(Chicago, IL — May 10, 2006) On Tuesday, Congressional Republicans passed a bill that would extend cuts in the capital gains tax and provide relief for middle-income taxpayers by stemming the growth of the alternative minimum tax.
Over the next few days, critics of the tax bill will complain the “tax breaks” will benefit wealthy taxpayers most and that it is irresponsible to cut taxes when deficits are high. But the facts show the country is experiencing a tax revenue boom, largely as a result of the lower capital gains taxes put in place in 2003.
Experts contacted by The Heartland Institute strongly support this tax relief effort and oppose any characterization of the bill as beneficial only to the rich. The Heartland Institute is a 22-year-old nonprofit research and educational organization based in Chicago. For more information about Heartland, contact Michael Van Winkle at 312/377-4000 or via email at [email protected].
Dr. Robert Genetski is a policy advisor to The Heartland Institute. He earned his Ph.D. in economics from New York University and has taught economics at New York University and at the University of Chicago’s Graduate School of Business. He has served on numerous boards of directors and writes a regular column for the Nikkei Financial Daily, Japan’s leading business newspaper. He can be reached at [email protected].
“Congress spent most of its recent session bandying about destructive and meaningless policies such as limits on foreign investments (Dubai Ports), tariffs aimed at Chinese imports, immigration restraints, and mailing everyone a check for $100. Finally, they have produced a constructive policy. The move to extend the 15 percent rate on the capital gains tax through 2010 is a positive development.
“Government doesn’t create any income or wealth. The main role of government is to make sure there is a positive environment that permits the creative energies of those in the private sector to flourish. When the private sector prospers there are gains throughout the economy. This is precisely what happened when Congress lowered key tax rates in 2003. In the wake of that move the US economy has far outpaced every developed economy in the world.
“The creation of additional income has made it easier to deal with challenges such as soaring energy prices, higher interest rates, and conflict in the Middle East. When the economy performs well, the benefits reach all sectors, including government. Growth in incomes, jobs, and profits have soared to such an extent that government revenues are now rising at double-digit rates.
“Extending the lower capital gains rate through the end of the decade helps promote a healthier environment for the creation of wealth–one that will not only help to increase incomes, jobs, and profits throughout the economy, but also produce more revenues for government.”
Ross Kaminsky is a fellow at The Heartland Institute and can be reached at [email protected].
“There are reasons that the politics of class envy don’t work regarding tax cuts. The most obvious is that Americans tend to believe in the American dream. I may not be a rich guy today but I hope to earn my way into a high tax bracket. So I do not oppose lowering marginal tax rates for all.
“Note the important word “earn,” a concept all too invisible from the left who believe we are simply “entitled” to the product of other peoples’ work or risk-taking.
“Another reason that the liberal arguments against tax cuts are bogus–although it may be more subconsciously understood than overtly recognized–is that after every major income tax rate cut, from Kennedy to Reagan to Bush, the share of income taxes paid by the “rich” increased. In other words, even when the highest marginal rates are cut, lower rates or other provisions are also modified which make the result a more “progressive” tax system. So when you hear that some big percentage of the benefit from a tax cut goes to the rich, you can rest assured they pay an even bigger percentage of total income taxes.”
The Heartland Institute is a national nonprofit organization based in Chicago. Among other publications, Heartland publishes Budget & Tax News, a monthly newspaper addressing tax and fiscal policy issues. For more information, call Michael Van Winkle, media affairs assistant, 312/377-4000, or email him at [email protected].