CMP
111
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Economic Policy
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And what’s best for America
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Name
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7/14/2009
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In America we have many ideas of what is best for the
future economic growth of our nation. The two main theories have very different
views in what is best to move our country forward. The first is often promoted
by the Republicans, the basic belief is that lower taxes for business and the
richest of the population helps expand the economy, by creating new investment
opportunities. The second is promoted by Democrats; they believe that when the
masses have lower taxes our economy grows, because the money they receive is
spent on goods and services which increase the profits of everyone. Both have
endless amounts of research and statistics to back up their views. But only one
can keep the American economy competitive for the long term. This paper sets
out to show that lower taxes for the largest percentage of Americans can make
the American economy stronger.
In
the 1980’s the Republican Party tested what we will call supply side economics
and the U.S. Treasury Department lost $644 billion in revenues with no
increase in
worker productivity or investment activity (Hage,
December 1994) . A problem with the Treasury losing so much money is
that the Fed had to slash grants to states and local governments which
caused many states to raise income and sales
taxes. In 1981 congress enacted a
series of tax breaks such as
capital gains, generous write-offs for business investment.
The Reagan Administration believed it would
expand the economy 4.4% annually and
create a budget surplus of
$28 billion by 1984 (Hage, December 1994) . But this estimate
was far off base in 1986 the Treasury collected $171 billion less than expected (Hage,
December 1994) .
Thomas Sowell argues in the article “A dishonest Slogan” that lowering capital
gains tax only
helps to keep up with the
rate of inflation and isn’t really a gain at all. He also believes
that raising capital gains tax discourages
investment and hurts the economy. This
argument just doesn’t hold
up when you realize that the people that benefit the most from
capital gains tax will always invest their
money because it is there chosen profession.
In America both of our major political parties have
conflicting ideas of how our
economic policy should work
this goes beyond their tax plans. The Republicans believe
that self reliance means there is no safety
net needed. They believe business can thrive
without healthy social
conditions (Porter, Novemeber 2008) . While the Democrats
talk in a way that sounds like they want to penalize investment and economic
success. They believe social
progress can only happen at
the expanse of business (Porter, Novemeber 2008) . Both these views
are wrong we need to realize what makes America great is our ability to find a
middle ground, something that allows business to grow while offering a protective
net for those who need it. Business can thrive in an environment where our
poorest Americans are given a helping hand. The problem is that a politician by
their very nature can’t admit when they are wrong and spend all their time
defending the policies of the past to prove they were right. What we need is
for political leaders, business leaders, and civil society to have a respectful
fact-based dialogue about the challenges we face.
Taxes are still a major part of what happens in our
country and Americans tend to
look poorly on taxes. Taxes
are necessary in any government, and a fair and balanced tax
structure is something
everyone can agree on. But this hasn’t been the case in America
for a very long time. Most
Americans believe business has put their personal gains over
what is best for the entire
nation. And with a August report released by the U.S. General
Accounting Office that
stated that two-thirds of all American corporations paid no
federal income taxes between
1999 and 2005, it’s easy to see why the American people
feel that way[1]
(Zuboff, 2008) . No one likes paying
taxes but everyone should pay taxes not just
some people. But with the
current economy we are dealing with there is a growing belief
that what has been seen as a
“Liberal Democratic policy” might be what is needed to
keep America competitive in
the future (Zuboff, 2008) .
A Business Week Online article by Jane Sasseen offers a
good contrast between
the tax plans of the
Republicans and the Democrats here are a few samples from her
article:
“Len Berman a former
Treasury tax official who is a senior fellow at the Urban Institute say if
Obama’s proposals which include plans to
rescind the Bush tax cuts on couples making more than
$250,000,
close corporate tax
loopholes, and tax private equity earning
known as ‘carried interest’
as ordinary income were adopted in
quintile of the population
would see their after tax income rise
5.8%. Those in the next
quintile would see an increase of
4%. McCain’s proposals by
contrast far more benefits would go
to the top a corporate tax
cut and a large reduction in estate taxes
also extension of the Bush
tax cuts. In 2009 if McCain’s
proposals went into effect
the bottom fifth of the population would
see after tax income go up
just .2% and people in the next
quintile would see a .7% hike. But the top quintile would see a
bump up in after tax income
of 2.7%. Obama’s proposals when
compared with current tax
policy would actually increase revenues
coming into government
coffers. Although he has promised tax
cuts too many middle and working class families, along
with the elderly. Obama’s tax plans
would bring an estimated additional
$734 billion to the treasury
over 10 years. By contrast McCain’s
tax changes would still
leave the Treasury coming up short.
McCain’s proposals would
slash tax revenues by an estimated
$628 billion over the 10
year period.” (Sasseen, 2008)
Obama
·
$734
billion in treasury in 10 years
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McCain
·
Slashes
$628 billion in treasury in 10 years
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There are many theories to
what is best for the economy, but the obvious choice is
to give money to the mass of
consumers. They will generate sales which will help
business and also bring in
sales tax for many states. A fair and balanced tax structure that
taxes the people on top and on bottom at a
nearly equal rate means that everyone thrives
from the increases sales. And if more people
have more money investments will
naturally rise. A fair tax
plan that lowers taxes for most Americans is a long term solution
that will grow our economy
for many years.
Bibliography
Hage, D. a. (December 1994). The Repackaging of
Reaganomics. U.S. News & World Report .
Porter, M. E.
(Novemeber 2008). Why America Needs an Economic Strategy. Business Week
, 38-42.
Sasseen, J. (2008,
November 30). Obama vs. McCain: Taxing and Spending. Retrieved from
Bussiness Week Online: http://web.ebscohost.com
Sowell, T. (January,
1995). A dishonest slogan. Forbes , 81.
Zuboff, S. (2008,
November 30). Bill Bradley Slams McCain's Tax Rant. Retrieved from
Bussiness Week Online:http:/web.ebscohost.com
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