Thursday, August 06, 2009

Tax Cuts=Economic Boom, Tax Hikes=Recession!

History has shown us time and time again that tax cuts lead to economic booms and tax hikes lead us into deeper recessions/depressions. Yet, liberals seem to like government dependency so that means sucking away more of your money, no matter what the damage. Investor's Business Daily nails it again in the following editorial, Revenue Plunge Is Nothing New. They point out exactly what I'm learning in Amity Shlaes' book, The Forgotten Man.

Here are some excerpts from the IBD editorial:
As we've noted repeatedly, this wasn't an isolated instance. Tax cuts in the 1960s, 1980s and even 2000s led to rising economic output. Usually, they led to higher tax revenues. By contrast, tax hikes almost always bring the opposite — lower output, or even recession, and slowing tax receipts.

It's shocking that today's policymakers, searching desperately for revenues to fund a $10 trillion expansion in federal government, seem willfully ignorant of such clear lessons in our history.

As Mellon put it, "It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the government, and that more revenue may actually be obtained by lower rates." And yet, that's the truth.

We mention this because it seems that we're now heading down the same well-trodden path to fiscal and economic ruin. As Phil Kerpen, policy director of Americans for Prosperity, noted a few months back:

"The composition of the tax hikes in the 2010 budget is frighteningly similar to the Revenue Act of 1932, the much-maligned Hoover tax hikes that put the 'Great' in Great Depression by putting an enormous tax burden on millions of Americans, largely through excise taxes."

And as in the 1930s, more spending and higher taxes won't help. The U.S. deficit this year is expected to reach $1.8 trillion, up from about $400 billion last year. This is equal to a remarkable 10% of GDP in stimulus — and still the economy isn't growing. Nor will it, if Congress and the White House plunge forward with their planned tax hikes in the midst of a brutal economic downturn.

There's only one way out of this: growth.

Today, planned tax hikes on the "rich" and possible trillion-dollar tax hikes to fund health care and an utterly wasteful cap-and-trade system to reduce greenhouse gases risk pushing our economy back into recession just as it's struggling to get back on its feet.

Instead of raising taxes on entrepreneurs and the middle class to pay for an ever-wider array of failed "stimulus" packages, bailouts, TARPs and government takeovers of key U.S. industries, Congress and the White House should be cutting both spending and taxes.

If they did, they'd see deficits shrink, growth pick up and America get back to the business of America.

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