Despite the incessant criticism of President Bush, from everything to his Iraq policy to the hotly debated amnesty bill to his spending appetite to the seemingly incalculable claims of corruption, there is amid all of it a bright spot worthy of praise (if but one). At the behest of the President, and in great opposition to liberal Democrats, the Republicans passed not one but two major tax relief packages; the first of which came in 2001 and the second in 2003. While the liberals in Washington chided the President’s plan as being one for the mega rich, their denouncing it as such exposed their ignorance of two very well known and fiscally important facts.
The first of these facts goes back to last week’s article of which I spoke about income inequality. The problem with the Bush tax cuts from a liberal perspective, dealt with the inequality in relief provided by such cuts. As the president rightfully pointed out at the time, anyone who paid taxes would have received relief under his plan. That said, it is sensible to expect that one’s relief would be commensurate with one’s contribution on such matters of taxation. In real dollars we know that those at the top of the economic ladder pay a larger amount towards the overall Federal tax burden. So then, it is reasonable to expect they would see larger refunds as a result of a cut. However, liberal discontent with the tax relief packages went against this conventional wisdom. Not only did it buck conventional wisdom, this ideology is simply illogical. Were I to pay $400 for front row tickets to a concert and you $100 for nose bleed seats, we could safely assume that if the event were canceled I would receive a full refund of $400 and you $100. However, if we apply the liberal argument against Bush’s tax cuts to the above scenario, we would expect to bridge such inequality by redistributing my contribution downward so that we both receive relief to the tune of $250. Whether liberals deem it as equality, compassion, aid, or tout it with any other such label it’s nothing more than pure Marxism. However, this socialist ideology aside, the second and much more observable fact, which Washington’s liberal Democrats have repeatedly refused to accept, is that tax cuts simply work.
The rate of economic growth that we have seen over the past five years is unprecedented in and of itself. But, when we factor in the challenges which faced the country following the events of September the 11th, the economic up tick is astounding and yet gets hardly a mention on the evening news (shocking no?). With a 3.4 percent growth in the second quarter of 2007, a 2.8 percent average productivity growth since 2001 (well above the average of the past 30 years), 8.2 million new jobs over the past four years, an unemployment rate of 4.5 percent (lower than the average of the past 40 years) and a real after-tax income up over 9.9 percent (equating to nearly $3,000 per person) since President Bush took office, the economy is without a doubt forging ahead. And, not only is it forging ahead at a steady and healthy rate, it has generated higher than expected tax revenues for the federal government while at the same time (are you ready for this) driving down the deficit which is expected to measure just 1.5 percent of our GDP (again well below the average of the past 40 years). But, despite the progress of a growing economy and the 37 percent increase in tax receipts over the last three years, Democrats in Washington have approved a budget which will result in a $736 billion tax increase simply for failing to extend Bush’s tax cuts and allowing them to expire in the next few years.
In addition to this gigantic tax increase, Democrats on the House Ways and Means Committee, in their infinite wisdom, have come up with an ingenious proposal to provide alternative minimum tax relief (mind you it comes with a price) to the many Americans who fall victim to it every tax season. But, in keeping true to their Marxist and redistributionist heritage, their plan is a 4 percent tax increase on higher income Americans and small business owners (I suppose it was enough that they socked small business owners with a minimum wage increase mandate). Now, forgive me if I fail to see the logic in raising a tax for the sole sake of paying down another one.
Democrats will tell you time and time again that they support the middle class. But, who are the middle class? Or maybe the better question is who exactly makes up the population of small business owners who would be subjected to this 4% tax increase? Without question those small business owners are largely middle class citizens. Even California Democratic Representative (pardon the redundancy there) George Miller understands full well the correlation between America’s small businesses and the preservation of a strong middle class as he pointed out in a July 2004 publication. But, while George Miller cites a squeeze on small business growth as a result of congressional Republicans proposing to eliminate loan programs which provided such entrepreneurs access to capital he, all too conveniently, fails to heed his own advice, with respect to a 4% tax increase. These small businesses are a key component to running the engine of our present economic success while also attributing to creating 3 out of every 4 new jobs in America.
When government cuts taxes, the American people work more, save more, invest more, spend more; creating a greater demand for goods, and as a result the economy grows. And yet, despite all that success, here go those “middle class & working family” Democrats with another ingenious plan to kill the goose laying the golden eggs.
7 comments:
Christ, SOAP. again yopu write more than you think:
NOBODY got ANY money "back" from the tax cuts - the federal government borrowed $hundreds of billions in new loans allowing it to giove away money to stimulate economic activity. This is rudimentary macroeconomics: to counter a recession, you run government at a deficit to inject new money into the economy.
Problem here is Republicans have been doing this every year for over three decades and chicken Democrats are afraid to pull in the reigns.
SOAP -
Think about this: we're spending $150 billion of borrowed money a year in Iraq and Afghanistan, most of it finds it's way directlty back home. We've also been building new homes on credit like mad: about 1 million new homes sell each year - there are 4.5 million on the market.
So of course our economy is going to act "strong" with that amount of spending on credit.
WHOOO HOO! GET OUT THE VISA, darlin! DRINKS FOR EVERYONE! Jesus is A COMIN' HOME!
Like you said Soap, "here go those “middle class & working family” Democrats with another ingenious plan to kill the goose laying the goldenegg"
And that's why our middle class is disappearing.
Tis true...
When you consider that a Tax Foundation Study of 2004 data found that an estimated $1.03 to $1.53 trillion dollars (that’s right I said TRILLION) was redistributed from the two highest income quintiles to the three lowest, I guess we'd have to wonder why given this massive redistribution of wealth to those at the bottom, we still have such great economic gap (a disappearing Middle Class as you say)??
Dare I say it might be a lack of will; a lack of progress?? Those are not things which can be purchased. Tis why young troubled athletes granted multi-million dollar professional contracts end up being troubled adults (certainly no shortage there).
The net transfer would be considerably less. The wealthier one is, the more government services one uses or benefits from: a stable currency, courts of law, an educated workforce, efficient transportation system, corporate welfare, subsidization of under-paid employees ...
Goes both ways.
Are you implying wealthy individuals not only use more government services but that they benefit from government services more?
No, I'm not implying that, I'm explicitly stating it!
Well, your assumption couldn't be further from the truth. As John Adams once said, "Facts are stubborn things..." as you'll soon learn Erik. Don't say I didn't warn you.
This from my Fair Taxation: A Taxing Conundrum? (Hardly) Op-Ed.
...a separate special report recently released by the Tax Foundation, which fully supported the findings of the Minnesota tax incidence’s statistics, “America’s lowest-earning one-fifth of households received roughly $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle-incomes received $1.30 per tax dollar (nearly breaking even), while America’s highest-earning households received a mere $.41 in government spending to their tax dollar.” The report further found that “government spending targeted at the lowest-earning 60% of U.S. households is larger than what they paid in federal, state, and local taxes.”
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