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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (42221)	2/15/2001 8:44:20 AM
From: michael97123	Read Replies (1) \| Respond to of 70976

Bob, My son asked me to teach him a bit about tax policy. Most kids have this liberal bias but when my son gets his paycheck and sees 45% of it taken and then at the end of the year he still owes and he has to file quarterlies to boot. Well you get the picture. Its a rambling email but I would be interested in comments by this group. Contrary to bush admin folks who are calling for the tax cut to fight recession, the actual effect of the tax cut will me much more important long term. During the Clinton admin the eco ws fueled by nasdaq and a bubble was created. The first line of defense against the bubble was higher marginal tax rates on the rich who could afford it then because of all the money they were making. These tax receipts created surplus which sopped up liquidity and kept the bubble in check until 1999 when it appeared to be getting out of control. Enter greenspan and higher interest rates. Bubble finally popped. Then energy crisis + election turmoil turned a naz decline into a rout and a fair christmas retail season into a mediocre one. Now enter greenspan and bush. Policy Lower interest rates quickly but long terrm impediment to growth now are unsustainalbly high marginal tax rates that crowd out investment. So now rates must be reduced. In the reagan/bill bradley tax cut circa 1986, highest rate was 28% I believe( too low) and now they are 40%(too high). Bush 35% target seems fair and yes the rich benefit the most First, but their benefit is plowed back into the economy in the form of renewed investment. Now for the little folks. They deserve a break too. So bush lower all rates and raises threshhold as to when taxes kick in. Also end the marriage penalty. And perhaps that rebate check could be returned to all citizens lets say at $200 per head. That money will be spent and spur the demand side of the economy. The real reason the burden of taxation on lower and middle class folks is so heavy is the fica tax--7% of the first 70k or $4900(actually $9800 if you include employer match which worker would ostensibly receive) per year. That raises effective tax rate of most low and middle class americans to unbearable proportions. But fica must be collected to maintain the integrity of social security and medicare so they arent funded by general funds and become welfare programs. My suggestion is to make FICA a deductible expense for all individual taxpayer. Someone in the 28% bracket would save $1300-1400. This actually would be better solution for most americans than reducing the lower marginal rates. But in any case higher marginal rates must be reduced or the economy will be in trouble down the road..