CONTRACT WITH AMERICA CELEBRATES 10th ANNIVERSARY
October 7, 2004
Although this is the 10th anniversary of the "Contract with America" and three of the five core principals have become law, there is still much work to be done, says John Goodman (National Center for Policy Analysis).
A place to start, he says, would be to eliminate the Social Security benefits tax:
- Although nominally a tax on benefits, it is actually a tax on other income, including pensions and 401(k) withdrawals.
- It causes some seniors to face the highest marginal tax rates in the nation.
- The House has already passed the repeal once, but it died in the Senate.
Similarly, a repeal of depreciation indexing is in order, says Goodman:
- Our income tax system discriminates against long-term investments; instead of being able to deduct the full cost of an investment in the year made, firms are forced to spread the tax deduction over a number of years.
- Yet these rules ignore the effects of inflation and the time value of money; in this way, tax policy makes short-lived assets more attractive than long-lived assets.
President Bush has proposed different ways to achieve the same results -- such as giving everyone access to the Roth method of savings and increasing the limits on such accounts. This would shield significant income from the Social Security benefits tax. And proposals for tax simplification, whether in the form of a sales tax, a flat tax or a value-added tax, would eliminate the discriminatory treatment of investment income.
Ten years after the Contract, with the economy slowly recovering from the 2000 recession, it is time to rededicate ourselves to aggressive pro-growth policies, says Goodman.
Source: John Goodman, "'Contract' ideas: two to go," Washington Times, October 6, 2004.
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