Do we need a tax cut to get the economy moving? Some Republicans think so. Some (all-?) of the Republican presidential candidates have called for tax cuts when they have announced their platforms. But while I would love to be able to keep more of my paycheck (who wouldn’t like more money), I doubt that a tax cut (at least in the sense of lower overall total tax collections) is a good idea.
As I have said before, I favor lower marginal tax rates, but those lower rates would have to be balanced with fewer deductions, exclusions, credits, etc., so that the tax base could be broadened and overall tax collections would at least be the same. (In fact, and this is probably more appropriately the subject of a post of its own, you could probably collect more taxes with fewer adverse consequences to the economy by lowering the marginal tax rates and broadening the tax base.)
I also favor tax simplification. In fact, the “tax cut” I want is a cut in the amount of time I have to spend figuring out my tax bill each year. (I also wouldn’t mind, and I believe the economy would benefit from, a simpler tax system that didn’t make it economically advantageous for people to spend so much time and money figuring out ways to pay less in taxes.)
But both of those ideas are probably sufficiently unrealistic right now that we need to look elsewhere for a tax proposal for today. So here is my proposal for today: We don’t need a tax cut. We need tax certainty/tax stability. We need to lock in rates, and the rest of the tax code, for a period of time, so people can rely on them and plan based on them. Instead of a constant chorus of raise this tax, grant this credit, etc., we need to just leave things alone.
The lack of certainty as to what taxes are going to be next year or the year after is a drag on the economy. While more certainty/stability won’t solve all of our economic problems, it would help. And it would certainly be better than what we are doing now.
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* The corporate tax rate probably does need to be cut. It is uncompetitively high. But if it is reduced, the amount of taxes collected from corporations can be maintained at the current level by getting rid of, or at least reducing, some of those special credits, deductions, exclusions, etc., that Congress has passed out to businesses in the past.
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