Treasury Secretary Timothy Geithner said Wednesday that extending the Bush-era tax cuts for the wealthy would be a $700 billion mistake.
Geithner said cuts for families making more than $250,000 annually should be allowed to expire on schedule at the end of the year. But the administration believes tax cuts for the 95 percent of taxpayers making less than $250,000 should be extended, he said.
Geithner's comments came during a speech at the Center for American Progress and focused on what is likely to be a key economic battle leading up to the November midterm elections. Unless Congress acts, all of the tax cuts approved in 2001 and 2003 will expire at the end of December.
Republicans have argued that all of the tax cuts should be extended. They contend that raising taxes on any group at the current moment would be harmful for the economy.
Geithner said extending the tax cuts for the top 2 percent of taxpayers would cost $700 billion over a decade and $30 billion for a single year. He said wealthy families are more likely to save the money, which doesn't help the economy in the short run.
Geithner said allowing the tax cuts on the wealthy to expire would also help get the soaring deficits under control.
"Borrowing to finance tax cuts for the top 2 percent would be a $700 billion fiscal mistake," Geithner said. "It's not the prescription that the economy needs right now and the country can't afford it."
Geithner rejected the argument that all of the tax cuts should be extended for a couple of years so the economy can improve.
He said the money could be better spent on stimulus programs, to aid state and local government, or to provide support to small businesses. He also said extending tax cuts for the wealthy could burden future administrations with a difficult decision.
"The world is likely to view any temporary extension of the income tax cuts for the top 2 percent as a prelude to a long-term or permanent extension," Geithner said. "That would hurt economic recovery by undermining confidence that we are prepared to make a commitment today to bring down our future deficits."