Congress needs to take action, or your taxes will be going up

The latest data suggests a drop in energy prices may have tamed the inflation monster. President Joe Biden certainly hopes so, since the marks he's getting from the American people for his handling of the economy are some of the lowest on record.

What people think and what the data shows don't always sync up. People are still feeling the effects of Bidenflation. Prices may have stopped rising, but they're still way up from where they were when Donald Trump left office. Look at a recent Financial Times/University of Michigan poll that showed just 14% of voters said that financially, they were in a better position now.

The price of gasoline, something everyone watches like a hawk, is down right now from its peak. That adheres to the president's benefit but, as we know from decades of experience, it can shoot up in a fortnight. The housing market, though, is still dragging. Heritage Foundation economist Richard Stern estimates yearly mortgage payments on median-priced single-family homes have tripled since Biden was elected. It makes sense the poll had 33% of voters saying Biden's economic policies "had hurt the economy a lot."

Nevertheless, the president likes to say that "Bideneconomics" is working and that he created more jobs than any of his predecessors. That's true, but only if you count the jobs that came back when the lockdowns ended as new jobs. He really shouldn't take credit for them.

Biden doesn't like to admit he inherited an economy made stronger by 2017's Tax Cuts and Jobs Act, which has kept us out of an official recession for most of his presidency.

This is backed up by a new study conducted by the National Bureau of Economic Research that looked at 12,000 corporate tax returns in the two years before and after the tax cuts became law. It found the reduction in the corporate tax rate, bonus depreciation, and other changes made to the tax code increased domestic investment by 20%.

The increase in economic activity created by Trump's tax cuts before the pandemic provided the cushion needed to survive the lockdowns, not the record level of government dollars distributed under the rubric of assistance during the pandemic.

Some of the new laws' provisions, like the tax credit for research and development, have bizarrely been allowed to expire. Likewise, the 2021 childcare tax credit. They are politically popular and, up to a point, economically meaningful. Pro-investment policies like the research and development credit help feed American consumers. Farmers buy new equipment to keep productivity up so food prices remain down. American manufacturing's investments in new and expanded facilities produce what people like Biden used to call "good jobs at good wages."

Childcare expenses consume an increasingly large portion of family budgets. If these issues aren't going to be addressed through a rate reduction that keeps that amount of tax paid the same – and there's not much of a chance of a bill like that getting through this Congress or being signed by the president – then an extension of the entire package of expired deductions through 2025, when the tax cuts expire in their entirety, needs to be a priority for Congress before it leaves for the year.

These extenders are vital to the future growth needed to reduce the debt. We cannot tax our way out of our problems, but that doesn't mean they're insignificant. On that point, there's surprisingly bi-partisan agreement. Referring to the National Bureau of Economic Research study, for example, former Obama economic adviser Jason Furman said it showed "taxes actually do matter," adding that it provided "the most convincing estimates of the response of investment to corporate tax changes that I have ever seen."

Congress must act on the extenders package now before the end of the year. If it doesn't, it invites additional long-term damage from what amounts to a hidden tax increase while the economy is still on very thin ice.