ELIMINATING TAX CUTS WILL DAMPEN ECONOMY
June 30, 2008
One of the most important debates this election year is whether the Bush tax cuts should be made permanent, says Byron Schlomach, the director of the Center for Economic Prosperity at the Goldwater Institute.
The 2003 tax cuts simplified income tax brackets and slightly lowered rates. Consequently, the income tax\'s penalty on work, investment and innovation was reduced. Eliminating these cuts would be poor economic policy, poor tax policy and poor social policy, says Schlomach.
Without the Bush tax cuts:
- The long-term capital gains tax rate, now 15 percent, will revert to 20 percent in 2011, rendering the United States less competitive internationally.
- This increase would raise the tax on investment gains by one third, increasing the tax from about the world average to one of the world\'s highest; this is hardly a formula for domestic investment in job growth.
- Families would also see their taxes increase, when half of current child tax credits would disappear, dropping from $1,000 per child to $500.
- Grandparents could pass on less to their grandchildren, too, because death taxes would also rise.
The federal deficit is certainly a problem, says Schlomach, but the culprit is too much spending, not too little revenue:
- Spending is growing twice as fast as the government\'s bank account and twice as fast as it needs to provide services for our growing population.
- From 2001 to 2008, federal outlays increased at an average annual rate of 3.6 percent, three times the rate of population growth.
- Tax revenues did not dry up but instead increased over that period at an average annual rate of 1.4 percent.
Congress rarely practices spending restraint for the sake of reducing the national debt. Nevertheless, that\'s exactly what we need, says Schlomach.
Source: Byron Schlomach, "Eliminating Tax Cuts will Dampen Economy," Goldwater Institute, June 26, 2008.
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