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When a 'Tax Cut' Isn't a Tax Cut
Posted By Ken McIntyre On February 12, 2009 @ 5:16 pm In Ongoing Priorities | Comments Disabled
“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.
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 .
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2009/02/12/when-a-tax-cut-isnt-a-tax-cut/
URLs in this post:
 President Obama says he can be persuaded by evidence, facts and proof.: http://www.nytimes.com/2009/02/09/us/politics/09text-obama.html?_r=1
 roll over American taxpayers and their futures with a trillion-dollar juggernaut assembled with disproven old theories and emotions instead of facts.: http://www.foundry.org/2009/02/11/the-largest-permanent-redesign-of-the-federal-government-since-the-great-society/
 (including a few here at Heritage) : http://www.heritage.org/Research/Taxes/sr0029.cfm
 observed: http://www.heritage.org/Research/Economy/wm2247.cfm
 permanent reductions in income tax rates for individuals and businesses : http://www.heritage.org/Research/Economy/wm2191.cfm
 demonstrably creates incentives to work, innovate and invest.: http://www.foundry.org/wp-content/uploads/2009/01/2003taxcuts2.jpg
 But it gets worse, as Heritage welfare expert Robert E. Rector first disclosed: : http://www.heritage.org/Research/Welfare/wm2287.cfm
 Heritage’s research and analysis shows, : http://www.heritage.org/News/economic-stimulus.cfm
 just ask: http://askheritage.org/Default.aspx?utm_source=HeritageWebSite480x230&utm_medium=Banner&utm_content=AskHeritageCreative&utm_campaign=2009RadioCampaign
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