RatcliffeBlog - Mitch Thinking Out Loud

Muddled thinking taxing the American...

Muddled thinking taxing the American economy

Joining the chorus about the Bush tax cuts (a little late, but hopefully the more analysis now will lead to defeat of the next round of cuts) comes from The Economist:

IT IS hard to object to tax cuts—particularly when you are about to receive one. However, even the most conservative American should pause to reconsider the “economic recovery bill” concocted by Congress and George Bush that will hand back some $350 billion over the next decade. Sadly, this giveaway is disingenuous and also something of a gamble.

Mr Bush has muddled up two sensible ideas: the short-term need for a fiscal stimulus to pep up the faltering American economy; and a long-term fiscal reform—namely shifting the tax burden away from investment. Mr Bush has got rid of inheritance tax, at least temporarily. This time his big target was dividend income, which is taxed twice—as corporate profits and as personal income. He wanted to eliminate the latter; Congress has opted to cut the rates roughly in half.

By trying to smuggle in dividend-tax reform as the best way to give the economy an immediate jolt, Mr Bush has improved neither the stimulus nor the long-term fiscal position.

Let's make a deal, Mr. President. Before you propose more tax cuts, demonstrate that the 2001, 2002 and 2003 cuts have been of some value to anyone who didn't donate to your campaign. - Signed, a disgruntled American business-owner.