Eighteen years ago, President George H. W. Bush made his famous campaign pledge, “Read my lips: no new taxes.” (Bush Sr. broke this pledge when he signed the 1990 budget agreement.) Now, President George W. Bush is following in his father’s footsteps.
In 1999, he said he would “oppose and veto any increase in individual or corporate marginal income tax rates or individual or corporate income tax hikes.”
But by signing the recently passed tax cut bill, he raised marginal income tax rates for Americans living abroad. (The bill also cut taxes for the wealthy and worsened long-term deficits.) The New York Times reports today:
In an effort to raise revenues, tax writers in Congress added a last-minute provision that retroactively increased taxes for Americans living abroad. “¦ The change, which is retroactive to the beginning of 2006, is expected to raise taxes on Americans abroad by $2.1 billion over the next 10 years. “¦
Americans working overseas get a dollar-for-dollar credit for income taxes paid to foreign countries to offset their American income taxes. They also get to exclude $80,000 from the income they report to the I.R.S. The new law increased the exclusion to $82,400 this year.
But analyses by the accounting firms Ernst & Young and PricewaterhouseCoopers show that by adding provisions to how the exclusion is calculated, it raises the overall tax bill and marginal tax rates as well for some overseas Americans.
The Times reported last week that the bill also “tripled tax rates for teenagers with college savings funds.”
Perhaps these tax hikes are good policy. But President Bush has been insisting for years that any tax increase is bad policy. If he has reconsidered his position, he should be upfront about it.
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