Monday, January 5, 2009

Tax Cut Stimulus

$300 billion?
The Obama tax-cut proposals, if enacted, could pack more punch in two years than either of President George W. Bush's tax cuts did in their first two years. Mr. Bush's 10-year, $1.35 trillion tax cut of 2001, considered the largest in history, contained $174 billion of cuts during its first two full years, according to Congress's Joint Committee on Taxation. The second-largest tax cut -- the 10-year, $350 billion package engineered by Mr. Bush in 2003 -- contained $231 billion in 2004 and 2005.
As much as I like paying less taxes, 40% of the stimulus being tax cuts strikes me as a bad plan. Krugman lays it out:
...there’s a reasonable economic case for including a significant amount of tax cuts in the package, mainly in year one.

But the numbers being reported — 40 percent of the whole, two-year plan — sound high. And all the news reports say that the high tax-cut share is intended to assuage Republicans; what this presumably means is that this was the message the off-the-record Obamanauts were told to convey.

And that’s bad news.

Look, Republicans are not going to come on board. Make 40% of the package tax cuts, they’ll demand 100%. Then they’ll start the thing about how you can’t cut taxes on people who don’t pay taxes (with only income taxes counting, of course) and demand that the plan focus on the affluent. Then they’ll demand cuts in corporate taxes. And Mitch McConnell is already saying that state and local governments should get loans, not aid — which would undermine that part of the plan, too.

A good faith gesture at bipartisanship at least gives cover if they come back with demands for even greater tax cuts... but yeah, it doesn't seem like a good sign to be giving so much ground before negotiations have even really begun.