A pair of recently released reports shows why politicians are often in a quandary when it comes to fashioning taxation policies—the first suggests that lower taxes increase national debt, while the other blames poverty on state income taxes.
According to a new report by the Pew Economic Policy Group, a think tank, extending the 2001 and 2003 federal income tax cuts would sharply increase the national debt, even if extensions are limited to individuals earning below $200,000.
These cuts have been proposed in the administration’s budget, but "in light of the escalating national debt, policymakers need to understand the long-term costs of any extension of the tax cuts," said Ingrid Schroeder, director of the Pew Fiscal Analysis Initiative.
Meanwhile, another economic policy institute estimated that 13 states had fiscal policies that pushed working families deeper into poverty last year.
The Center on Budget and Policy Priorities found that in some of those states low-earning families faced several hundred dollars in state income taxes, a significant amount for anyone living paycheck-to-paycheck.
"States’ budget challenges are real, but so are the challenges that hard-working families are facing in today’s tough economy," said Nicholas Johnson, director of the Center’s State Fiscal Project.
He added that "states have better ways to balance their budgets than to make their tax codes tougher on low-income workers."