PERMANENT MARGINAL INCOME AND CAPITAL GAINS TAX RATE CUTS.
Productivity growth is what counts for economic growth. You can get productivity growth by lowering the penalties (taxes) on capital and labor applied to productivity growth.
The main way to get the economy to apply more investment (capital) towards productivity improvment is to lower the taxes on the returns you get when you invest for productivity. That means a Capital Gains Tax Cut, and a Corporate Income Tax Cut. Lower Corporate Taxes works for all of Europe (a socialist haven, BTW), it will work here.
The main way to get people to be more productive (i.e. work more) is to decrease their marginal income taxes. That causes actual economic growth because people are penalized less for being productive, so they work more.
The really productive, expanding and hiring business owner needs to see improved incentive (i.e. lower income taxes) before he'll work harder.
Tax cuts that put money in people's pockets to spend gets spent. That doesn't improve productivity. It moves money from the Government's spending account to your spending account, surely a salutory move since the government usually just immolates the money.
Nonetheless, spending doesn't cause growth. Keynsianism is dead.
Investment for productivity improvement causes growth. Supply Side Economics works every time it is tried.
Rather than a political-pander-tax-cut, let's have a tax cut that works:
PERMANENT MARGINAL INCOME AND CAPITAL GAINS TAX RATE CUTS.
That would help, but thanks to a gutless GOP Congress and lack of leadership from Bush, it isn’t likely to happen.
“PERMANENT MARGINAL INCOME AND CAPITAL GAINS TAX RATE CUTS.”
I’ll go along with you on half of that. The capital gains rate is already low comparatively speaking. The marginal tax rate on someone who is upper middle class and who works to earn a dollar is somewhere around 38-45% when you add in social security and state taxes. Said another way, someone who earns a dollar pays 38-45 cents in taxes whereas someone who has a capital gain pays 15-20 cents, tops. That’s a significant disparity that is unjust.
When the effective marginal tax rate on earnings is dropped to somewhere in the region of capital gains, then I’ll be interested in hearing about the need for a further capital gains tax cuts.