U.S. Democratic Party is proposing tax hikes

June 8, 2007

Free Market Foundation

The hottest U.S. domestic political issue of the coming two years will be federal income taxes. The Democratic Party is for a big tax increase, via repeal of the Bush tax cuts. Republicans, arguing that the 2003 tax cuts have helped the economy grow, are mostly against raising tax rates, says Pete du Pont, National Center for Policy Analysis chairman and former governor of Delaware.

So what are the facts? According to most economic indices, the 2003 tax cuts have strengthened the American economy:

Economic indicators show that since the 2003 tax cuts the gross domestic product (GDP) has grown an inflation-adjusted average of 3.3 per cent a year, and eight million new jobs have been created over 44 consecutive months of job growth.

Unemployment has fallen 25 per cent, from 6.1 per cent to 4.5 per cent, with strong declines across all ethnic groups.

Productivity growth has expanded 2.8 per cent a year since 2001, outstripping the past three decades’ average.

In addition:

The tax cuts have produced substantial tax revenue increases 14.5 per cent growth in 2005 and 11.7 per cent in 2006.

For the first seven months of the current fiscal year, total revenues were up 11.3 per cent over last year and individual income tax receipts were up by 17.5 per cent.

Total tax receipts in April were $70 billion higher than in April 2006.

Democrats have their economic policy backward, says du Pont. Instead of looking for higher tax rates to raise the money to pay for some Alternative Minimum Tax elimination and add and expand government programs, it would be better to reduce spending without imposing punishing tax rates that would suffocate investment and ultimately slow the cash machine that provides the needed federal revenues.

Source: Pete du Pont, Dems Want You to Take a Hike, OpinionJournal.com, May 24, 2007.

For text: http://www.opinionjournal.com/columnists/pdupont/?id=110010114

For more on Taxes: http://www.ncpa.org/sub/dpd/index.php?Article_Category=20

FMF Policy Bulletin/ 29 May 2007