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  • When a 'Tax Cut' Isn't a Tax Cut

    real tax cuts stimulate economy

    “So my whole goal over the next four years,” President Barack Obama said Monday night at the end of his first prime-time White House news conference, “is to make sure that whatever arguments are persuasive and backed up by evidence and facts and proof, that they can work, that we are pulling people together around that kind of pragmatic agenda.”

    The question, the last of 13 President Obama fielded,  had to do with the future of bipartisanship after the “stimulus” fight — and how he intends to work with Republicans in Congress who opposed him this time almost to a man.

    So: President Obama says he can be persuaded by evidence, facts and proof.

    And yet Obama brushed aside all three when he allowed the left, gleefully spearheaded by Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi, to roll over American taxpayers and their futures with a trillion-dollar juggernaut assembled with disproven old theories and emotions instead of facts.

    As Obama correctly noted, some conservative critics (including a few here at Heritage) initially “were pleasantly surprised and complimentary about” his inclusion of tax cuts in drafting what turned out to be a trillion-dollar spending plan.

    But there are tax cuts and then there are tax cuts, Mr. President. That’s why conservatives are so concerned about the kind of  “tax cuts”  you and congressional Democrats emphasize.

    As Rea S. Hederman Jr., assistant director of The Heritage Foundation’s Center for Data Analysis, observed:

     It’s commendable that President Obama wants a sizable portion of the stimulus package to contain tax cuts. However, the package should have tax cuts that are most likely to boost the economy. The tax cuts that are part of the stimulus bills and supported by President Obama are a bad deal.”

    Heritage experts assert that any realistic, practical plan to prime the economy’s pump must emphasize permanent reductions in income tax rates for individuals and businesses – not, as liberals advocate, one-time or short-term tax rebates and credits combined with upward of $1 trillion in deficit spending.

    Reducing tax rates on Americans’ income — such as President Bush’s  2003 tax cuts and those championed roughly 20 and 40 years earlier by Presidents  Reagan and Kennedy – demonstrably creates incentives to work, innovate and invest. The evidence of history and decades of research bear this out.

    Obama and most congressional Democrats err when they “rely on increased consumer spending instead of boosting investment and saving,” Hederman explains. “Similar proposals that rely on the same thinking failed to boost the economy, and it’s unlikely history will change course this time.”

    Liberals this time largely pinned their hopes on a refundable, two-year tax credit for low- and middle-class Americans applied to the first $8,100 of earnings. It amounts to $400 per person per year, or $800 per couple – about  $10 more per weekly paycheck.

    There’s really only one difference between these proposed “tax cuts” and last year’s ineffective tax rebates from President Bush and Congress, Hederman says: Rather than wait for a government check in the mail, taxpayers would see a little less of their money temporarily withheld from their paychecks. They wouldn’t see it as a permanent increase in income to save, spend or invest as they please. No rush to buy an iPhone or plasma TV, much less start or expand a business.

    Among the taxpayer outrages hidden away in the trillion-dollar spending plan was a tax credit to provide hundreds of dollars to low-income adults who don’t pay any income taxes. For the first time, the government would hand out money — $23 billion the first year — to able-bodied men and women who don’t have dependent children.

    But it gets worse, as Heritage welfare expert Robert E. Rector first disclosed: The House and Senate “stimulus” bills would undo the historic welfare reform of 1996 by heavily rewarding states that increase the size of their welfare caseloads.

    Beginning with more than $260 billion, the package would — if unchecked — add nearly $800 billion in new means-tested welfare spending over 10 years, Rector calculates.

    This welfare “spendathon” amounts to $22,500 for every poor American and would cost, on average, more than $10,000 for each family that pays income tax, warns Rector, whose work provided the foundation for the ’96 reforms achieved by President Clinton and a Republican Congress.

    Most American workers, of course, make more than $8,100 a year. So tax credits capped at that amount won’t reward them for working more.

    Reducing the marginal tax rate would, though, especially for lower-income Americans. By also reducing tax rates on business income, Heritage’s research and analysis shows, President Obama and Congress could curb the recession and spark creation of 1.3 million new jobs by next year, with 4.8 million new jobs by 2013.

    We’ve got far more  evidence, facts and proof than the mega-debt spenders do, Mr. President. If you’re curious and persuadable, just ask.

    Posted in Ongoing Priorities [slideshow_deploy]

    16 Responses to When a 'Tax Cut' Isn't a Tax Cut

    1. Pingback: frankhagan.com » Tax Holiday: A Real Stimulus

    2. Johnn Rail says:

      You just don't get it. No economy can survive with a growing concentration of wealth and income at the top, which your proposals would foster.

    3. Ozzy6900, CT says:

      Another poster doesn't understand the realities of business! Mr. Rail, who provides you with a job, the rich man who owns the business or the homeless woman needing a car and a kitchen? Lear economics BEFORE you post your nonsense about "redistribution of wealth". The economy works from the top down, not the bottom up! They tried running the economy from the bottom up in the 1930's…. didn't work too well, did it?

    4. Rick Copple, Marble says:

      This bill is misnamed. It isn't a stimulus for the economy, it should be called, "The Welfare and Government Socialist Stimulus Act of 2009."

      If it looks like a duck and quacks like a duck, it's a duck, no matter what title is plastered on it.

      Obama's campaign slogan should have been, "Change we can fear." This is turning into a horror story.

    5. Pingback: « RockStarKevin

    6. Leigh Anne Stamm, Oh says:

      Ozzy6900: I agree with you! There seems to be a really dangerous mindset–us against them, the tried and true concept of class warfare. I think that President Obama really used this principle to his advantage. And he had plenty of takers.

    7. Sgt William Butler U says:

      Please don't buy into this spending debacle! There is nothing stimulus about Obama's plan! Imagine that you could erase your debt by simply pulling out your mastercard. We are in deep shit and this country is one flush away from septic hell. The fleecing of America is in full swing! I do believe that there will be a second American Revolution. This time it will resemble the French Revolution. God help us!

    8. Karen, Georgia says:

      Maybe it's me, but I don't understand the purpose of the stimulus plan. Is it that they want EVERYONE on welfare? Is that the goal? To have everyone dependent? Because the people who actually work for a living are going to get fed up paying for these loafers (I see a lot of it now and I cannot imagine having to see more of it in my face–all of these people able to buy things I cannot buy all the while on welfare!) And if the goal is to have everyone on welfare, I want to know how that benefits anyone. I don't understand this at all.

    9. jjay - Louisville, K says:

      Yep! I AM tired of supporting the loafers, especially those at the top being rewarded with millions of dollars for leading their bank or business into bankruptcy. If they are the best that America has to offer, then capitalism needs some serious adjustments.

      One of those adjustments is accountability for what individuals have done, no matter what 'position' s/he has; economically, politically, socially and legally.

      When we get back to applying our justice system equitably, then some citizen confidence may return.

    10. The Common Conservat says:

      Why not change the entire tax structure to something VERY radical and what I call "Inversely Progressive". It would reward those who INCREASE their income and punish those who rely of Government Handouts (entitlements) for their entire existence. The ENTIRE proposal is here:


      This idea would revolutionize the ENTIRE structure of Government as our elected officials could no longer "buy votes" with the government "goodies" and would be forced to do everything they can to make sure that people and businesses are profitable. The current tax system punishes success. This idea REWARDS success and rewards achievement.

    11. Sheila Byrne, Sacram says:

      Isn't there any way to get the Pres out of office. He is scary. I've heard mental patients that make more sense than he does. An army of welfare recipients is no fiscal improvement over a bunch of crooked CEOs who could have gone to jail if the wind had been right. We lack ethics. If we had ethics we wouldn't have so many crooked self-serving politicians.

    12. Citizen X USA says:

      Just a thought;Instead of the current IRS tax system ,we the people, should pay a FED tax on all durable goods we purchase.That way the loafers would have to pay back into the system.It would simplify the current Tax system.

      Former Congress and Senate members should not be given their full pay for life when they leave office,they should not get special med. benefits either and their pay raises should reflect the actual cost of living increase that the rest of the citizenry,if lucky enough,gets.That might save some money.They should pay into the system like the rest of us and jump on Medi Care at age 65 just like the rest of us.Presidents included.Politicians don`t run for office for the money and perks to they?, they run because they care and want to make a difference,right;).yeah!right.


    13. Aaron, Indiana says:

      I like the comment Citizen X wrote about paying a tax on goods rather than income. This would be a realistic way to enforce equitable taxation. It would also encourage people to maintain their purchases and recycle whenever possible. The individual who can afford to buy a new car every 5 years will pay more taxes than the "poor" individual who maintains one vehicle for 20 or more years. If businesses paid taxes on goods purchased they would be more inclined to recycle whenever possible. This would be a taxation policy that should apeal to liberals and conservatives alike. In some ways it would be a tax on waste and excess. This would help with the environment and make the "rich" consumers pay more taxes. It would reward those who invested rather than spent. It would remove the tax benefit that businesses derive from being in debt and encourage fiscal responsibility. It would be interesting to discuss the change in dynamics that would occur with this adjusted system of taxation. The more I think about it the more issues I see needing to be addressed. What kind of businesses would produce the most income for a state? Would you tax raw materials and components? Would it be a flat tax or one based on product retail value? How would you tax services with no material product? I think you would have to have one percentage charged for retail sales and another for wholesale items or products with a very low markup. There are many variables that must be considered before making a major policy change in our system of taxation but it is not outside of reason. It wasn't that many years ago that there was no income tax and our government received money through other taxes.

      The need to require accountability from our elected and nonelected government officials is another statement I agree with wholeheartedly. Of course we get the government we as a society deserve. Since we have become fixated on aquisition of material goods and complacent in accepting the excesses of our government we can only expect that they will push us as far as they can.

    14. tim Charlotte nc says:

      I cant wait to ruch out and spend my extra 8 dollars a week!!This is the working class tax cut that Obama promised.This will really help the econmy.I might buy a pack of smokes with this.Since they are clse to that price anyway.What a joke if it weren't so trajic>>>

    15. Pingback: Obama to introduce another business tax cut

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