Liberals always scream at any tax rate reductions. It doesn't matter if the rates are across the board and equitable. The contrived and demagogic class warfare card gets pulled out faster than a Las Vegas dealer. We're at that point again. This New Year's Eve, the tax rate reductions from 2001 and 2003 will expire and rates will sky rocket, further hammering the economy and deepening the Obama recession. Liberals in Washington, including the president, say with a straight face the revenue gained from the automatic tax increase will bring in more than $700 billion over the next several years, money needed to close the deficit. Apparently spending $787 billion in one year isn't a problem, however, as he did with the so-called "stimulus" bill, which was supposed to keep unemployment below 8 percent. (Not to mention today's $26 billion federal bailout of the national teacher union's pension fund.) (Wall Street Journal Washington Wire blog.)
(By the way, in a move that eerily presages the future under ObamaCare, it will be better to die on New Year's Eve if you are planning to leave an estate to a loved one. On January 1, that loved one will get hit with a massive tax increase, as the death tax itself rises from the dead.)
But some Democrats are lobbying for an extension of the tax cuts, such as Evan Bayh of Indiana (Washington Examiner). Of course, it won't happen because the president is busy demonizing every action by the Bush administration as evil, and extendin the tax cut are politically untenable . . . for him. Never mind the bogus premise that raising taxes beyond a certain point increases tax revenue, because it decreases revenue, while lower tax rates increase it as history has shown time and again.
Don't believe me? Then try this one on for size. One of Virginia's most quoted economists, Christine Chmura, in the Richmond Times-Dispatch yesterday, wrote about a study on tax rate reductions by two University of California-Berkeley economists (not your most conservative campus). The study was a bit different because it examined a broad scope of federal taxation as well as four categories, including reducing the deficit and economic growth. Their findings?
The resulting estimates indicate that tax increases are highly contractionary.
Then, Chmura summarized the rest of their findings:
The large effects are driven considerably by a sharp reduction in investment.
Other parts of the economy, such as consumer spending on goods and services, as well as imports, also are negatively impacted.
However, the economists also found that tax increases to reduce a persistent budget deficit leads to a reduction in real gross domestic product. ...
She urged Congress to heed the study, published in 2007. But perhaps so should the president. It was written by professors David Romer and his wife, Christine — Mr. Obama's very own Chairman of the Council of Economic Advisers.