DEMOCRATS IN DISARRAY ON ECONOMY (RNC Research)

______________________________________________________________________________________

“[I]t Is Unclear Whether Democrats Can Unite Behind Specific Stimulus Proposals. While Some In The House Criticized Bush’s Plans To Reduce Taxes On Dividend Income, Some Senate Democrats Have Embraced Such A Move.” (Bob Kemper, "Democrats Assail Bush On Economy, War On Terrorism," Chicago Tribune, January 4, 2003)

_______________________________________________________________________________________

President Bush’s Growth Proposals Will Spur Consumer Spending, Promote Small Businesses, Increase Consumer Confidence And Extend Unemployment Assistance. Central elements of the President’s proposal include: 1. Accelerating the 2001 tax cuts to increase the pace of the economic recovery and job creation; 2. Promoting investment by individuals and businesses that will lead to economic growth and job creation; and 3. Delivering critical help to unemployed citizens. (President George W. Bush, Remarks To The Economic Club Of Chicago, January 7, 2003; “Taking Action To Strengthen America’s Economy,” The White House, January 7, 2003)

“Senate Democrats Have Not Generated [An Economic] Plan Of Their Own Yet.” (Louise Schiavone, CNNfn’s “The Money Gang,” January 7, 2003)

Senators Kerry And Baucus At Odds With Fellow Democrats Over Ending The Double Taxation Of Dividends. While Kerry has endorsed the measure and Finance Committee Ranking Member Baucus is open to ending double taxation of dividends, Senators Daschle, Lieberman, Edwards & Reid all oppose the proposal. (Senator John Kerry, Remarks To The City Club Of Cleveland, December 3, 2002; Jonathan Weisman, “Senior Hill Democrat Offers Tax-Cut Plan,” The Washington Post, December 20, 2002; Senator Tom Daschle, Democratic Response To The President’s Weekly Radio Address, January 4, 2003; Senator Joe Lieberman, Press Release, January 7, 2003; Senator John Edwards, ABC’s “This Week,” January 5, 2003; Senator Harry Reid, NBC's “Meet The Press,” January 5, 2003)

Democrats Have Advanced Competing Proposals For Encouraging Growth Among Small Businesses. While Senator Lieberman proposes an information technology investment tax credit, Senator Kerry advocates a $250,000 small business tax deferral. Senator Edwards wants to increase by 50% the current investment depreciation bonus while Gephardt calls for a one-time tax incentive for company investments. Still, House Democrats propose doubling the total amount small businesses may expense for new investments made in 2003. (Senator Joe Lieberman, Remarks At NASDAQ MarketSite, October 18, 2002; Senator John Kerry, Remarks To The City Club Of Cleveland, December 3, 2002; Senator John Edwards, Remarks To FORTUNE Global Forum, November 12, 2002; Representative Dick Gephardt, Remarks To Economic Policy Institute, October 15, 2002; House Democratic Economic Stimulus Plan, January 6, 2003)

Democrats’ Proposals For Tax Relief For Individuals And Families Run The Gamut.

--While House Democrats propose a one-time, refundable income tax rebate, Senate Democrats have failed to endorse a tax rebate. (House Democratic Economic Stimulus Plan, January 6, 2003)

--Senators Kerry and Lieberman favor a payroll tax holiday while the House Democratic stimulus plan rejects payroll tax reductions. (Senator John Kerry, Remarks To The City Club Of Cleveland, December 3, 2002; Senator Joe Lieberman, Remarks At NASDAQ MarketSite, October 18, 2002; House Democratic Economic Stimulus Plan, January 6, 2003)

--Other Democrats suggest increasing the minimum wage or providing a $500 energy tax credit is the right course of action. (Representative Dick Gephardt, Remarks To Economic Policy Institute, October 15, 2002; Senator John Edwards, Remarks To FORTUNE Global Forum, November 12, 2002)

HOW THE TAX SYSTEM REALLY WORKS

A good time to resurrect this description of "how taxes work"...

This is a VERY simple way to understand the tax laws. Let's put tax cuts in terms everyone can understand.

Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this.

The first four men, the poorest would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18; and the tenth man, the richest would pay $59.

That's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day; the owner threw them a curve (in tax language a tax cut).

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." So now dinner for the ten only cost $80.00.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his "fair share?"

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would end up being PAID to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

So the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12; leaving the tenth man with a bill of $52 instead of his earlier $59.

Each of the six was better off than before. And the first four continued to eat for free.

But once outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20," declared the sixth man, but he, pointing to the tenth. "But he got $7!" "Yeah, that's right," exclaimed the fifth man, "I only saved a dollar, too. It's unfair that he got seven times more than me!" That's true!" shouted the seventh man, why should he get $7 back when I got only $2? The wealthy get all the breaks!" Wait a minute," yelled the first four men in unison, "we didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up. The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered, a little late what was very important.

They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!

And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.

Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic!

NOTE:

The copy I received of this credited a Professor of Business Law as the author. When I complemented him for his wisdom via e-mail, he said: "I am unaware of the true author's identity, which is unfortunate, since the piece has generated considerable interest. Unfortunately, one of my students sent it along and erroneously contributed the authorship to me."

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.