NCPA - National Center for Policy Analysis

A Progrowth Agenda for Congress

November 12, 2010

Uncertainty about future public policies coming out of Washington, D.C., and the prospect of huge tax increases is stifling potential recovery and job creation.  The most important step Washington can take to spur recovery is to immediately and permanently reduce taxes on capital and labor, say Stephen J. Entin, president and executive director of the Institute for Research on the Economics of Taxation, and John C. Goodman, president and CEO and Kellye Wright Fellow at the National Center for Policy Analysis.

Following are measures that will lower the tax burden, create jobs and accelerate economic growth:

Extend the Bush tax cuts.

  • Many small businesses would pay the higher personal income tax rates scheduled to return if Congress does not act -- the Joint Committee on Taxation found that 50 percent of business income will be reported on returns facing 36 percent or 39.6 percent tax rates.
  • In addition, the estate tax is scheduled to return to 55 percent in 2011, which would lower gross domestic product by $183 billion and labor compensation by $122 billion.

Extend the Alternative Minimum Tax (AMT) Patch.

  • Supposedly enacted to raise taxes on wealthy Americans who were able to take a variety of deductions, the AMT hits millions of middle-class taxpayers.
  • If the patch is not extended, about 21 million additional taxpayers would now be subject to the AMT.

Allow Immediate Expensing of Investment and Cut Corporate Tax Rates.

  • Raising the expensing percentage to 100 percent through 2011 would increase the after-tax return on capital by about 2.5 percent­age points.
  • The United States currently has the second highest corporate tax rate in the world -- lower rates would raise labor productivity, wages and employment.

Congress should also move to eliminate the individual and employer health insurance mandates, repeal the Medicare tax hikes and extend the research and development tax credit, say Entin and Goodman.

Source: Stephen J. Entin and John C. Goodman, "A Progrowth Agenda for Congress," National Center for Policy Analysis, November 12, 2010.

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