POINT: Bush’s tax plan bad for us
The most difficult thing one faces when writing about taxes is that readers quickly grow uninterested. Taxes seem boring.
But tax policy can affect the average U.S. citizen more than other policies. In a sagging economy, tax policy can be used to pre-empt recession.
So Alan Greenspan said in 2001 a tax cut could be “required.” Sadly, politicians picked the wrong plan.
Bush’s tax cut was bad. Here’s why.
We now have deficits. This is bad because deficit spending leads to recessions.
To understand how this happens, we’ll consider an individual named George who wants to lend money into the market.
Because of the tax cut, George, who is fairly wealthy, has an extra $100,000 to invest as he sees fit. As the economy struggles, he knows it might be naÃve to invest in the unstable, post-Enron stock market.
Luckily for George, the government has begun to run a deficit. Congress needs his $100,000 to make ends meet. Suddenly, George has a secure place to put his money. He knows he can expect a positive return. Ironically, the government will give George interest on the money given back to him in the first place.
Now, that George has invested in the government, not only is his $100,000 unavailable for lending, George will expect all his other investments to return as much as his first investment – i.e., when George’s friend wants to borrow money from him to build a house, George raises the interest rate on him, so the investment is worth his risk.
When this happens on a collective level, interest rates go up, consumers pay more for loans and buy less from businesses, who, in turn, produce less and cut costs. This leads to layoffs, and eventually, recession.
Today, we can expect the recession sooner because the nation still carries a large debt, and we have begun adding to it. If we don’t change something we are in trouble.
I have an idea where to start. Let’s take the 43 percent portion of the tax cut, which goes to the wealthiest 1 percent of Americans, and begin balancing our budget.
The choice is ours. With the economy on a sad track, the future looks bleak. Write your Congressman today and ask him to revise the tax cut, or better yet, vote Democrat in the coming election. Either way, you might make a difference.
Aaron Law is a senior majoring in political science. Comments can be sent to him at sinatrastrashcan@cc.usu.edu