December 9, 2008


Instead Of Spending, Cut Taxes (Brian S. Wesbury and Robert Stein, 12.09.08, Forbes)

Why not eliminate corporate taxes all together? During fiscal year 2008, the U.S. Treasury collected $304 billion in corporate taxes--elimination would cost roughly half of what the Obama stimulus plan may cost and just 30% of this year's budget deficit. Imagine how the elimination of corporate taxes would change investor perceptions about investment, even for auto companies. Another option would be full (100%) expensing for any investment made by any company in 2009. This would encourage spending and investment.

Individual income tax receipts were $1.15 trillion in fiscal year 2008. A 50% reduction in tax rates would cost less than the Treasury's TARP proposal. Lower tax rates would take the sting out of any pay cuts that unionized workers at auto companies might be forced to accept. Another option would be to allow all capital losses by individuals to be written off in full for 2008, rather than limiting them to just $3,000. This would limit the selling of profitable investments this year to absorb those losses for tax purposes only.

There are many positive alternatives (including these) that are not being formally discussed. This is a mistake. And more to the point, the last time the government tried to bail out the economy with drastic action, we ended up in the Great Depression. If we really want to "change" the way government and the private sector interact, why is the U.S. government still trying the same old policies that failed in the past? Tax cuts have worked before, so if deficits don't matter, why not try a different kind of surge--a private-sector, incentive-creating one?

It would certainly make more sense to give sub-prime borrowers money than those who made such exploitative loans. That way the banks would get their money but people would get their homes.

Posted by Orrin Judd at December 9, 2008 8:30 AM
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