent bracket to 15 percent. It will raise the 25 percent rate to 28 percent; the 28 percent rate to 31 percent; the 33 percent rate to 36 percent; and the 35 percent rate to 39.6 percent. 

It would also dramatically increase the investment tax rate on dividends, lower the child tax credit from $1,000 to $500 and remove tax protections for married couples. 

"All of that goes away," Kyl warned. The estate tax is also coming back in 2011, meaning a 55 percent tax on estates worth between $1 million and $10 million. 

House Majority Leader Steny Hoyer, D-Md., last month suggested that if Congress does protect middle-income earners, it might have to be on a short-term basis due to deficit concerns.

Hoyer's comments, at a deficit reduction forum, drew recriminations from Republicans on Capitol Hill already on high alert about tax increases. Senate Minority Leader Mitch McConnell warned that Democrats were "starting to signal" their intent to raise middle-class taxes. 

But that's exactly what the White House says it will not do. Gibbs said on NBC's "Meet the Press" that "we're certainly not going to raise taxes on them." 

Gibbs said Monday the issue of the Bush tax cuts will probably be taken up "sometime in the fall." 

Still, Republicans on the House Ways and Means Committee on Monday accused the White House and congressional Democrats of breaking their pledge long ago. The committee Republicans released an outline of $670 billion in tax increases over the next decade -- much of which they trace to various provisions in the health care law.