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January 26, 2009



I find it disturbing and hard to believe that you blame the current economic situation on tax cuts made by the previous administration. It seems to me that tax cuts, no matter what the size, favor the people that get paychecks allowing them to keep more of their money, and this spend more money.


Deb Cupples at Buck Naked Politics has written a Pulitzer quality summation of where tax cuts fit into a stimulus package.

It is such a great article I wrote a post on my blog completely about this article

Buck Naked Politics

Hi Sam,

I'll respond in two parts. I all-cap some words NOT to indicate shouting, but because I can't bold or italicize in the comment field.

PART I: Corporate Tax Cuts

Tax cuts free up extra money that companies COULD use to create jobs, BUT if the tax-cut legislation doesn't require job creation, then companies are free to take the tax cuts yet not create jobs.

Because tax cuts increase a company's bottom line, Boards often (at executives' urging) end up funneling the tax-cut savings into a relative-few execs' and managers' pockets.

Despite Bush's corporate tax cuts, many U.S. companies paid their execs' better AND shipped jobs overseas.

Thus, a whole lot of Americans ended up unemployed while a few execs/managers ended up fabulously rich (courtesy of company shareholders).

You're right: Bush's tax cuts, alone, did NOT cause the current economic crisis, but they DID help increase our annual budget deficits and ultimately our national debt.

Also contributing to the national debt was Bush's and the GOP Congress's (from 2001-2006) insistence on borrow-and-spend policies.

I think that Bush and the GOP Congress (from 2001-06) contributed to the current economic crisis largely through their lax approach to regulation of the banking, finance, accounting, and securities industries -- NOT through the corporate tax cuts.

PART II: Individual Tax Cuts

What I question is a PAYROLL tax cut, specifically (NOT all tax breaks for us ordinary folks). That's because payroll tax cuts affect only people who get paychecks (i.e., who haven't lost their jobs).

I apologize if I was unclear about that.

A real tax rebate or credit for us ordinary folks might be good, in that it would help people who need money. It would also enable us to spend, which would support businesses and help our largely-consumer-driven economy.

Would tax credits be better than stimulus spending (e.g., creating jobs) for increasing consumer spending? I'm not sure of the answer.

Some argue that ordinary folks who fear losing their job in the next few months or years will not spend a small (e.g., $500) tax break but will instead save it for a rainy day. That's understandable.

In that case, the money-saver is better off, but the economy wouldn't be stimulated.

Again, I'm not sure what the solution is re: this issue.

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