Make Tax Cuts Permanent
February 27, 2004
There seems to be little doubt that President Bush's three big tax cuts, totaling well over $1.8 trillion, have helped pull the economy up off the mat after three years of unusually slow recovery. Now the party seems to be getting under way again, with GDP growing an average of 6 percent over the past two quarters, and job growth starting to rev up. Good news, but it may not last because, starting this year, Bush's tax cuts will start to expire, says Investor's Business Daily.
Which tax cuts will be reversed?
- The child tax credit, which helped millions of families, for one: It drops back to its previous level at year-end 2004 - a de facto tax hike; if you got relief from the so-called marriage penalty under the Bush tax cuts, say goodbye, it also ends this year.
- Other Bush tax cuts will take longer to get rid of: The dividend tax, for instance, gets kicked back up in 2008 and so do capital gains taxes; all the remaining Bush tax cuts disappear by January of 2011.
Letting the tax cuts expire would poison the recovery, says IBD. As Federal Reserve Chairman Alan Greenspan noted this week, investors and savers respond to incentives. For the economy, it's far better to cut spending and make the tax cuts permanent.
If we let Bush's tax cuts expire, we'll basically be raising taxes on those who work, save and invest - the most productive members of society. Tax anything at a higher rate, and you'll get less of it. Do those who advocate tax hikes really think economic success comes from less work, lower savings and fewer investments, asks IBD?
Source: Editorial, "Clear Cut," Investor's Business Daily, February 27, 2004.
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