Suitably Flip

Magically Delicious Tax Cuts Make Longevity Gains

The 2003 tax cuts on capital gains and dividend income (currently slated to expire in 2008), which have so successfully spurred business investment over the last three years, leading to GDP growth outstripping the rest of the industrialized world, low inflation, crazy low unemployment, and a sustained equity bull market (notwithstanding high energy prices, war, and natural disasters), got a glimpse of a stay of execution today.

Congressional Republicans reached tentative agreement on a $70 billion tax-cut package that would extend tax breaks on investment income for two years, a Republican U.S. Senate aide said on Wednesday.

Lawmakers are still fine tuning the plan, but Congress could pass the package later this week, the aide said. It would then go to President George W. Bush.

This is incrementally good news, but what Congress really needs to do is to make these cuts permanent.  They have been an enormous and persistent shot in the arm for the U.S. economy.  With stable inflation, low unemployment, and swift GDP growth, we have a rising tide that mitigates almost all economic problems, including unfunded entitlement liabilities, current account deficits, and budget deficits.  Best of all, with more capital left to the discretion of corporations, small businesses, and individuals, and as we less severely punish the investment of that capital by those entities, we're left with a more nimble, more flexible, and more robust national engine of wealth creation, which is vital to ensuring swift recovery from future disasters, price shocks, and international unrest.

It's great news that it's now likely these remarkably effective tax cuts will persist beyond 2008.  What would be less great is if the political balance of power two or three years down the road is one less willing or able to appreciate the causal connection between these cuts and our national prosperity.  That's why my emotions are mixed.  It's disappointing that the bi-cameral Republican majority has been unable to pass a bill making the cuts permanent.

I guess we'll just have to make sure we don't upset the balance of power in 2006 or 2008.

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Magically Delicious Tax Cuts Make Longevity Gains

The 2003 tax cuts on capital gains and dividend income (currently slated to expire in 2008), which have so successfully spurred business investment over the last three years, leading to GDP growth outstripping the rest of the industrialized world, low inflation, crazy low unemployment, and a sustained equity bull market (notwithstanding high energy prices, war, and natural disasters), got a glimpse of a stay of execution today.

Congressional Republicans reached tentative agreement on a $70 billion tax-cut package that would extend tax breaks on investment income for two years, a Republican U.S. Senate aide said on Wednesday.

Lawmakers are still fine tuning the plan, but Congress could pass the package later this week, the aide said. It would then go to President George W. Bush.

This is incrementally good news, but what Congress really needs to do is to make these cuts permanent.  They have been an enormous and persistent shot in the arm for the U.S. economy.  With stable inflation, low unemployment, and swift GDP growth, we have a rising tide that mitigates almost all economic problems, including unfunded entitlement liabilities, current account deficits, and budget deficits.  Best of all, with more capital left to the discretion of corporations, small businesses, and individuals, and as we less severely punish the investment of that capital by those entities, we're left with a more nimble, more flexible, and more robust national engine of wealth creation, which is vital to ensuring swift recovery from future disasters, price shocks, and international unrest.

It's great news that it's now likely these remarkably effective tax cuts will persist beyond 2008.  What would be less great is if the political balance of power two or three years down the road is one less willing or able to appreciate the causal connection between these cuts and our national prosperity.  That's why my emotions are mixed.  It's disappointing that the bi-cameral Republican majority has been unable to pass a bill making the cuts permanent.

I guess we'll just have to make sure we don't upset the balance of power in 2006 or 2008.