Monday, October 13, 2008

Can we afford this tax policy?


Senator John McCain has proposed significant changes to the tax systems that seem to give breaks to just about all classes, including individuals and corporations. His tax plan seems to leave one problem looming – we just added $700 billion to the deficit. How can we continue to mortgage the future of our children and refuse to pay the price?

I am not arguing that we raise taxes. I think it is important that we keep the government out of our collective pocket book. However, there are programs and entitlements to which the government has sealed our fate. These programs cost money, lots of money. Most of the budget is decided long before the President has anything to add. Most of the budget was decided by men and women who are no longer part of the process many years ago. The bill for this part of the budget is there facing us square and challenging us to do more without the funding to do it. The only way to avoid these entitlements, programs and other policies set by previous administrations and congresses is to repeal them. It seems that even those policies that were passed under extreme scrutiny are even harder to repeal.

Anyway, I digress. Senator McCain and Governor Palin have suggested a few tax cuts through some very specific programs. Keeping the Bush tax cuts seems to be central to John McCain’s plans. I don’t remember those tax cuts helping me directly. I have a short memory of these things.

John McCain wants to cut corporate taxes. The United States currently taxes its corporations at a higher rate than just about every other government in the world. Doing business elsewhere is cheaper than it is here. I am aware of a few jobs we’ve lost here due to outsourcing to off shore companies. I have to wonder if the corporate taxes were lowered if these jobs could be saved. Conversely, the effect to the government’s revenue by reducing this tax is significant. Is enough made up in the creation of jobs to overcome this cut?

John McCain has a few proposals that would reduce or eliminate taxes on new equipment and on research and development. Capital expenditures help companies stay competitive. By keeping the technology and best practices up-to-date, organizations will be more profitable. Additionally, other companies who sell this technology will generate more income. Would the additional income at a lower tax rate improve actual revenue?

I don’t know if this policy is the right policy. Many people consider trickle down economics a failed policy. It seems, however, that when companies make more money they hire more people. When more people are working in higher paying jobs, the whole country benefits. Maybe the government needs to make it easier to keep the savings in the country and a better benefit to the citizens living here rather than just benefiting the stock market and foreigners.
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