These tax rates, pegged to various income brackets, are now set at 10 percent, 15 percent, 25 percent, 28 percent, 33 percent and 35 percent. If they expire, they will revert back to the higher Clinton tax rates of 15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent.
Bush's new 10 percent tax targets the lowest-income bracket in America. It applies to the first $7,550 of income for individuals and the first $15,100 for couples. If it expires with the rest of the lower Bush rates, the people who would be hit hardest would be those on the lower end of the income scale and the middle class.
Other tax cuts will be eliminated in 2011. For example, the marriage-penalty changes that protected two-earner married couples from having to pay more on their income than if they had filed as individuals. The $1,000 child tax credit would drop to $500. The death tax on one's estate would see its 45 percent tax rate in 2007 and higher $3.5 million exemption in 2009 revert back to a top rate of 60 percent on a $1 million exemption.
Bush would like to see the lower rates made permanent before he leaves office as a lasting legacy of his presidency. But there are many lawmakers, including Republicans, who fear that increased tax revenues are needed at a time of rising deficits.
In fact, just the opposite is needed to bring the deficits down.
About a year ago, the U.S. Treasury took in $100 billion more than expected, owing to much stronger economic growth than anyone had forecast.
Revenues could be larger still this year, taking another big bite out of the deficits, if the Bush tax cuts are made permanent -- giving the economy the booster shot it needs to climb to the next plateau.
The lesson of the last five years is simply this: Lower tax rates produce more government revenue, which reduces the budget deficits. Higher job-killing tax rates will only worsen them.