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  • October 6, 2008 07:52 AM EDT by Brian Sullivan

    What We Need Now are Tax Cuts

    Now that the rescue plan is passed, Congress and the candidates need to turn their attention to the overall economy.   Whatever you want to call the economic slowdown we are facing, don't call it mild.   The rapid loss of jobs and weak condition of housing are proof enough that the economy needs triage.   Some economic wounds can be healed with tax cuts.   Now.  Especially for American businesses.  

    American corporations already pay among the highest taxes in the world.  From the tax foundation:

    In Tax Foundation Fiscal Fact No. 145, "KPMG Study Finds U.S. Corporate Tax Rate Higher Than Every Global Region," Tax Foundation President Scott Hodge explains that America's stagnant business tax system is potentially harmful to America's economic competitiveness in the global marketplace.

    "Of the 106 countries surveyed, only the United Arab Emirates (55 percent), Kuwait (55 percent), and Japan (40.69 percent) impose a higher corporate tax rate than the combined rate of 40 percent in the U.S.," says Hodge. "What this says about America's tax competitiveness is not good."

    Generally the most costly part of any business is payroll.   That means jobs tend to be the first thing companies cut when faced with a slowdown.   Companies have to pay taxes.   They have to pay their suppliers, landlords, etc.   There is little to cut but jobs.    Lowering the corporate tax rate would help keep people employed and stimulate new growth.   Even Sweden has just cut its corporate tax rate in an effort to create new jobs.  The more companies pay in taxes, the less money they have to add new employees.   Employees who if working would help stimulate the economy by spending.  The unemployed tend to absorb resources, not add to them.

    We also need cuts in the personal income tax rate.   JFK understood the power of lower tax rates.   It's why he created the Revenue Act of 1964, a sweeping tax change that actually lowered the top tax rate for individuals and also cut corporate taxes.   Of course, the Act lowered the top rate from a staggering 91% to a still staggering 70%, but it was a significant cut nonetheless.    JFK's chief economist Walter Heller convinced the President that the more money individuals have in their pockets, the greater the overall benefit to the economy.  Tax dollars trickle down.   Sadly, Kennedy never lived to sign it or see its benefits to economic growth.

    Ronald Reagan and many Democratic leaders in Congress understood this again in the early 1980s.   While the two sides argued over the amount, they agreed there needed to be tax cuts.

    From a July, 1980 article in Time magazine:

    The President's attack was designed to blunt mounting criticism from House Democrats that the Administration's tax proposals favor the wealthy. Reagan wants to reduce taxes 25% over three years for all income groups, which would return the most tax dollars to those who pay the most taxes. House Democratic leaders, who are pushing for a 15% tax cut over two years, would give only minimal reductions to individuals earning more than $50,000. "The President may be a real tightwad when it comes to programs that help working families," proclaimed House Speaker Thomas P. O'Neil to cheering union members in Boston. "But when it comes to giving tax breaks to the wealthy of this country, the President has a heart of gold."

    The article notes that the Democrats even went to so far as to push for greater tax cuts for the oil industry:

    On the Hill both Democrats and Republicans are adding sweeteners to their bills to lure votes. "It's rather an unusual way of marking up tax bills," says Democratic Representative James Jones of Oklahoma. "But these are unusual times." Besides offering more tax deductions to small businesses, the Democrats are trying to improve on the Administration's $2,500 tax credit for independent oil producers and royalty owners.

    Imagine that, Democrats arguing for more tax breaks for oil producers.   They understood following that gas crises of the past few years that the way to get more of something is to maximize incentives on the the production of that item.  Bill Clinton's cut in the capital gains rate also is credited with helping stimulate investment and growth.  Tax cuts work.

    There have been few times in recent memory where Americans were more unhappy with government.   The rescue package was highly unpopular but Congress passed it anyway, citing the dire economic situation and possible outcomes if its not passed.   So now that it is passed and the Treasury begins buying bad assets, Congress and the Presidential candidates need to work to restore perhaps the most important part of the economy: confidence.   Confidence not only in the economic outlook but also confidence in government.   The way to do that is to put more money back into taxpayer pockets and help companies keep people on the payroll.   

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Let’s Hope California Isn’t The Model This Time at The Brian Sullivan Blog

[...] it provides a basis for my recent argument about the need for tax cuts.   And this is not just about “the rich.”   Consumer [...]

October 8, 2008 at 9:07 pm

STEVE G

How about us middle class people who have kids in high school and in college. ThE IRS stops our child tax credit when a child turns 16 and when they start college and request loans and grants the govt uses our income on the applications. If you are making over 40000 grants get denied and a ton of tax records are needed for student loans. What I am getting at is; kids are grown at 16 for the child tax to stop but not old enough to use their own income for grants and loans when they turn 18. We need tax cuts and changes to the education system to help these kids get to college so we can prepare ourselves for retirement. Also now that we are trying to bail out the wealthy how about paying us back by cutting capital gains and the death tax.

October 7, 2008 at 1:55 pm

Gary Driscoll

If anyone who knows me personally has read these characterizations, they will have gotten as much amusement from them as I have. To be described as a "commie-crat" in favor of big government is a huge compliment to my independence. I am usually described as a "right-winger". If tax cuts lead to prosperity and jobs, then we must now be in a time of high prosperity and low unemployment. Hmmm... Try cutting the spending and size of government before you cut the taxes. Then, if you get more funds from the cuts, you can spend them. It is both cutting the taxes and keeping (or in this case, increasing) the spending that I have a problem with. It is pretty hard to spend yourself into prosperity using borrowed money. Pretty soon you have most of your spending required just to pay the interest on your previous spending.

October 6, 2008 at 10:08 pm

john

We need two things in this shoot out. 1--cut capital gains tax to zero. That will draw some money including mine. 2--Cut the corporate tax from 35% to 15%. That will keep jobs in the usa, and keep companies from outsourcing to Ireland, etc. Will this happen?? Hell no, because the voters do not have the balls to elect McCain president, and Obama will make the above worse rather than better, and the recession will turn into a depression. Mark my words Cavuto.

October 6, 2008 at 7:38 pm

David

To Gary Driscoll and the other commie-crats business is evil and big government is good. Sounds to me like they have completely bought in to the marxist doctrine, so class war fare is the order of the day. Our fore fathers knew better, business is the back bone of our country and unlike our government business does not have the ability to "manufacture" money. Hence they must give account to stock holders, banks, government, and others. Our fore fathers also understood that the SMALLER government was the more freedom the people would have, big government is a marxist idea which is completely un-American. Just who is it the commie-crats give account to? It's not the American people every year since FDR commie-crats have stolen more and more of our freedom and ability to succeed, all in the name of BIG GOVERNMENT. Wake up dude and quit drinking the cool-aid served up by the commie-crats, their spin doctors, and of course the drive by media like CNN, MSNBC, ABC, and CBS. Remember in the last century commie-crats killed around 200 million of their own citizens in places like China, USSR, North Korea, North Vietnam, Romania, and other communist countries. Live free or die

October 6, 2008 at 1:36 pm

Tom Coster

I own a business. My taxes go up, I charge my customers more. I don't pay taxes, My customers do. End Business Tax & Capital Gains Tax & we won't need a "bail out"

October 6, 2008 at 1:04 pm

Publius

Drop the corporate tax rate to 0. Drop the capital gains tax to 0. Cut the federal budget by $1 trillion. (Massive layoffs in the beltway region, anyone?) Watch the economy take off.

October 6, 2008 at 12:22 pm

Tim Kromholtz

People like Gary Driscoll is why tax cuts will never happen. He can't understand that business is what makes our country work, he thinks reducing how much the government takes from taxpayers is "spending," even though it always results in more revenues for the government. No, don't confuse him with facts, he's too blinded by envy. No, Democrats would rather hurt wealthy people than have the whole nation prosper. They say as much. It's a matter of "fairness." It's looking like we're going to put a whole class of politician's in office whose instincts are to tax us into prosperity.

October 6, 2008 at 11:44 am

Blake

Would someone inform Barack Obama? Attention all Lemmings and Sheeple: Go ahead and vote your "wallet" because come spring you will NOT have a wallet....instead, you will have soup lines.

October 6, 2008 at 11:35 am

Bill Lockley

Yes i think that the economy should be focused on more and more. The crisis now with DOW industries is hurting the economy terribly. Lowering taxes would be a good thing for the economy because the people would buy more products and increase

October 6, 2008 at 11:09 am

Gary Driscoll

Great. Just spent another trillion dollars that you don't have (to make a total of about 60 TRILLION dollars) and then cut your revenue--to give more to business. I guess we can tell who is "getting the business". That would allow business to export our jobs to India and China even faster, but keep up the big bonuses for execs.

October 6, 2008 at 9:40 am

Atholl

Great story... the Commi-crats would flip their wigs if they knew this.. thanks

October 6, 2008 at 8:55 am

about this blog

  • Brian Sullivan joined FOX Business Network (FBN) in April 2008 as an anchor. He co-anchors the 10am-12pm ET hours of the FOX Business block. Prior to joining FBN, Sullivan served as an anchor for Bloomberg Television where he hosted the programs Morning Call and In Focus.

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