The burgeoning budget deficit may influence many lawmakers to allow the 2001 and 2003 tax cuts to expire as scheduled in less than six months. However, the November elections will likely place pressure on incumbents to take action. Lawmakers have the option to move on extending, in some fashion, the present tax cuts.
The Democratic leadership has yet to decide what to extend, when to move legislation and whether any changes they make should be permanent or temporary. Unless Congress acts by Jan. 1, the tax cuts will expire, thereby increasing tax rates on earned income, dividends, capital gains and estates.
President Obama has long supported extending the income tax cuts permanently, but only for individuals making less than $200,000 and for married couples making less than $250,000. Senate Finance Committee member Olympia Snowe, R-Maine, says it's important to be very cautious about to what extent these tax cuts are allowed to expire.