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  • Morning Bell: Cutting Taxes for Growth and Fairness

    Throughout his 1992 campaign, then-candidate Bill Clinton promised tax cuts for the middle class. By the time he was sworn into office in 1993, though, Clinton said he would have to “revisit” his tax-cut plan and was “absolutely mystified” that the media had perceived it as a major pledge. A year later Americans punished Clinton by electing the first Republican Congress in more than 40 years. President-elect Barack Obama also campaigned on a middle class tax cut, but so far, he seems intent on not repeating Clinton’s mistake. Yesterday on NBC’s “Meet the Press,” Obama reaffirmed his promise to cut taxes for 95% of working Americans:

    Well, understand what my original tax plan was. It was a net tax cut. Ninety-five percent of working families would get tax relief. To help pay for that, people like you and me, Tom, who make more than a quarter million dollars a year, would play — pay slightly more. We’d essentially go back to the tax rates that existed back in the 1990s. My economic team right now is examining do we repeal that through legislation? Do we let it lapse so that when the Bush tax cuts expire they’re not renewed when it comes to wealthiest Americans? And we don’t yet know what the best approach is going to be, but the overall thrust is going to be that 95% of working families are going to get a tax cut, and the wealthiest Americans, who disproportionately benefited not only from tax cuts from the Bush administration but also disproportionately benefited when it comes to corporate profits and where the gains and productivity were going, they are going to give up a little bit more.

    While it is encouraging to hear Obama plans to keep his tax cutting promise, there is much in his statement that is troubling — particularly his insistence on raising taxes on the individuals and entities “where the gains and productivity were going.” A government that raises taxes on the most productive parts of an economy impedes, not encourages growth. The Heritage Foundation sincerely hopes that Obama listens to his Council of Economic Advisers chairman Christina Romer closely. As a economics professor at the University of California at Berkeley, Romer published papers concluding: 1) tax increases harm economic growth; 2) tax cuts lead to greater economic activity; and 3) government spending has at best a small effect on stimulating economic activity.

    To best promote broad economic growth and stronger benefits for the middle class, Heritage’s memo to Obama on taxes recommends:

    • Reduce marginal tax rates and the total tax burden on taxpaying families: For most Americans, a pledge of “broad-based tax relief” or to “cut taxes” does not mean narrow tax breaks restricted to families who engage in activities that Washington decides are worthy. Instead of targeted tax relief for groups preferred by Washington, reducing marginal tax rates for all would provide larger incentives for work, innovation and entrepreneurship.
    • Cut taxes for everyone, and do not increase taxes on those who are most likely to save and invest: The income tax is already highly progressive. Those who earn more than $250,000 already pay about 48% of all income taxes, yet Obama is still promising to raise their taxes to have them pay an even greater share. On the other hand, 43 million tax filers — nearly one-third of the 135.7 million who filed in 2006 — paid no federal income taxes at all after credits, deductions and exemptions.
    • Lower capital gains taxes generally, not just on small firms: Small businesses and start-ups are important engines of job growth in our economy, and cutting capital gains taxes for them is an effective way to stimulate this sector because small and start-up firms depend on venture capital and invested savings. However, lowering taxes on only some capital investments is very difficult to apply in practice and likely to be counterproductive. Obama’s limited capital gains tax proposal would be difficult to implement, would make the tax code even more complex, and would be less effective in stimulating economic activity than you desire.

    Obama’s promise to cut taxes on 95% of Americans struck a strong chord with voters, and his pledge to lower the capital gains tax makes strong economic sense. But cutting taxes only for the selected groups Obama targeted in the campaign and then raising them for high-earners will not generate the growth America needs. Obama’s first priority when taking office must be to help stabilize a flagging economy, and that means lowering taxes for all Americans.

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    16 Responses to Morning Bell: Cutting Taxes for Growth and Fairness

    1. Gary Peterson says:

      Who are all these guys kidding on taxes.My New Year Resolution.Keep track of every penny I pay in taxes from taxes on each gallon of gas to take out and payroll.Wake up America,you are Tax Slaves.

    2. jim.levey, tabernacl says:

      how about the Heritage Foundation taking up the case that US rep. Gomert (?), R- Texas is proposing?

      a federal tax holiday to stimulate the econmomy where all federal income, payroll and SS taxes are waived for the months of Jan and Feb 09?


    3. Travis in VA says:

      Also embedded within Mr. Obama's "Meet the Press" showing was his inherent distrust of capitalism as history's prevailing economic structure:

      "If our entire economic policy is premised on the notion that greed is good and 'What's in it for me,' it turns out that that's not good for anybody. It's not good for the wealthy, it's not good for the poor, and it's not good for the vast majority in the middle."

      Let me be clear: Obama has not done anything – yet – that I fear. It is this underlying current in his way of thinking that scares me.

      From an OpEd I wrote: A free market allowed to operate without massive government intervention benefits all citizens. Isn’t it true that the world’s richest nations have better standards of living for all members of their society? Isn’t it also true that the world’s richest countries have the freest economies? Innovation thrives in free nations, due to capitalism. Consider this: how many Russian cars do you see on the road? Do any of you own a Saudi-made computer? Even with massive amounts of petrodollars, these countries’ governments cannot compete with free markets.

      It frightens me that our President-elect does not recognize this much; as Winston Churchill put it, "The inherent vice of capitalism is the unequal sharing of blessings; the inherent vice of socialism is the equal sharing of miseries."

    4. Bobbie Mueller, San says:

      As I remember from the nation's five economic "experts" who were on the I.O.U.S.A. panel, it was generally agreed upon that raising taxes to pay off the national debt would be painful but necessary. I don't think raising taxes to benefit those Americans in a lower income bracket is what they had in mind.

    5. Butch, Austin, TX. says:

      Tax cuts are obviously good as the effect is to put more money for consumption into the private sector where the "multiplier" effect produces the best impact. However, we must also be capable of producing and competing in the marketplace. The assumption that more consumption will automatically create jobs for Americans is no longer valid. Other countries are now providing the bulk of production and therefore, jobs. The long-term solution is for us to regain our ability to produce product that can compete. (i.e., auto industry). Regaining market competitiveness was the key to the Reagan economic development program, "Socrates". We, here in Texas, are reviving the computer-based intelligence system that powered Socrates during Reagan years, with the latest computer technology. This will enable Texas industry clusters to produce with competitive advantage. We would like your support.

      Butch Ackman, Austin, TX.

    6. Kevin E. vonMoses, G says:

      The concept of 'living within your means' has been lost on the Congress. As early as 1974 a proposed national sales tax projected that a 4% tax would cover outstanding 'obligations' with sufficient reserves to pay down the deficit.

      The entitlement mentality has extended the 'obligations', while the bent to steal more than the other guy has proliferated in Congress.

      Throw all of the bums out.

    7. Ken Jarvis - Las Veg says:

      What we need is a NATIONAL SALES TAX – NSTx

      ALL Taxes are paid = when the Purchase is made .

      No records to keep

      April 15 is just another day

      No fear of Audits



    8. Mayme, NY says:

      I agree with Kevin. Also, we have had years of tax cuts and I see no real benefit. Where did the money go? We just let a bunch of pyramid schemers ruin our country. NO conservative would ever allow banks and investment firms to leverage themselves the way they did. That was shear robbery of our years of work and effort. Capitalism is great, but it comes with responsibility to those you serve. You don't scam people and expect to stay in business. Let's face it, we have been robbed and it ain't poor people who did the robbing.

    9. Pingback: Morning Bell: Cutting Taxes for Growth and Fairness

    10. Ireland, NY says:

      As a tariff lawyer the idea that Obama expects to charge the rich, who generally hide large amounts of money in overseas or off shore accounts to avoid paying US taxes on their millions and billions. Since a large percentage of these wealthy 5% who are expected to pay for everyone else, are liberal in their politics, it will be interesting to watch whether Obama forces them to place those funds in US banks in order to collect their due taxes or whether he’ll create laws to tax those who try to hide their funds overseas and/or the transaction or do nothing.

      Its always interesting to watch those who are wealthy who are generally liberal in their thinking and vote democratic tend to move more funds out of US banks to off shore accounts to avoid paying US taxes increases imposed by their liberal friends in Congress and the White House. My job is to catch them in the act of moving their funds and expose those who are successful in their duplicity and force them to pony up those tax dollars.

      On this issue, I don’t believe Obama will force the issue with his billionaire and millionaire friends and do nothing. They backed his candidacy, gave him money, probably more than what is legal; so I doubt he’ll punish them for their deceit. This means he’ll do what Clinton did and tap into those who he campaigned to assist. Republicans call it lying and Democrats call it re-evaluating the situation.

    11. Pingback: Clinton On Best Political Blogs » Blog Archive » Morning Bell: Cutting Taxes for Growth and Fairness

    12. Mayme, NY says:

      Here is an example of the robbers, his company goes to pot and he thinks he should be paid for it. Fire him! I don't get to tell my boss what bonus I should get.

      "Merrill Lynch & Co. chief John Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered securities firm's compensation committee is resisting his request, according to people familiar with the situation.

      The committee and full board are scheduled to meet Monday to hear Mr. Thain's formal bonus recommendations for himself and other senior executives of the New York company."

    13. Dennis Aderholt Soci says:

      I know he promised a tax cut for 95% of all Americans, but I do not believe he thought about all that do not pay taxes, or get an income credit, and have not paid any taxes. His cut seems to only help those that are already a burden to the tax payer. Their cut would be even more than it is now. This cut comes in the form of a bigger check,from you and me the tax payer.

      I am a long way from a big earner, but those that earn so much are basically the ones that create jobs and opertunity for us that work. I personally would not want to work for a government that wants to tax me for better than 50% of my earnings. More taxes are not the answer to the problem we face. We need jobs and growth, more taxes will stop both. If the taxes keep increasing we will be closer to the socialist style government that seesm to be on peoples mind. Work for the state not for ourselves.

    14. Evan from Anchorag says:

      If cutting taxes helps the nation's bottom line, will cutting my donations to the Hertiage Foundation help their bottom line?

    15. Spiritof76, New Hamp says:

      Taxes are not the immediate problem that we face. Spending in Washington is! It doesn't matter what Obama thinks about taxes or does when he gets sworn in. US is bankrupt. Wake up people. They are printing like mad. Now, they want to run a car company. We are going to have double digit inflation, interest rates in the twenties and double digit unemployment- sort of triple double. Get ready now. Obama will use the opportunity to establish Soviet style socialistic country here and the middle class will be sharing poverty, not the wealth. I would rather have greed than Polit Beauro built on envy. You can control greed in a real free market but envy is self destruction.

    16. mike hutchings texas says:

      inflation was the hidden tax now it is the bailout mechanism entrenching its self in tune with the gangster mentality of politicians not fettered by law or constitutionality.they have in effect established a foothold deep in the territory of free enterprize and are pouring into the breach.they do not care if the ecomomy improves because it gives them the chance to shape the fear and bind the fearful to them.obama is a shill and cover for a wider purpose. the incident of the door and window company in chicago is a start.bank of america took the money from the man and now the man wants them to dance and jesse and his traveling shake down crew will be a greek chorus while obama nods in response to the tug of strings pulled behind the curtain.this is another show piece where the socialist demos will bind the shrinking blue collar base to them and the blue blood republicians will continue in the roll REAGAN attempted to shift them from and be grand gentlemen when we need brawlers.the industial base is being legislated out of existence by trade laws and environmental laws that have no base in reality.if you wanted to save the car companies trade equally with the nations who sell to us.stop locking up third world resources such as coal in africa and else where in the name of global warming when it is ready to hand and africa in need of electricity.why is steel made here more expensive than that made abroad when we send them the scrap metals to make it then ship it back.unions have become so corrupt that they will not fight for the laws that would expand employment for thier members. legacy costs for pensions and insurance can not be borne by buisness any more than social secrerity can be carried by tax payers.it is bad buissness and will not work because goverment and the new age mobsters who have earned thier degrees have decided that they know justice and will see that it is dished proper.they cream thiers off the top and then comes the time when there is nothing left to steal and they maintain thier places by bailing out who they deem needy and force it on others who do not want it.in this banking crisis(manufactured by the way i suppose we should should put a number of dollars to it and count it part of the GNP so the obamanites can claim at least one healthy industry)the smaller healthier banks will be drawn to the orbits or out right absorbed by the larger.examine what happenned in the crisis framed by the keating five you will find this true.entire areas of the country particularly in the west were absorbed.i read an article this past week stating that power will not corrupt contrary to the old saying. i believe the author of it by the point he made disproved his premise.the road to power in washington stretches over seas and the imperialism of the green gagsters( cap and trade, carbon emmissions take your pick) shovels what ever grade of bull they can sell down gaping the maws of a liberal electorate weaned on late night comics and saturday night live.all these weapons to hand and the republicians wont dirty themselves by picking up the obvious issues favored by 70 and 80 percent of the people.the travesty of what is being done to black americans regarding education leaves the field of battle to the ilk of the jacksons and sharptons and race baiters who guard thier ghettos with the ferocity of SS KOMMANDOS.fredrick the great of prussia said he who holds everything holds nothing.he did not mean give up.he established a base and built on it.the republicians in this edition do not have the guts to do that lest they offend and the enemy always needs to be offended to get and keep his attention. treat the left like what they are and deal where you have too. make a plan and build a force to put behind it and take them down.it is as simple as watering the seeds of self destruction they sow. you can gather enough blue collar gardeners to grow them up and use the produce and then get out of the way of real people and lets take back what has been lost for the good of the world its self. we are its last best hope and free people the greatest product we can export.stop treating the third world(black africa in particular)like colonies still exist.you may not like what they grow into but grow is the word then shape the nation accordingly and that does not include wailing your sorrow at each opportunity.you will not find perfection this level of creation. what you will find is life being lived that you can not control and the need for a military to manage borders lest you cease to exist and all your B.S.notions about the evil white man and the arrogant persistence of the noble savage concept that is ingrained and drummed into the heads of children till they rattle will be revealed for the danger that it is.the west europeans must take more of thier defence and be jarred out of thier comfort zone and thier military must be(save for the brits)something other than a joke.last i looked the united nations could not run faster in the congo.still another joke being used as a cloak to control energy supplies using global warming.i do not have time to detail the idiocy we are treated to by pretty mobsters who can legislate themselves out of jail.for GODS sake tell the truth about this great green nonsense bailout machine and who is driveing it and why.

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