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5 Myths About the Bush Tax Cuts


By Kelly Thomas - Posted on 01 August 2010

Link from The Washington Post. This is a very good, fact-based article highlighting five myths about the Bush tax cuts. Since we can expect much more debate on this topic in the coming months, I thought it might be helpful to become more informed. Here are the myths explored in the article:

1. Extending the tax cuts would be a good way to stimulate the economy.

2. Allowing the high-income tax cuts to expire would hurt small businesses.

3. Making the tax cuts permanent will lead to long-term growth.

4. The Bush tax cuts are the main cause of the budget deficit.

5. Continuing the tax cuts won't doom the long-term fiscal picture; entitlements are the real problem.

I know the likely scenario will be that the tax cuts will remain for couples making under $250,000 and expire for the rich. Personally, I think they should consider lowering the cut-off to couples making $200,000 or even lower. It would go a long way in cutting the deficit and I don't think it would negatively impact such couples in devastating ways. Basically, we would be returning to rates matching the Clinton years and those were pretty good years for our economy if I recall correctly. As someone who would be "spared" of a tax increase under President Obama's plan, I would be willing to sacrifice my tax cut for the good of the nation and if it would mean saving needed programs. What I do know is that the typical over-spending (military budget, wars, etc.) and demands for tax cuts is a pattern we can no longer indulge in. Something must change if we are to return to the days of surplus, or even break even.

Until I read the article, I agreed with all but number 4. Technically, it is true that the Bush tax cuts may not be the MAIN cause of the budget deficit, but it is significant. Interest on the deficit and the cost of two wars have taken a toll as well. If Bush had only asked the American people to make sacrifices after 9-11, we would have risen to the occassion, felt pride in ourselves as a nation, and might not have dug ourselves into the financial hole we find ourselves in today. Bush might have had a much different legacy, and we would be stronger as a nation. Instead, he encouraged us to spend. Also, I think we should reward companies who keep jobs in America with tax breaks while increasing taxes for those who send jobs overseas to save a buck. We should also make VERY public the names of those companies who have moved their "headquaters" to obscure foreign locations avoid taxes. We as consumers have much more power than we realize. If we want a stronger economy, we need to "vote" with our dollars and support those companies that contribute to OUR economy.

Here's the biggest question of all regarding the Bush tax cuts:

If they were so great, why did the legislation build in a sunset provision in the first place? Can anyone who rails against the expiration and blames the current Administration and Congress please answer that simple question for me?  Argghhhhh....

On the thread topic, there was an intriguing Op/Ed over the weekend written by David Stockman, Director of the OMB during Reagan's administration.  Truly outstanding read. However, since there's a chance you might not take the time to read the piece I'll bullet point it:

  •  Supply Side tax cuts for the wealthy are based on “money printing and deficit finance
  • Republicans abandoned the belief that prosperity depended upon the regular balancing of accounts — government, trade, central banks private households and businesses.

    • Once fiscal conservatism was abandoned, it led to the serial financial bubbles and Wall Street

  • Who is to blame? Milton Friedman. In 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold.

    • According to Friedman, “The free market set currency exchange rates, he said, and trade deficits will self-correct.” What actually occurred was “impossible.” Stockman calls it “Friedman’s $8 trillion error.

 

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