Here is the real reason middle class tax cuts are set to expire. Politics.

[kikiek]

Claire Buchan, a White House spokeswoman, said the administration was still trying to negotiate. But Republican Congressional officials said the administration did not want a deal that Democratic lawmakers might support, giving them a tax-cutting credential, too.

Senator John Kerry of Massachusetts, the presumptive Democratic presidential nominee, had already said he would retain most of Mr. Bush's middle-class tax cuts, and many Democratic lawmakers said they would vote for a modest extension of the tax cuts even if the extension was not paid for.

"If the Democrats had been on the same side, it would have taken a lot of arrows out of the quiver,'' said one Republican staff member.
Entire article at NYT might require registration. http://www.nytimes.com/2004/07/22/politics/22tax.html