The Discerning Texan

Labels: American Culture, American History, Economics, Fred Thompson, Newt Gingrich

Labels: Economics, Media Bias, The Left

One of the bigger lessons to be learned by politicians everywhere is that taxation can inhibit economic growth. Actually, what politicians need to learn about taxation is its function is to provide the funds necessary to run the government, and nothing more. But for some reason it appears that lesson was long ago lost. It's almost as if they feel a collective right to revenue at whatever level they choose if it will fund their pet projects, taxpayers be damned.

Obviously the level of taxation can and does directly effect the amount of economic growth a nation (and the global economy, depending on how big the player is) will enjoy.

James Pethokoukis, of US News& World Report talks about that in his latest article. Some interesting points. He first quotes Goldman Sachs:

"If we and the consensus are correct, then the period 2003-2008 will have been one of the most powerful periods of economic growth globally since accurate data [have] been collectible for much of the world."

That's a pretty powerful statement. Here's an even more powerful one:

The 21st century has also seen a global effort to reduce tax rates. Since 2000, according to the Tax Foundation, more than half the countries in the Organization for Economic Cooperation and Development—the group of 30 nations that includes most of America's major economic competitors—have lowered their top marginal rates, reducing the OECD average rate from 45.93 to 42.95 percent.

Got that? The most powerful global economies the world has ever seen has been driven by what? Tax reduction. In fact consider this:

Indeed, the global economy is growing at about a 5 percent annual pace, according to the International Monetary Fund, after growing 4.9 percent in 2005 and 5.4 percent last year. By contrast, the global economy grew at a 3 percent pace from 1980 to 2000 and at 4.7 percent from 1960 to 1980.

Now this may come as a surprise to some on the left who claim that we did just fine with the high taxes of the Clinton administration, but if you look at it globally, not so hot.

Which brings us to this:

The group goes on to examine possible future trends, including what happens if the Bush tax cuts are left to expire at the end of 2010 or if a 4 percent tax surcharge is imposed on wealthier Americans to pay for reform of the alternative minimum tax:

The U.S. reduced its top rate by over 13 percent between 2000 and 2006, dropping it from 15th to 21st in the rankings. If no other country had reduced its tax rates, the U.S. would stand at 26th highest, but the strong tax-cutting trend in other OECD countries blunted the impact of the 2001 rate cuts. . . . Full repeal of the 2001 rate cuts after a surcharge to fix AMT would move the U.S. from 21st to 9th highest in the rankings—and that assumes the tax cutting abroad comes to a halt. A repeal of the 2001 tax cuts with no AMT surcharge would move the U.S. to 11th highest, while an AMT surcharge alone would move the U.S. to 14th highest. In all three cases, the U.S. would rank higher than it did in 2000 (15th), before the passage of the 2001 tax cuts.

Notice the line after the bold part? "That assumes that tax cutting abroad comes to a halt" as well. Fat chance. Pethokoukis asks:

I wonder what would happen if all the industrialized nations decided to start raising taxes? It might make the U.S. more competitive with them on a relative basis, but how would it affect global economic growth?

Yet there seems little chance of that happening, given the global competitive race, in which making your country more attractive to financial and human capital is critical. Examples like Ireland, where tax cutting has accompanied a huge economic boom, are too powerful to ignore.

Yet given the mantra of the Democratic Presidential candidates, we will be ignoring it if and when one of them is elected. Meaning?

So it looks as though the high-tax experiment might be confined to America, which by the way already has the second-highest corporate tax rate.

What were those two words I was looking for? Oh, yeah ... unemployment and recession. Yeah, that's the ticket.

Labels: Business, Democrat Sabotage, Economics, Republican

Labels: Economics, History, Homeland Security, President Bush, The Long War

Labels: Democrat Sabotage, Economics, Europe, France, Free Markets

In the 102 quarters since Ronald Reagan's tax cuts went into effect more than 25 years ago, there have been 96 quarters of growth. Since the Bush tax cuts and the current expansion began, the economy's growth has averaged 3 percent per quarter, and more than 8 million jobs have been created. The deficit as a percentage of gross domestic product is below the post-World War II average.

Democrats, economic hypochondriacs all, see economic sickness. They should get on with legislating their cure.

Twenty-three months after the next president is inaugurated, the Bush tax cuts expire. The winner of the 2008 election and her or his congressional allies will determine what is done about the fact that, unless action is taken, in 2011 the economy will be walloped:

The five income tax brackets (10, 25, 28, 33 and 35 percent) will be increased 50, 12, 10.7, 9.1 and 13.1 percent, respectively, to 15, 28, 31, 36 and 39.6 percent. The child tax credit reverts to $500 from $1,000. The estate tax rate, which falls to zero in 2009, will snap back to a 60 percent maximum, and exemptions that have increased will decrease. The capital gains rate will rise, and the marriage penalty will be revived, as will the double taxation of dividends.

Furthermore, the alternative minimum tax was enacted by Democratic moralists in 1969 because 21 millionaires had legally avoided paying any income tax. The AMT, which allows almost no deductions, had one rate (24 percent) until 1993, when Democrats replaced it with two (26 percent and 28 percent). It has never been indexed for inflation and in the current tax year will hit almost one in five households -- 23 million of them.

Democrats need not confine themselves to their ritual tropes about how "the middle class is under assault" (Clinton again). They control Congress; they can act. The unemployed John Edwards, who has the luxury of irresponsibility, challenges Democrats to repeal the Bush tax cuts they disapprove of rather than wait for them to expire.

Democrats cannot end the war (actually, they can but won't), but they can send their tax agenda to the president and dare him to veto it. They can, but they won't. Do you wonder why?

Labels: 2008 Presidential Race, Democrat Sabotage, Economics

Labels: China, Democrat Sabotage, Economics, The Left

Is the French election a belated acknowledgment of reality or the latest attempt to dodge it? In other words, is it Britain voting for Mrs. Thatcher in 1979 and America for Ronald Reagan the following year? That's to say, the electorate understands the status quo is exhausted and unsustainable and that unless catastrophe is to be avoided radical course correction is required. Or is it Germany voting tepidly and tentatively to give Angela Merkel the narrowest of victories in 2005? In other words, the electorate was irritated with the incumbents but recoiled from any meaningful change, with the result that Frau Merkel found herself presiding over a nominally fresh government with no agenda and no mandate for reform.

I'd bet on the latter. Just as Frau Merkel proved not to be Germany's Thatcher, I would be surprised if Nicolas Sarkozy turned out to be France's Reagan. Not because he doesn't have Reaganite tendencies but because the French electorate, like the Germans, aren't there yet. M Sarkozy did well in the first round because he co-opted many of Jean-Marie Le Pen's concerns. I don't mean the fascism and the anti-Semitism and the oven jokes. It's a tribute to the shriveling of the French political sphere that, by the time of the last presidential election in 2002, an antiquated perennial loser was able to catapult himself into second place. But, in an advanced technocratic state, where almost any issue worth talking about has been ruled beyond the scope of partisan politics, you might as well throw away terms like "left" and "right." The previous presidential election was meant to be a contest between the supposedly conservative Jacques Chirac and his supposedly socialist Prime Minister, Lionel Jospin. In practice, this boiled down to a candidate who's left of right of left of center, and a candidate who's right of left of right of left of center.

Labels: Economics, Elections, France, Socialism

Labels: Class Warfare, Democrat, Economics, Marxism, Socialism, Tax Policy, The Left

Labels: Bush Derangement Syndrome, Democrat Sabotage, Economics, Iraq, Islamic Fascism, US Politics

Labels: Asia, Economics, Stock Markets

Let’s allow our unions and their organizers to lift up this country’s middle class again.

Labels: Capitalism, Democrat, Economics, Socialism, US Politics