Growth—Not “Stimulus”—Just What the Economy Needs
MYTH: The whole idea of an economic “stimulus” package is a dinosaur-like remnant of big government socialism. It pretends that the government can spend taxpayer money and somehow “stimulate” economic growth
FACT: Only permanent changes to economic incentives will result in economic growth. America needs a growth package, not a pork-laden “stimulus” bill
Positive Tax Improvements to Grow the Economy Today and Going Forward
- Immediately allow all businesses to expense the cost of assets they purchase for their business. Under current tax law, businesses must slowly-deduct, or “depreciate,” assets like computers, machinery, cars, and furniture. All businesses should be able to deduct these costs fully in the year paid. The principle is simple—they don’t have the money anymore, so they shouldn’t have to wait for their tax deduction over many years.
Legislative Proposal: Allow full expensing for personal property business assets bought in 2008
- Cut the corporate income tax rate from 35% to 25%. The U.S. corporate income tax is the second-highest in the developed world, behind only Japan. Our European economic competitors have an average corporate income tax rate of about 25%. We should cut the corporate income tax to give U.S. companies an ability to compete around the world without onerous tax penalties at home.
Legislative Proposal: Reduce the top corporate income tax rate to 25%, effective January 1, 2008
- Index the basis of capital gains assets to inflation. Capital gains tax is paid on the profits investors generate from selling assets. Much of this profit growth, though, reflects nothing more than the rise in prices over the years. Investors should not have to pay taxes merely on inflationary gains. They should be allowed to adjust the cost basis of the asset sold by the inflation that happened since they bought it. This would represent an effective capital gains tax cut. There is some evidence the Treasury Department can do this by regulation alone.
Legislative Proposal: Allow investors to index the basis of capital assets sold in 2008
- Allow corporations to benefit from the 15% capital gains tax rate. Corporations face a 35% capital gains tax, compared to just 15% for individuals. Some estimate that over $1 trillion in assets are locked up in corporate accounts—assets that will never be sold, since the corporation doesn’t want to lose over a third of their profit in taxes. Cut that rate to 15%, and corporations will free up cash to create jobs and grow the economy.
Legislative Proposal: Lower the corporate capital gains tax to 15% in 2008