To stimulate growth, cut spending
EAST VALLEY - VOICE
- Sen. Jon Kyl, R-Ariz., has been appointed as a conferee on the tax reconciliation bill.
During the Senate’s budget debate this week, critics of tax cuts claimed we should raise taxes to reduce the deficit. But the evidence shows we cannot afford to raise taxes on families and business. The tax cuts a majority of us in Congress supported have led to sustained economic growth, which gives Americans increased opportunities, better jobs, and improved standards of living, as well as more revenue to run the government. The policies we have put in place are designed to keep tax rates low on work, savings, and investment because economists tell us this is the best way to generate economic growth. When tax rates are lower, people work more and they are more productive, which boosts economic growth and standards of living. Arizona State University Professor Edward Prescott, 2004 Nobel Laureate in Economics, studied the effect of high tax rates and found that people really do work less as their taxes increase. Accordingly, Congress and the president lowered income tax rates for all. Savings and investment generate economic growth by giving businesses access to the capital they need to grow, innovate, and create more good-paying jobs. In 2003, Congress reduced tax rates on dividends and capital gains, which encouraged people to invest and put their money to work. The investor class is now very middle-class, since more than half of all Americans own stock. Data from Arizonans in 2003 (the most recent IRS data available) showed 73 percent of taxpayers who benefited from lower tax rates on dividends had incomes of less than $100,000. Of the taxpayers benefiting from the lower tax rate on capital gains, 68.8 percent had income of less than $100,000, and 17.9 percent had income of less than $30,000. This proves that the middle class benefits significantly from lower tax rates on investments. The tax reconciliation bill under discussion by a House-Senate conference committee hopefully will extend the lower tax rates for dividends and capital gains through 2010. Eventually, Congress must make these lower rates permanent to give Americans the certainty they need to make responsible investment decisions. These pro-growth tax policies have worked. Over the last 12 months 2.1 million new jobs were created, and last month alone 243,000 new jobs were created; the economy grew by 3.5 percent in 2005, marking 17 straight quarters of growth. Tax policies specifically designed to encourage economic growth, such as lower tax rates on income and investment, are not a drain on the federal Treasury. Recent data show that even though the tax rate was reduced from 20 percent to 15 percent, capital gains revenue to the Treasury actually increased by 20 percent from 2003 to 2004 and by another 25 percent from 2004 to 2005. Individual income tax revenue was also dramatically up. The real cause of deficits and accumulated debt is overspending by Congress. In the long run, the key is to reform entitlement programs (the biggest being Social Security, Medicare, and Medicaid), which automatically grow faster than inflation year after year. The solution is most definitely not to raise taxes on hardworking Americans.
