ENCINO, CA-Bush-era tax cuts remain an open question with considerable consequences for the economy and will be one of the items that economy-watchers will be following closely in the wake of the Nov. 2 election, according to a recent research report by Marcus & Millichap. The tax cuts are set to expire at the end of this year, and Republicans advocate the extension of all of the cuts, while the Obama administration seeks to extend the cuts for individuals earning less than $200,000 per year and families with incomes under $250,000.

“If the tax cuts expire without legislative action, the economy could face a significant setback,” says the Marcus & Millichap report, authored by Hessam Nadji, managing director of research services for the company. His report points out that current projections indicate the expiration of all tax cuts would virtually derail the recovery, reducing GDP growth to just 0.9% in 2011. Extending the tax cuts in full would lead to GDP expansion of approximately 3% next year, while the Obama plan would foster an estimated 2.6 % GDP growth rate.

Among the points underscored in the report:

Nearly all households would experience an immediate impact from the complete expiration of the Bush-era tax cuts, with higher taxes reducing take-home pay.

Raising taxes for only upper-income households could also impede economic growth, as households in the top 5% income brackets account for approximately 37% of consumer outlays.

While raising taxes for even higher-income households increases economic risk, particularly as the recovery remains fragile through the near term, extending the tax cuts indefinitely also creates challenges.

If the tax cuts expire without any intervention, the potential for another round of significant job losses would endanger the nascent recovery in apartment performance.

More details and statistical data regarding the potential impact of various tax cut scenarios can be found at the Research Brief blog at Marcus & Millichap. To read the full report, click here.