The political reality, especially in an election year, makes extension of the so-called "middle-class" tax cuts very likely. Hardly anyone is arguing against extending these cuts, as long as they are paid for. However, there are very good arguments why, even If the cost of the extension is offset, extension of these tax cuts is not supportable.

What's the problem with "middle-class" tax cuts that are offset?

• "Middle-class" is in quotes for a reason. While these tax cuts do provide modest benefits for middle-class families, and may include the refundable child tax credit that benefits low-income families, they benefit wealthier families far more. As a double whammy, rising deficits and caps on spending resulting from tax cuts that mostly benefit the wealthy reduce revenue for public services that primarily middle- and low-income families depend upon, such as education, healthcare and mass transit. Under the Bush presidency, tax rates have nearly flattened, with the wealthiest one percent of the population now paying 32.8 percent of their income in taxes, and most of the rest paying 29.4 percent, according to an analysis by Citizens for Tax Justice. That tosses the principle of progress taxation out the window. No offsets that could roll back some of the tax cuts to the very wealthy have been suggested.
• The tax cuts will not pay for themselves, in spite of arguments that they produce economic growth. We are borrowing money (adding to the national debt) to pay for the tax cuts. At some point, deficits and a burgeoning national debt will begin to hurt the economy and the borrowed money must be paid back. Who will pay then? According to a report by the Tax Policy Center, middle and low-income families will pay the price for the tax cuts.
• While one- or two-year extensions appear to cost less, in reality they make the tax cuts permanent in all but name. Massive retirement of the baby-boomers will continue increasing the cost of medical care, already growing much faster than inflation. Social Security will no longer take in enough revenue to pay out benefits. Even if no more tax cuts are passed, if the tax cuts that are phased out continue to be extended, we will be even less able to deal with future needs.
• Ultimately, the fiscal hole which the tax cuts -- middle class or not -- are rapidly deepening poses an even greater threat. In a recent speech, Brookings Institution Fellow Henry Aaron asserted that "[o]ver the long haul, the nation faces budget challenges so great that they threaten the stability of our nation's democratic political institutions."

The huge cost of the Bush tax cuts of 2001 and 2003 has created a structural problem -- there is not enough revenue to meet the country's needs. The 2004 appropriations process, with its budget cap too tight to adequately fund even high priorities, is just the beginning. As the adage "you don't miss the water 'till the well runs dry" observes, we may not recognize the importance of government spending to our everyday lives until those services are even more radically cut. And that is what our future holds without some tax "increases."