The $300 Billion Tax Cut That Isn't
I railed about this on Strategy Room this morning, but I need to get it down on paper screen or it's going to continue to gnaw at me.
Barack Obama's ostensible $300 billion tax cut is anything but. It's being used as a lure, in order to - well, lure Republicans to the farcically irresponsible and inevitably feckless trillion-dollar Keynesian stimulus plan, but with tax cuts like these, who needs socialism?
So far the plan is lean on details, but there are a few things we do know.
- It will include a $500 rebate for nearly every working American (whether or not they pay federal income taxes). For low earners, this is welfare (an expensive and ineffective spending program rarely mistaken for a tax cut). But even for high earners, this is just a rebate. It's very similar to the stimulus checks that were sent out in 2008 (both in structure and size). I don't recall precisely how that worked out, but if I recall correctly, it solved everything.
- The "corporate tax cuts" included in the plan will enable businesses to accelerate write-offs related to losses incurred in 2008, and will offer some incremental job creation incentives. If Obama's past rhetoric is any guide, those job incentives will be strongly concentrated among (or possibly limited to) federally blessed "green jobs" and companies who promise not to make efficient and rational use of the global labor market send jobs overseas.
On the whole, these tax "cuts" represent significant expansion of government intervention and of wealth redistribution (which is something akin to the opposite of tax cuts). The reason that actual tax cuts are well-indicated for digging out of economic recessions is that they encourage the useful deployment of capital by increasing the expected after-tax returns of those doing the deploying. For anyone who has trouble following the economic causality (e.g. elected officials on both sides of the aisle), Reagan in 1981 and Bush in 2001 provided us with strong, confirming empirical evidence. Few if any of the 300 billion dollars in Obama's package do anything of this sort.
If Congressional Republicans do sign on with the trillion-dollar stimulus in consideration for this package of tax "cuts", they will have sold their fiscal souls for an embarrassingly cheap price.
Handcrafted by Flip on January 5, 2009 |
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