The Wrong Reasons For Not Cutting Taxes
September 11, 2002
President Bush's plan for cutting taxes has fallen victim to apathy, erroneous political calculations and the deadly disease of static scoring. There is only modest support for any new tax initiatives even among Republicans in Congress. However, the arguments against tax cuts for the investor class are shaky. They include:
- "A tax cut will add to the deficit" -- but deficits simply don't matter much economically, since in the past year, as we went from a surplus of $127 billion to a deficit of $300 billion, both inflation and interest rates have fallen.
- "Cutting taxes will only benefit the rich" -- while in fact, rich people will only incidentally be affected, because the primary beneficiaries will be middle class investors.
- "Cutting taxes will raise saving, which depresses growth" -- a silly argument, since saving finances investment, which increases productivity, thereby increasing jobs and wages.
- "There isn't time for Congress to act before it adjourns" -- but there is, and it would give Republicans something to run on, and give voters a reason to keep Republicans in control of the House, and perhaps even return them to a majority in the Senate.
At present, there is little reason for marginal voters to vote Republican. War and terrorism are important, but historically pocketbook issues predominate on Election Day. When the economy is as weak as it is now, voters usually vote against the party in power unless they have a good reason not to. A tax cut would be that reason.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, September 11, 2002
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