Copacabana

I can explain it to you again, but I can't understand it for you

THE IMMINENT TAX BOMB
(From Boortz)

There was an article recently in the Wall Street Journal written by John F. Cogan and R. Glenn Hubbard. Cogan is a senior fellow at the Hoover Institution and Hubbard is the dean of Columbia Business School. Here's what they had to say. Although Hillary Clinton and Barack Obama believe that tax increases are needed in order to restore a balanced budget and finance entitlement programs, "these claims fail budget arithmetic and economics. Worse, they raise serious questions about the nation's broad fiscal policies and its commitment to economic growth."

We currently stand on the edge of a very large tax increase if Congress fails to continue the Bush tax cuts. If these tax cuts expire, the personal income tax burden will be driven up by 25% ... that will be its highest point relative to GDP in history. It will be the largest increase in personal taxes since WWII, and it would be twice as large as Lyndon Johnson's attempt to fight the war of poverty and finance the war in Vietnam. And it would be more than twice the combined personal income tax increases under George H. W. Bush and Bill Clinton

So Hillary and Obama and other Democrats will tell you that these tax cuts on the evil rich must expire in order to balance the budget and finance the retirement and health-care promises made to the baby-boom generation. "But a tax increase is neither wise nor necessary," according to the authors. The economic damage caused by tax increases will prevent promised revenues from being realized ... and higher revenues will encourage Congress to continue its wasteful spending. In other words, even if the Congress has more money to balance the budget, it won't do it because it is so caught up in pork-barrel spending.

A big screaming amen to that.

So if we let things continue at the current rate, the federal budget deficit will increase this year because of the economic slowdown. But ... and here's the big "but" that many Democrats don't understand ... "as the economy enters a recovery phase, raising taxes would choke off the recovery. The right policy, for both the economy and the budget, would be to make current tax rates permanent well before the scheduled increase. Giving investors greater certainty that current tax rates will be maintained will spur investment and aid the economic recovery, as it did in 2003. Federal budget balance will be achieved once the economy is again operating on all its cylinders."

posted by Lola @ 2:48 PM