A New York Times op-ed proposes a neat idea that makes cynics like me savor the idea of George W Bush sabotaging the economy for his predecessor, either a Democrat or John McCain. Get all the consumer spending and economic boost out of the tax cuts this year and repeal them in the beginning of next year, so a real recession can fall in the lap of the next president. The gist:
t’s true that more tax cuts this year could help head off a recession in the short run. Washington could send taxpayers rebate checks or give businesses temporary breaks for new investments in equipment. President Bush is likely to propose both as part of his $150 billion package of emergency measures.
But if they were repealed in a year, the Bush tax cuts could spur a burst of economic activity in 2008. If people knew that their tax rates were going up next year, they’d work to make sure that more of their income is taxed at this year’s lower rates. Investors would likewise have a giant incentive to cash out their capital gains now to avoid paying higher taxes later. In 1986, stock sales doubled as taxpayers rushed to avoid the capital gains tax rate increase scheduled for 1987. If people pour their stock gains into yachts and fast cars, that’s pure fiscal stimulus.
Now, for the good of the American economy, I can’t support this policy because on balance I don’t want to raise taxes, period. When taxes are at about 20% of income for the higher brackets, then we can negotiate. Between federal, state, and sometimes city income taxes, property taxes, sales taxes, death taxes, and capital gains taxes, there are just too many taxes on us. But the cynic in me likes the idea of W giving Clinton or McCain a big crap sandwich to eat for their short four-year tenure (which I predict would happen with either of those two candidates).