The U.S. Senate wants to cut President Bush’s proposed tax cut package in half, but economists say that would be a mistake. Eliminating the double taxation of corporate dividends first as corporate profits, then as income to investors would provide an immediate and long-term stimulus, say economists Arthur Laffer and Stephen Moore.
Laffer and Moore say the prospect of budget deficits should not deter tax cuts. In order for the national debt to return to its 1993 level as a share of GDP, assuming a 5 percent annual growth rate before adjusting for inflation, the U.S. would have to run deficits of $500 billion per year for the next 10 years. That is unlikely, especially if spending is restrained, and taxes are cut. As with the Kennedy, Reagan and Clinton-era tax cuts, the
rate of real economic growth is likely to increase, and rising federal revenues will reduce the size of the deficit from the levels forecast by static projections.
Source: Arthur B. Laffer And Stephen Moore, A Tax Cut: The Perfect Wartime Boost, Wall Street Journal, April 7, 2003.
For text http://online.wsj.com/article/0,,SB104967800539491900,00.html
For more on Tax Legislation http://www.ncpa.org/iss/tax/
FMF Policy Bulletin/22 April 2003
