Free eBook

Great Democrat Tax Cuts

Great Democrat Tax Cutters -- Who Knew?As John Boehner and Mitch McConnell’s unified minorities drag Obama kicking and screaming toward actually cutting taxes for a change, it seems like a good time to discuss the true relationship between tax policy and the economy.

When I turned on the TV this morning, I was “greeted” by that mean faced woman Claire McCaskill screaming things like:

“I don’t know how anyone can keep a straight face and say they are for deficit reduction while they insist on a permanent tax cut for the wealthiest Americans, completely unpaid for,” McCaskill said of the GOP stance in favor of giving tax cuts to everyone. “If they think it’s OK to raise taxes for the embattled middle class because . . . [Democrats] don’t give more money to millionaires, it really is time for people in America to take up pitchforks" (Source: St. Louis Beacon.)

It’s hard to say how many Americans are still buying this liberal lie that “tax cuts for the rich” grow the deficit, but I know it’s less than it was ten years ago. As discussed many time at Who Stole My Career?, lowering taxes on the wealthy frees up private sector capital and that alone grows businesses and jobs in America.

McCaskill is just one democrat and she will be facing a very tough reelection in 2012, but I suspect her voice will become a rallying cry for dems as they have now set up an epic campaign issues for the next election; to extend the tax cuts or not.

With this in mind, I challenge everyone who cares about the survival of the United States to learn the truth about tax cuts for the wealthy and deficit reduction and to make sure everyone you know does the same – our national survival depends on it.

Bookmark this article and forward it to as many people as possible, it's our best defense against liberal tax policy demagoguery.

Forget Reagan and Bush

Yes, the republican tax cuts in 1981 and 2003 did result in dramatic increases in the amount of tax dollars collected by the government in the subsequent decade, but I suspect this fact is less than compelling to a typical brainwashed liberal.

Rather, I would suggest that you brush up on the great democrat tax cutters of the past and share their history with your liberal friends.

The Great John F. Kennedy Tax Cut

JFK knew that liberal tax policies that came before him were stifling the economy. Specifically, President Hoover dramatically increased tax rates in the 1930s and President Roosevelt compounded the damage by pushing marginal tax rates to more than 90 percent.

Recognizing that high tax rates were hindering the economy, President Kennedy proposed across-the-board tax rate reductions that reduced the top tax rate from more than 90 percent down to 70 percent. What happened? Tax revenues climbed from $94 billion in 1961 to $153 billion in 1968, an increase of 62 percent (33 percent after adjusting for inflation).

According to President John F. Kennedy:

“Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now" (Source: Heritage Foundation.)

So McCaskill’s emotional whining about tax cuts for the wealthy increasing the deficit is proven patently false by the very actions of liberal icon John F. Kennedy. JFK slashed the tax rates “for the rich” and grew deficit reducing tax collections by 62%!

The Great Clinton Tax Cut

As good a story as the JFK tax cuts was, it’s pale in comparison to the great Clinton tax cut of 1997. As we now know, the tax collection tsunami that followed the Clinton tax cut was so powerful that it actually led to temporary budget surplus – which was something no one ever thought was possible.

The Clinton 2007 Tax Bill:

Lowered the top capital gains tax rate from 28 percent to 20 percent;
Created a new $500 child tax credit;
Established the new Hope and Lifetime Learning tax credits to reduce the after-tax costs of higher education;
Extended the air transportation excise taxes;
Phased in an increase in the estate tax exemption from $600,000 to $1 million;
Established Roth IRAs and increased the income limits for deductible IRAs;
Established education IRAs;
Conformed AMT depreciation lives to regular tax lives.

According to Treasury's original estimates, the 1997 tax cut was relatively modest, amounting to just 0.11 percent of GDP in its first year and 0.22 percent of GDP by its fourth year. In 2007, the fourth-year effect would be roughly equivalent to a reduction in the overall tax burden of about $30 billion.

Despite its modest size, tax cut advocates had high expectations for the tax cut's effects on the economy because the reduction in the capital gains tax rate was expected to unleash a torrent of entrepreneurial and venture capital activity. They were not disappointed.

In 1995, the first year for which these data are available, just over $8 billion in venture capital was invested.[5] Venture capital is especially critical to a vibrant economy because high-risk/high-return investment permits promising new businesses to blossom, rapidly spreading new technologies and new ideas into the marketplace and across the economy. Such investments, when successful, generate returns to investors that are subject primarily to the tax on capital gains. By 1998, the first full year in which the lower capital gains rates were in effect, venture capital activity reached almost $28 billion, more than a three-fold increase over 1995 levels, and by 1999, it had doubled yet again.

The explosion in venture capital activity cannot be credited entirely to the cut in capital gains tax rates, as the cut fortuitously coincided with technological developments that gave rise to the Internet-based "New Economy." However, the rapid development and application of these new technologies could not have occurred at such a rapid clip absent the enormous investment flows made possible largely by the reduction in the capital gains tax rate. This experience demonstrated yet again the truth of the axiom: The less you tax of something--in this case, venture capital investment--the more you get of it (Source: Heritage Foundation.)

It’s The Uncertainty, Stupid

Although Obama’s tax cuts are minor and temporary, they will give the private sector a ray of hope that’s been lacking since Nancy Pelosi took over as Speaker of the House in January of 2007 (the year the recession began).

I do think that the fiscal victory registered by Boehner and McConnell will provide comfort to business owners who are contemplating expanding in 2011. Moreover, I think that the two year extension provides a perfect agenda item for framing the 2012 elections.

If we can educate democrats and independents with the truth about tax cuts for the wealthy and deficit reduction, we may just be on the verge of a sustainable economic recovery in America.

Dave

Quote this article on your site

To create link towards this article on your website,
copy and paste the text below in your page.

Preview :

Great Democrat Tax Cuts
Tuesday, 07 December 2010

Who Stole My Career?

Add this page to your favorite Social Bookmarking websites