Sunday, January 20, 2008

Tax Cut Inflation

In 2001 President Bush wanted to cut marginal income tax rates for the top income brackets. He also wanted to eliminate the estate tax and reduce the capital gains tax. To help push this through he offered a tax "rebate" of $300 for singles and $600 for couples.

Now, in 2008 President Bush wants to make those tax cuts permanent. To do this he is offering a tax "rebate" of $800 for singles and $1600 for couples. Now that is either a indication of just how much inflation their has been in the last seven years, or it is an indication of just how weak the case for permanent tax cuts, and Republican hopes this fall, are.

I know that the Administration has said that making the tax cuts permanent is a high priority this year, but they have insisted that the "rebate" is a separate issue. They claim that the "rebate" is strictly a stimulus package aimed at holding off the oncoming recession. How much do you want to bet, that before this stimulus package is passed this spring, permanent tax cuts is the concession that the hapless Democrats give up to get some one time cut in the social security payroll taxes.

Another interesting point related to this stimulus package. It appears that politics have finally returned to the pre 9-11 world. The economy is in a crunch, Republican's want another tax cut and a tax "rebate" to buy some voters this fall. All of this has little to do with 9-11. It is of course related to the totally wasted Billions of dollars that have been poured into Iraq, but that will not be talked about this spring. Further tax cuts, which will be touted as temporary but will end up being permanent, will further weaken our fiscal health which is the root cause of our current economic malaise.

So, while this plan might offer some temporary relief, and will surely improve the publics image of the Republicans, it will not help us in the long run. What we need is a increasing manufacturing base, increasing wages and investments into our public infrastructure. Tax cuts will not give us these things. Enjoy your $800 or $1600 it may be the only raise you get for some time.

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