Just a trim, perhaps
Clint Fullen
Issue date: 10/29/08 Section: Opinion
Every election year, voters hear promises of lower taxes and more benefits, but tax cuts are not the quick cure-all for the American economy.
In fact, lower taxes might not be the solution at all.
Presidential candidates John McCain and Barack Obama both promise lower taxes overall. However, the similarities end there.
According to a study by the Tax Policy Center, McCain pledges a 2 percent average tax cut. Obama promises a 0.3 percent average tax cut.
Families with yearly income of more than $2.87 million are promised a 4.4 percent tax cut under McCain. Obama proposes a tax increase of 11.5 percent for the top 0.1 percent.
McCain's policy would give 60 percent of taxpayers a tax cut of less than 1 percent. Obama promises a 3.8 percent tax decrease for families who make under $66,000 a year.
Obama aims to give the biggest tax cuts to those who make the least. McCain would create larger cuts for the wealthiest.
Implementing massive tax cuts for the upper class is often associated with supply-side economics. The philosophy is that lower tax rates lead to more economic activity and government revenue.
However, in recent history, the United States received more rapid economic growth under policies with higher taxes.
Congress passed massive tax cuts for corporations and wealthier households in 1981 and again in 2001. Between the two eras, America underwent a tax hike in 1993. Economic activity was considerably higher after the raise in taxes.
A report from the Center for American Progress states that after the 1981 tax cuts investment growth raised by 2.8 percent. After 2001, the growth rate enlarged to 2.7 percent. Following the Deficit Reduction Act of 1993, investment growth swelled by 10.2 percent.
Average hourly earnings also went up by 0.9 percent after the 1993 tax hike. Tax cuts after 2001 only raised earnings by 0.3 percent. Americans suffered a 0.1 percent decrease in average hourly earnings after 1981.
In fact, lower taxes might not be the solution at all.
Presidential candidates John McCain and Barack Obama both promise lower taxes overall. However, the similarities end there.
According to a study by the Tax Policy Center, McCain pledges a 2 percent average tax cut. Obama promises a 0.3 percent average tax cut.
Families with yearly income of more than $2.87 million are promised a 4.4 percent tax cut under McCain. Obama proposes a tax increase of 11.5 percent for the top 0.1 percent.
McCain's policy would give 60 percent of taxpayers a tax cut of less than 1 percent. Obama promises a 3.8 percent tax decrease for families who make under $66,000 a year.
Obama aims to give the biggest tax cuts to those who make the least. McCain would create larger cuts for the wealthiest.
Implementing massive tax cuts for the upper class is often associated with supply-side economics. The philosophy is that lower tax rates lead to more economic activity and government revenue.
However, in recent history, the United States received more rapid economic growth under policies with higher taxes.
Congress passed massive tax cuts for corporations and wealthier households in 1981 and again in 2001. Between the two eras, America underwent a tax hike in 1993. Economic activity was considerably higher after the raise in taxes.
A report from the Center for American Progress states that after the 1981 tax cuts investment growth raised by 2.8 percent. After 2001, the growth rate enlarged to 2.7 percent. Following the Deficit Reduction Act of 1993, investment growth swelled by 10.2 percent.
Average hourly earnings also went up by 0.9 percent after the 1993 tax hike. Tax cuts after 2001 only raised earnings by 0.3 percent. Americans suffered a 0.1 percent decrease in average hourly earnings after 1981.
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