"I think that the worst thing you can do is increase taxes during a recessionary period. And to go back on that program would, in effect, be a tax increase." (CNN, Novak, Hunt and Shields, 1/6/02)

–Senator John Breaux (D-LA)

"When the government cuts taxes, it increases households\’ take-home pay…When the government cuts taxes and stimulates consumer spending, earnings and profits rise, which further stimulates consumer spending….If the households expect the tax cut to be permanent, they will view it as adding substantially to their financial resources and, therefore, increase their spending by a large amount. In this case, the tax cut will have a large impact on aggregate demand."
— N. Gregory Mankiw (Principles of Economics)

TAX INCREASES 101:
The dictionary defines in-crease (in-kres\’) as:

  • To become greater or larger
  • To make greater or larger
  • A process of becoming larger.

Synonyms for increase: expand, enlarge, augment.

DELAYING TAX RELIEF WILL RAISE TAXES ON THE AMERICAN PEOPLE BY:

  • Preventing the repeal of the death tax (the law repeals the death tax).
  • Preventing marriage penalty relief (the law provides relief from the marriage penalty).
  • Raising taxes on taxpayers in many brackets (the law cut taxes for all taxpayers in all rates).
  • Reducing the value of itemized deductions (the law repeals the phase out on itemized deductions).
  • Reducing the value of personal exemptions (the law repeals the phase out of personal exemptions).
  • Raising taxes on small businessmen and women (the law cut taxes for small businessmen and women by reducing their rates)
  • Scrapping planned increases in the child tax credit (the law increases the child tax credit to $1,000 to help parents with the high costs of raising children).
  • Denying scheduled increases in annual tax-free IRA contributions (the law increases the IRA contributions to $5,000 to allow Americans to save more for their retirement tax-free.)
  • Complicating the tax code (the law simplified the tax code).

WHY TAX INCREASES WILL HURT AMERICA\’S ECONOMY

  • Tax increases reduce economic activity, particularly in a time of recession.
  • Tax increases raise the cost of investment and reduce employment.
  • Tax increases during economic downturns assume the federal budget is more important than the family budget.
  • Tax increases during economic downturns take money from families when they need it most.
  • America\’s workers are the engines of economic growth. A strong economy and more jobs – not tax increases – are the keys to improving the daily lives of working families and creating budget surpluses for years to come.
  • Millions of business owners and entrepreneurs whose businesses are unincorporated will pay higher taxes. Higher marginal tax rates and less cash in the hands of these business owners will reduce incentives for hiring and curtail business expansion.
  • Permanent tax cuts are most likely to increase business activity, because entrepreneurs need to know that the extra resources will be there year after year. Even the possibility of higher taxes in the future can reduce investment and employment today.
  • According to one survey, nine of ten successors whose family businesses failed within three years of the owner\’s death listed the death tax as a contributing factor.

ECONOMISTS AGREE THAT HIGHER TAXES CAN LOWER ECONOMIC GROWTH

  • According to N. Gregory Mankiw (Principles of Economics): "When the government cuts taxes, it increases households\’ take-home pay…When the government cuts taxes and stimulates consumer spending, earnings and profits rise, which further stimulates consumer spending….If the households expect the tax cut to be permanent, they will view it as adding substantially to their financial resources and, therefore, increase their spending by a large amount. In this case, the tax cut will have a large impact on aggregate demand."
  • According to William J. Baumol and Alan S. Blinder (Economics: Principles and Policy): "It should be no mystery, then, how changes in personal taxes affect consumer spending. Any reduction in personal taxes leaves consumers with more disposable income to spend….Permanent cuts in income taxes cause greater increases in consumer spending than do temporary cuts of equal magnitude."
  • According to Paul A. Samuelson and William D. Nordhaus (Economics): "Extra taxes lower our disposable incomes, and lower disposable incomes tend to reduce our consumption spending…Without a doubt, taxes lower output in our multiplier model."