Sen. Tom Daschle's (D-S.D.) proposal will hike taxes just in time for presidential election.

WASHINGTON - Today, Senate Democratic leader Tom Daschle (S-SD) proposed $40 billion of new government spending along with tax cuts as part of the Senate Democrats economic stimulus plan. The plan includes a temporary $300 tax cut and an expansion of the accelerated depreciation for businesses to 50 percent.

"It's about time Democrats realized that cutting taxes is good for the economy," said taxpayer advocate Grover Norquist, who heads Americans for Tax Reform (ATR) in Washington. "But giving a one-time rebate will do nothing to improve economic growth."

The proposal put forward by Daschle will do little to create jobs, raise the wages of workers, or improve economic growth overall. ATR has just completed an analysis of the economic growth differences between temporary rebate checks issues in 2001 and the marginal rate reductions enacted at the beginning of 2002 (http://www.atr.org/pdffiles/incometax.pdf). Of the nominal amount of money that was actually spent from the rebates, all that occurred was a one-time jolt to mall sales. Businesses did not invest more, no new hiring was put in place, workers wages did not increase, and economic growth remained stagnant. In fact, the quarter following the rebate checks income, spending, savings, and debt reduction all fell back to levels at or below the levels prior to the rebates being distributed.

Conversely, Bush's subsequent first round of marginal income tax rate reductions provided support to the economy's downside risks of declining business investment. As the marginal income rate cuts became phased-in, taxpayers increased their disposable income in their weekly paychecks which resulted in increased spending, saving, and debt-reduction on a sustained basis thus propelling growth as the economy waited for business investment to restart.

"The evidence overwhelmingly demonstrates one-time rebates will do very little for economic growth, and thus it appears this proposal is little more than presidential politics at the expense of taxpayers and the economy," continued Norquist. "This tax cut is only good for the year 2003, which translates into a tax increase for every working American and productive business in 2004, just in time for the presidential election. And hiking taxes when the economy starts to rebound is economic suicide. Daschle wants a sluggish economy in 2004 so the Democrats can hang it around President Bush's neck."