Wednesday, October 10, 2007

Decrease Spending by Utilizing Tax Cuts by Akindele Akinyemi

I was reading some of the responses from several Michigan lawmakers over the course of the weekend on why it was necessary for us to raise taxes here in Michigan. This is after Gov. Granholm stated on statewide television last fall that she would NOT raise taxes.

ANYONE from Detroit who voted to raise taxes in a city that is deeply overtaxed has made a serious mistake. Some should be removed from office immediately for killing our families. Others should be talked to.

For one, I am not sure of our lawmakers, especially our freshman lawmakers, understand why tax cuts are to increasing economic growth here in our state.

Over 40 years ago John F. Kennedy believed that "an economy hampered by restrictive tax rates will never produce enough revenue to balance our budget, just as it will nimportant ever produce enough jobs or enough profits." So he proposed income tax rate reductions, which the Democratic Congress enacted the year after JFK's death. Back then, Democrats were for them: more than 80% of Democratic senators and representatives voted for the Kennedy tax cuts.

If our freshman lawmakers never read their own history on how the very party they represent historically supported tax cuts then I can clearly see why it is evident on why they have been misled.

Today the Democratic Party is so vehemently opposed to income tax cuts that when President Bush's reached their final vote in May 2003, only 4% of Democratic legislators (2 of 48 senators and 7 of 205 representatives) voted "yes."

On a national level,
President Bush signed the most recent tax cuts into law in the spring of 2003. In the past 33 months the size of America's entire economy has increased by 20%--or, as National Review Online's Larry Kudlow put it, "In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy."

In the 2 1/4 years before the 2003 tax cuts, economic growth averaged 1.1% annually; in the three years since it has averaged 4% per year, and in the first quarter of this year it was 5.6% on an annualized basis. Inflation-adjusted per capita GDP has grown 7.8% from 2003 through the first quarter of this year.

In the 36 months since the tax cuts became law, 5.3 million new jobs have been added to the economy. According to its employment survey, 288,000 jobs were added in May and 387,000 in June. The unemployment rate dropped from 6.1% when the bills were signed to 5.4% at the end of 2004 and 4.6% today, and the rate has gone down for men, women, blacks and Hispanics. Hourly wage rates for workers are up 3.9% in the past year, and they increased at an annualized rate of 4.6% in the second quarter of this year, the highest quarterly rate in nearly 10 years.

Again, this is JUST on the national level.

When we enact tax cuts incomes increases as well as profits. As Stephen Moore noted in The Wall Street Journal, "the percentage of Americans earning more than $50,000 a year rose from 40.8% to 44.2%" between 2002 and 2004. As for very wealthy families, the portion of total income "captured by the richest 1%, 5% and 10% of Americans is lower today than in the last year of the Clinton administration.

Tax cuts work, and work well, for individuals, employers and even the government, which sees its revenues increase dramatically when tax cuts are enacted and left in place over time.

However, when it comes to a liberal form of government we get crap like this in Indianapolis:

Vernon Brown

This is Vernon Brown, who sits on the Indianapolis City Council. He voted to raised the people in his district taxes by an whopping 65%. Who the hell can afford to pay these types of taxes? He would have been a great State Representative from Detroit. After all, if you never understood how finances work because of financial illiteracy in your household a state lawmaker could run mad game on you. That is exactly what they have done.

Here is something else our lawmakers do not understand.

High tax rates on working, saving, investing, and business development are among the biggest government burdens slowing the economy. Lowering these obstacles would trigger more jobs, higher incomes, and less poverty.

Despite the rhetoric of some politicians, government cannot "grow" the economy. The private sector, not government, creates jobs and produces prosperity. Government spending mislabeled as "economic stimulus" only misallocates resources that individuals, families, and businesses would use more efficiently.

Tax rate cuts now would improve incentives and help the economy now. Future tax cuts are uncertain because politicians may delay or prevent them from occurring. Workers, investors, and entrepreneurs understand this risk and discount the likelihood that these tax cuts will materialize.

So while Nick on Right continues to unearth the portrait of a tax hiker by exposing these State House Democrats I am saying to my House freshman lawmakers
that the way to reverse the economic slowdown is to reduce (not increase) government barriers to economic expansion imposed by high tax rates on working, saving, investing, and business development. The less government punishes these activities, the more these positive forces of economic growth will flourish. If our state government would understand how an tax increase is NOT the answer but more cuts are the economy will soar.

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