NCPA - National Center for Policy Analysis

TAX CUTS CRITICAL TO BALANCING THE BUDGET

January 5, 1996

Eighty-two Republican members of Congress recently signed a letter to the President, House Speaker Gingrich and Senate Majority Leader Dole pleading that congressionally-approved tax cuts remain in the final budget deal.

Politics aside, the cuts are vitally important to the country's fiscal and economic future.

  • Without the vibrant economy which the cuts would help ensure, government revenues would dry up and the long-sought balanced budget would disappear.
  • Many economists are forecasting economic growth this year of less than 2 percent and the word "recession" is increasingly heard.
  • Economists point to the effects of the tax increases of 1990: an economic downturn which reduced government revenues, boosted federal spending and increased the deficit.
  • At the state level, the 25 lower-taxed states experienced an economic growth rate almost one-third higher between 1965 and 1992 than the 25 higher taxation states -- according to a new study.
  • That difference translates to about $9,000 per family of four in 1993 dollars.
  • A 50 percent reduction in the capital gains tax would release more than $1 trillion now locked up in laggard stocks.
  • Releasing that amount would add more than $80 billion to the nation's gross domestic product over seven years.

As the Republicans said in their letter, "the...tax relief package must not be sacrificed at the altar of more spending and a bigger government."

Source: Editorial, "Don't Sell Out the Tax Cuts," Investor's Business Daily, January 5, 1996.

 

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