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Jul 20th, 2010 by wintercow20

From tomorrow’s WSJ:

Joint Tax now says that rescinding the Bush investment tax cuts will raise about $500 billion in revenue over the next five years. So on January 1 we will enact one of the largest tax increases in history, coming out of one of the deepest recessions in a century, because computer models that we know are wrong are telling Congress that this will raise far more revenue than the increases will raise in reality.
If Members of Congress are going to buy this, they should simply cut out the 535 middlemen and let Mr. Barthold write the tax laws.
Perhaps the most serious disconnect concerns the impending expiration of the 2001 and 2003 tax cuts, which will raise the top two income tax rates and the rates on dividends and capital gains. If these growth inhibiting tax increases occur—about $75 billion in tax increases next year, $1.4 trillion over 10 years—there will be serious economic damage.
In the most recent issue of the American Economic Review, Ms. Romer (and her husband David H. Romer) conclude that “tax increases are highly contractionary . . . tax cuts have very large and persistent positive output effects.” Their estimates imply the tax increases would depress GDP by roughly half the growth rate in this so-far-anemic recovery

Posted in Taxation

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