Growing Support For A Tax Cut
January 13, 1999
A new report from the U.S. Census Bureau highlights once again the need for a major tax cut this year. According to the report, the average household paid $9,445 in federal income taxes in 1997, more than twice what it paid in 1981. Even adjusted for inflation, the federal income tax take has risen by more than $1,700.
For this and other reasons, a number of groups and individuals are expressing support for a tax cut:
- On December 22, the National Association of Manufacturers called for a 10 percent reduction in income tax rates for individuals and corporations -- which it estimates would raise the gross domestic product by $167 billion by 2002, thus recouping much of the revenue loss.
- Former Federal Reserve Board Governor Larry Lindsey believes the Fed has done all it dare do to stimulate the economy, and that further interest rate cuts must be coupled with a reduction in the tax burden.
- Business Week magazine, which strongly opposed the Reagan tax cut in 1980, has also endorsed a tax cut this year to sustain eroding corporate profits and increase incentives for work and saving.
- The liberal Jerome Levy Economics Institute -- which looks at revenue surpluses from the viewpoint of Keynesian economics -- believes surpluses of the magnitude being forecast will lead to a recession, and although it would prefer to reduce the surpluses through higher spending, a tax cut would be better than doing nothing.
Furthermore, on January 6, Rep. Vito Fossella (R-N.Y.) introduced a bill to cut tax rates by 30 percent across-the-board over three years. Twenty-two years ago another Republican congressman from New York named Jack Kemp introduced a similar bill. At first it got little attention, but after being endorsed by Ronald Reagan in 1980 it became law in 1981.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, January 13, 1999.
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