The Wall Street Journal reminds us of what the impact of the 2003 taxcuts has been.
<<< Meanwhile, tax revenues continue to roll into the Treasury and state coffers. Federal receipts rose by 14.6% in fiscal 2005, another 11.8% in 2006, and kept rising by 9% in this year's first two months despite slower GDP growth. The budget deficit, in turn, has fallen by $165 billion in two years, and including state surpluses is now down to about 1% of GDP, which as an economic matter is negligible. Tax revenues as a share of the economy are also back above 18.5%, which is their modern historical norm.
This record is so impressive that liberal critics have been forced to ignore it and focus on other alleged outrages, such as "inequality," or CEO pay, or some vague prediction of future doom. And, yes, the future is unpredictable. But in the field of economics there are few more definitive tests than the results from the tax cuts of 2003. Critics predicted disaster, supporters the opposite, and the supporters can point to more than three years of prosperity as vindication -- despite $70 oil and $3 gasoline, and lately despite the worst housing slowdown in 15 years.
However, those lower tax rates are set to expire at the end of 2010, and the Democrats who now control Congress want them repealed. The "pay-as-you-go" rules that the House just passed would make their extension all but impossible. What this means is that if Congress merely fails to act, the tax cuts expire and the economy will be hit with one of the largest tax increases in history in 2010. >>>
In a real world, politicians would look at the results of the tax cuts, see the impact, and adjust their policies accordingly. But politicians don't seem to act in the real world. The evidence before their eyes is not enough to change their ideology. It might be too much to expect them to come out and admit that they were wrong, but they might adjust accordingly to the results and recognize that they shouldn't take actions to screw up the economy. I don't expect any such wisdom from the Democrats. If they don't take action to extend those tax cuts, then that should be a major issue in the 2008 election. Do all these senators who want to be president believe that they should hit Americans with this kind of tax increase?
<<< The dividend rate would snap back to 39.6% from 15%, the capital gains rate to 20% from 15%, and the top marginal income tax rate to 39.6% from 35%. Marginal and average tax rates for the middle class would also increase, returning to the Clinton-era levies that had driven taxes as a share of GDP to a postwar high of 20.9%. >>>
Sure they can sell such taxes as just on the rich, but a lot of Americans who think of themselves as middle class are invested in the stock market. And if the Republicans had any persuasive abilities (which is a big 'if') they should be able to answer such demagoguery with the statistics about the economy's growth since those cuts were passed.
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