Morning Bell: Just Don’t Call It a Tax Hike
Conn Carroll /
It is not common to advocate for tax increases as the economic outlook darkens, but that is exactly what liberals in Congress did yesterday when the House and Senate passed budget blueprints. Sympathetic minds in the press are determined to portray the budget proposals as only letting “tax cuts expire“, but the American people are smart enough to know that only in Washington can increasing the tax burden of Americans by $683 billion be considered anything but a massive tax hike. Liberals will claim they are only taxing the rich, but the Democrat budget voted for by Sens. Barack Obama and Hillary Clinton would raise taxes on individuals making as little as $31,850 and couples earning $63,700.
Democrats declined to explain yesterday how their plans to raise taxes could possibly help the ailing U.S. economy. After all, just last month Congress passed a stimulus package based on the idea that giving Americans a tax rebate would help economic growth. Apparently something happened in the intervening weeks that made letting Americans keep and spend their own money bad for the economy. Perhaps liberals remembered the 1993 tax hikes and now believe that taxing and spending is the best path to economic recovery. This is just not so. A review of recent literature on tax hikes and economic growth shows cutting taxes is far more strongly linked to economic growth. Furthermore, a specific look at the 1993 tax hikes shows that not only was the economy entering its eighth quarter of recovery by the time they were enacted, but the growth that succeeded them was much smaller than the growth after the 1997 tax cuts.
The tax increases in the House budget will significantly harm the economy. A Center for Data Analysis study on the budget shows it could cause a loss of more than $100 billion in GDP in 2012 and could also reduce job creation by more than 1 million jobs that year. Every taxpayer could also expect to pay, on average, more than $2,000 in taxes in 2012, while also losing an average of $1,767 in personal income.
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