Financial 411: Washington Tackles Taxes and the Deficit

President, GOP Leaders Meet

The only sure thing in life these days in Washington is talk of deficits and taxes. Washington publicly addressed these two contentious issues today, but didn't take any concrete steps on either subject.

First, those soon-to-expire Bush era tax cuts: President Barack Obama and Republican congressional leaders met at the White House to discuss their differences about extending them.

"The American people did not vote for gridlock. They didn't vote for unyielding partisanship. They're demanding cooperation and they're demanding progress," the president said. "And they'll hold all of us -- and I mean all of us -- accountable for it."

Republicans want the cuts that were enacted into law in 2001 and 2003 extended for all Americans. The president opposes a permanent extension for taxpayers earning more than $200,000 as individuals, and $250,000 as couples. The administration said it will meet with a small group of lawmakers to find a compromise.

States Bring in More Tax Revenue

State governments brought in more tax revenues this summer, as the economy slowly recovered and grew. That's welcome news for many states like New York, facing severe budget shortfalls. The Rockefeller Institute at the State University of New York calculated that tax revenues increased by more than 2.5 percent compared to the same time period a year ago. But the increase may not be enough to prevent state governments from having to make severe budget cuts, including laying off state workers. Here in New York, the state reported the biggest increase in tax collections, up 4.5 percent from a year ago.

Reducing the Nation's Deficit

As to cutting the debt -- this time the federal debt -- there was a little irony this afternoon.
The commission looking into ways to cut America’s debt and stop pushing our financial problems into the future will delay making its recommendations about just how to do that -- for a few days, anyway. The bipartisan debt commission, appointed by the president, had planned to vote tomorrow on what policies to recommend. But says it will now hold that vote on Friday.

The menu of distasteful spending cuts and unattractive revenue-raisers has already been widely circulated, so it’s not clear which measures could get enough votes to be included in the panel’s recommendations. Daniel Shaviro, professor of tax law and budget policies at New York University's law school, explains.