Tax cuts would perk up the slowdown

Back in 2000-01, when the US economy was slowing markedly, the Fed obsessed about inflation. It was wrong, and then took a radical U-turn. It can't be the same story again. The money supply hasn't grown in a few years, while inflation is poised to go way down. The Fed must act and act big. After that, elected Washington can do the rest, says columnist Lawrence Kudlow.

Right now, the single best thing President Bush and Congress can do is slash the corporate tax rate for large and small businesses, explains Kudlow:

  • Bush must reach out to Charlie Rangel and move the corporate tax to 25 per cent from 35 per cent.

  • Then, instead of taxing successful capitalists as an offset, Congress can entirely abolish corporate-tax subsidy loopholes, special provisions and other corruption-inducing K-Street earmarks.

  • A middle-class tax cut to help families and small businesses would also work wonders; this can be done by collapsing the three middle-income tax brackets of 15 per cent ($15,650), 25 per cent ($63,700) and 28 per cent ($128,500) into one 15 per cent bracket.

    These brackets apply to small-business owners who may be suffering the high costs of energy and raw materials. The biggest weakness in the jobs report is the household survey, which is made up of these owner-operated small businesses. Household job increases have slumped to only 262,000 over the last year.

    A major cut in the corporate tax and a simplification of the middle-income tax brackets makes good economic sense. It would help the current softening of the economy and increase America's long-run potential to grow. This is a good plan for President Bush as well as the GOP candidates on the campaign trail. It sure beats talking the economy down, says Kudlow.

    Source: Lawrence Kudlow, Tax, Rate Cuts Would Perk Up The Slowdown, Investor's Business Daily, January 7, 2008.

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    FMF Policy Bulletin/ 19 February 2008
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