Today in Columbia, South Carolina, John McCain unveiled his plan to stimulate the American economy. McCain's plan will lower the corporate tax rate, allow expensing of equipment and technology investments and establish a permanent research and development tax credit.
"Now is the time to act to stimulate our economy," said John McCain. "I offer a genuinely conservative, pro-growth plan to provide much-needed stimulus to our economy, creating more prosperity and opportunity for American families. Unlike the Democrats' tired ideas of tax and spend, my plan will cut taxes, spur investment and innovation and make American business more competitive in the global marketplace."
Jack Kemp applauded John McCain's economic stimulus initiative, stating, "John McCain's pro-growth stimulus plan is exactly what our economy needs today. As president, John McCain will provide principled leadership to ensure our economy remains the envy of the free world."
JOHN MCCAIN: BOLD SOLUTIONS TO STIMULATE THE AMERICAN ECONOMY
· Cut The Corporate Tax Rate From 35 To 25 Percent.
A lower corporate tax rate is essential to U.S. competitiveness. America was once a low-tax business environment, but as our trade partners lowered their rates, America failed to keep pace, leaving us with the second-highest rate among the world's advanced economies.[1]
Cutting the corporate tax will expand the U.S. economy, creating jobs and opportunities for prosperity. A recent analysis of tax policy options estimated that a cut less than half this size could increase long-term growth by 0.5 percent, or $100 billion in a single year.[2]
Lower corporate taxes leads to higher wages. Recent studies have shown that corporate taxes are in large part passed on to labor through lower wages. One study noted that a one percent hike in the corporate tax results in a 0.8 percent decrease in manufacturing wages.[3] Accordingly, cutting corporate taxes can increase wages for American workers.
· Allow First-Year Deduction, Or "Expensing", Of Equipment And Technology Investments.
Expensing of equipment and technology will provide an immediate boost to capital expenditures and reward investments in cutting-edge technologies.
The additional investment stimulated by a change to expensing of equipment and technology will drive to economic growth. A recent estimate of a modest expensing provision predicted a gain of 1.5 percent in long term economic growth.[4]
The complexity of our tax code needlessly burdens American businesses and families with $140 billion in compliance costs.[5] Allowing expensing will eliminate the need for complicated accounting for depreciation.
· Establish Permanent Tax Credit Equal To 10 Percent Of Wages Spent On R&D.
The R&D tax credit will simplify the tax code, reward activity in the United States, and make us more competitive with other countries.
A permanent credit will provide an incentive to innovate and remove uncertainty. At a time when our companies need to be more competitive, we need to provide a permanent incentive to innovate, and remove the uncertainty now hanging over businesses as they make R&D investment decisions.
· These Are Essential First Steps On The Path To Fundamental Tax Reform, Which Could Increase U.S. GDP By As Much As 10 Percent Over The Long Term.[6]
[1] Robert Carroll, "Fiscal Stimulus: Missing The Big Picture?" The Tax Foundation, January 11, 2008
[2] U.S. Department of the Treasury, "Approaches to Reform the U.S. Business Tax System for the 21st Century," December 20, 2007
[3] Kevin Hassett and Aparna Mathur, "Taxes and Wages," American Enterprise Institute for Public Policy Research, Working Paper Number 128, June 2006.; The President's Advisory Panel on Federal Tax Reform (2005)
[4] U.S. Department of the Treasury, "Approaches to Reform the U.S. Business Tax System for the 21st Century," December 20, 2007
[5] The President's Advisory Panel on Federal Tax Reform (2005)
[6] Alan J. Auerbach, Kevin A. Hassett, et al., "Toward Fundamental Tax Reform," AEI Press, May 2005
Thursday, January 17, 2008
JOHN MCCAIN UNVEILS ECONOMIC STIMULUS PLAN
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1 comments:
Still can't compare to the FairTax as advocated by Mr. Huckabee:
The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will generate $2.586 trillion dollars – $358 billion more than the taxes it replaces. [BHKPT]
The FairTax has the broadest base and the lowest rate of any single-rate tax reform plan. [THBP]
Real wages are 10.3 percent, 9.5 percent, and 9.2 percent higher in years 1, 10, and 25, respectively than would otherwise be the case. [THBNP]
The economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by the 10th year than it would otherwise be. [ALM]
Consumption benefits [ALM]:
• Disposable personal income is higher than if the current tax system remains in place: 1.7 percent in year 1, 8.7 percent in year 5, and 11.8 percent in year 10.
• Consumption increases by 2.4 percent more in the first year, which grows to 11.7 percent more by the tenth year than it would be if the current system were to remain in place.
• The increase in consumption is fueled by the 1.7 percent increase in disposable (after-tax) personal income that accompanies the rise in incomes from capital and labor once the FairTax is enacted.
• By the 10th year, consumption increases by 11.7 percent over what it would be if the current tax system remained in place, and disposable income is up by 11.8 percent.
Over time, the FairTax benefits all income groups. Of 42 household types (classified by income, marital status, age), all have lower average remaining lifetime tax rates under the FairTax than they would experience under the current tax system. [KR]
Implementing the FairTax at a 23 percent rate gives the poorest members of the generation born in 1990 a 13.5 percent improvement in economic well-being; their middle class and rich contemporaries experience a 5 percent and 2 percent improvement, respectively. [JK]
Based on standard measures of tax burden, the FairTax is more progressive than the individual income tax, payroll tax, and the corporate income tax. [THBPN]
Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it would be if the current system remained in place, by 2.4 percent in year 10, and by 5 percent in year 20. [THPDB]
On average, states could cut their sales tax rates by more than half, or 3.2 percentage points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the FairTax base. [TBJ]
The FairTax provides the equivalent of a supercharged mortgage interest deduction, reducing the true cost of buying a home by 19 percent. [WM]
ALERT: Kotlikoff refutes Bruce Bartlett's shabby critiques of the FairTax.
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