Tax Policy--The Bush View
The Bush Campaign's tax policy proposal for the 2004 campaign basically involves making the tax cuts of 2001-2003 permanent. As I understand Senator Kerry's proposal, it extends the tax cuts of 2001-2003, eliminates the tax cut for those earning more than $200,000, and introduces a new feature: deductibility of college tuition.
So as I see it, my task is to defend making the tax cuts permanent and keeping the tax cuts for the wealthy. Arguably I should post against deductibility of college tuition, but I'm going to choose the restrictive view and say that's coming too close to criticizing Senator Kerry. It's not like President Bush is arguing against the deduction; so in my humble opinion it's off-limits in my argument (but not Paul's).
Making Tax Cuts Permanent
Why does it matter? Because the tax cuts instituted by President Bush in 2001-2003 are scheduled to expire at various points over the next couple of years. Rather notoriously, the Death Tax is scheduled to expire in 2010; then resume in 2011; can you say throw Grandma from the train on December 31, 2010?
Rather than talk specifics, I'd rather talk about grand strategy. The objective of government with regard to the economy should be to do as little harm as possible, Taxation functions as a brake on the economy; tax cuts are the equivalent of releasing the brake.
The good news is that when you release the brake, the economy zooms ahead. This year, 2004, is on target to have the fastest economic growth since 1984. What is the similarity between those two election years? The answer is that they both came a couple years after the sitting Republican President, Reagan then and Bush today, instituted significant tax cuts.
What about the deficit? Well as a percentage of the overall economy, the deficit today is lower than much of the 1980s, and ridiculously lower than the other times the US government has found itself involved in a war. In WWII the deficit was over 100% of the overall economy. The deficit for 2003 was about 5% of the overall economy, lower than 1983-86 the Reagan years.
In this complicated world we live in, people don't make plans for the next year for their money. They make plans for 10, 20, 30+ years into the future. The wealthy especially have sophisticated financial models available to them. Tax policy has become less of an issue than it used to be in those financial models (I know, I design them myself), but there is still no doubt that people invest in America's future based on the promise of future return of their investment with some profit, and they don't forget to look hard at the effect taxation will have on that profit. If the tax rate jumps after this year, or the next, or five years from now, it just makes investment in America less attractive.
Sorry, Paul, about the lateness of the post. Researching this issue proved pretty hard.
So as I see it, my task is to defend making the tax cuts permanent and keeping the tax cuts for the wealthy. Arguably I should post against deductibility of college tuition, but I'm going to choose the restrictive view and say that's coming too close to criticizing Senator Kerry. It's not like President Bush is arguing against the deduction; so in my humble opinion it's off-limits in my argument (but not Paul's).
Making Tax Cuts Permanent
Why does it matter? Because the tax cuts instituted by President Bush in 2001-2003 are scheduled to expire at various points over the next couple of years. Rather notoriously, the Death Tax is scheduled to expire in 2010; then resume in 2011; can you say throw Grandma from the train on December 31, 2010?
Rather than talk specifics, I'd rather talk about grand strategy. The objective of government with regard to the economy should be to do as little harm as possible, Taxation functions as a brake on the economy; tax cuts are the equivalent of releasing the brake.
The good news is that when you release the brake, the economy zooms ahead. This year, 2004, is on target to have the fastest economic growth since 1984. What is the similarity between those two election years? The answer is that they both came a couple years after the sitting Republican President, Reagan then and Bush today, instituted significant tax cuts.
What about the deficit? Well as a percentage of the overall economy, the deficit today is lower than much of the 1980s, and ridiculously lower than the other times the US government has found itself involved in a war. In WWII the deficit was over 100% of the overall economy. The deficit for 2003 was about 5% of the overall economy, lower than 1983-86 the Reagan years.
In this complicated world we live in, people don't make plans for the next year for their money. They make plans for 10, 20, 30+ years into the future. The wealthy especially have sophisticated financial models available to them. Tax policy has become less of an issue than it used to be in those financial models (I know, I design them myself), but there is still no doubt that people invest in America's future based on the promise of future return of their investment with some profit, and they don't forget to look hard at the effect taxation will have on that profit. If the tax rate jumps after this year, or the next, or five years from now, it just makes investment in America less attractive.
Sorry, Paul, about the lateness of the post. Researching this issue proved pretty hard.
posted by Pat at 11:15 AM
12 Comments:
I have to admit that I scanned both of your comments rather hastily, but one thing that I think was overlooked as far as Bush is concerned is his interest lately about abolishing the IRS and creating a consumption tax.
The liberals are constantly lamenting that the 'wealthy' aren't paying their fair share of taxes. At first blush, creating a simple consumption tax based solely on whatever goods a citizen purchases seems like the most fair taxation system that could be put into place.
Simply put, if you don't have it; don't spend it; nothing to tax. Conversely, those with money to spend on the bling-blings, the toys and the gazillion square foot mansions pay tax on their purchases. What could be more fair?
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Thank you for this blog, I didn't think I would ever get an honest viewing of the issues from both sides, especially from the media!
I have to say that I have enjoyed the tax cuts and they came at an advantageous moment for me (being middle class!). I remember the President state that he would reform the tax system in a second term. It's in dire need.
Good points guys, but the main reason I didn't tackle the new proposals is because they are still in the formulative stage.
To the person who asked about the purpose of tax policy, (can't see the other comments from this window) I think it boils down to the greatest good for the greatest number. There are no people who don't need a tax cut if the government can afford it or if it is needed as a fiscal stimulus. Some people spent their tax cuts; presumably including even some who didn't "need it"; this helps push the economy forward short term and create jobs. The ones who don't spend it put it into investments, which pushes the economy forward long term and creates wealth.
Now you've got me curious as hell: what did Desert Rat say that was so controversial you had to pull it from the blog?
NO MORE BUSH! GO KERRY! KERRY FOR USA!
BUSH IS A LIER!
BUSH CHEATED! BUSH IS A RACIST!
BUSH SUCKS! BUSH IS A FLIP FLOP!
KERRY IS A GOOD LEADER! KERRY 05!
BUSH IS A KILLER! HE DID IT CODE99 57 ITS TOP SECRETE!
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