Saturday, June 25, 2005

It's The Tax Cuts, Stupid...

In a recent post on the shrinking deficit, I made the argument that tax reform is the best best for Bush and the Republicans, politically, since Social Security reform is seemingly dead in the water. William Kristol of the Weekly Standard echoes that thought, reminding us that Bush campaigned on making the first term tax cuts permanent. I'll let Kristol make the case:
The 2003 cuts in personal income rates, and in the tax rates on dividends and capital gains, have helped produce economic growth of better than 4 percent a year--as non-tax-cutting European economies have stagnated. Unemployment here is down to 5.1 percent, while it remains 10 percent or more in Germany and France. The Dow is up by about 24 percent since May 2003, and capital spending by business is up some 22 percent.

And tax revenues are up. As Stephen Moore has pointed out in the Wall Street Journal, the supply-side Laffer curve has worked. Federal tax receipts are up by over 15 percent so far this fiscal year--and state tax receipts are up 7.5 percent. Individual and corporate receipts are up some 30 percent in the two years since the tax cut. The budget deficit looks as if it will be down by some $60 billion this year.
I'll repeat a point I made in the earlier post: Bush has run his last campaign, but the Republicans in Congress need something positive for 2006. Tax cuts are the answer, and they're good for us, to boot...

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