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Fred Thompson: Tax Relief and New Economic Growth

In spite of our leading a war on terror around the world and also in spite of what you sometimes read in the news, the US economy has been strong, is strong and will continue to be strong. That is if the right decisions are made and our congress lead by the socialist leaning Democratic Party allows them to be implemented.

Our economy has a solid foundation, but there are also areas of real concern. Our economy has seen the longest uninterrupted period of job growth on record – 52 months of job growth – but job creation has slowed recently. Consumer spending has been growing, but the housing market is declining. Business investment and exports are still rising, but the cost of imported oil has increased.

After careful consideration and discussion with Members of Congress, the President has concluded that action is needed to protect the health of the economy as a whole. The President’s advisers and many outside experts expect that our economy will continue to grow over the coming year, but at a slower rate than we have enjoyed for the past few years – and there is the risk of a downturn. A growth package can help ensure that consumption and investment is sufficient to protect the health of the broader economy.

White House Fact Sheet

Today’s news shows how the world economy is tied tightly to the US economy

LONDON — Stocks fell sharply worldwide Monday following declines on Wall Street last week amid investor pessimism over the U.S. government’s stimulus plan to prevent a recession.

“We’ve taken our lead from the Asian markets who have not been impressed by the U.S. There’s debate if there’s going to be a recession in the U.S. I don’t think there’s much chance of that though,” said Richard Hunter an analyst at Hargreaves Lansdown Stockbrokers Ltd. in London.

AP – Bellingham Herald: Stock markets plunge worldwide

 

And again from the same AP article, confirmation of the connection between our economy and the need for quick action by the Bush Administration and Congress.

“People are certainly nervous about a potential recession in the U.S. spilling over to the rest of the world,” said David Cohen, Director of Asian Economic Forecasting at Action Economics in Singapore.

“Maybe there’s still some wariness about politicians are able to come up with a compromise and act sufficiently quickly” on a stimulus package, Cohen said.

The word “compromise” is a mouthful for sure, when each day that a new Democrat is elected to Congress puts us just that much closer to a socialist, or perhaps communist state. How’d things fare for the USSR? How’s individual prosperity going in China? It don’t take a rocket scientist, nor a guy from Ferndale, to understand that you don’t grow an economy and create prosperity in a nation by handing more money over to the government.

Why do you think all economic stimulus packages seem to follow the same recipe: cut taxes, put money back into peoples hands. Why do some people keep electing Democrats who do the exact opposite of a stimulus package? Why don’t we make theses stimulus packages part of everyday government? Well gladly, President Bush is calling for parts of his package to become permanent.

Passing a new growth package is our most pressing economic priority. When that is done, Congress must turn to the most important economic priority for our country, and that’s making sure the tax relief that is now in place is not taken away. A source of uncertainty in our economy is that this tax relief is set to expire at the end of 2010.

Unless Congress acts, the American people will face massive tax increases in less than three years. The marriage penalty will make a comeback; the child tax credit will be cut in half; the death tax will come back to life; and tax rates will go up on regular income, capital gains, and dividends. This tax increase would put jobs and economic growth at risk, and Congress has a responsibility to keep that from happening. So it’s critical that Congress make this tax relief permanent. The White House

And funny enough, one Fred Thompson, who by the way is running for President, has been preaching this formula since long before our recent economic slowdown. So here is a look see at Fred Thompson’s plan, courtesy of Fred08.

The following elements of the Thompson Plan for Tax Relief and Economic Growth will spur economic growth and move the nation towards a fairer, simpler tax system on the way to Fred Thompson’s ultimate goal of fundamental tax reform.

Permanently Extend the 2001 and 2003 Tax Cuts. Tax relief enacted in 2001 and 2003 has proved critical to generating a strong economy that has experienced growth despite the war on terror, the collapse in the housing market, and other economic challenges over the last six years. Unless action is taken, every American taxpayer will see a massive tax increase after December 31, 2010. Allowing this tax hike will impose an enormous financial burden on American families, slow economic growth, cost America jobs, and make it more difficult to address the country’s long-term budget, economic, and security challenges. The Thompson plan ensures the following:

  • Reduced individual income tax rates, saving every tax-paying family a minimum of $600.
  • Preserving the $1000 child tax credit,which was doubled from $500 per child.
  • Protecting Marriage penalty relief.
  • Retaining Education tax incentives, including Coverdell Education Savings Accounts, 529 college savings plans, and deductions for higher education expenses.
  • Reduced tax rates on capital gains and qualified dividends.
  • Increased expensing of investment for small businesses.

Permanently Repeal the Death Tax. Current law provides death tax relief, but only through 2010. The death tax is inherently unfair. Under the Thompson Plan, the death tax would be permanently repealed, thus protecting millions of American families, including small business owners and family farmers, from double taxation at rates ranging as high as 55 percent.

Repeal the Alternative Minimum Tax. The AMT is a separate tax system that was intended to ensure that a few high income Americans could not use deductions and credits to eliminate their tax liability. However, because the AMT is not indexed to inflation, it is penalizing Americans it was never intended to affect. While in the U.S. Senate, Fred Thompson authored legislation that would have repealed the AMT. Consistent with that earlier proposal, the Thompson plan will eliminate the AMT as part of broader tax and spending reform. Until comprehensive reform is feasible, the Thompson plan would index the exemption amounts annually so that millions of middle class families will not become subject to this tax.

Reduce the Corporate Tax Rate. The United States has one of the highest rates of tax on businesses of the industrialized nations, second only to Japan. Even Japan is currently considering reducing its corporate tax rate. Economic studies suggest that the U.S. Treasury is actually losing tax revenue by keeping the corporate tax rate so high. In order to increase the competitiveness of U.S. companies in the global marketplace, the Thompson plan would reduce the U.S. top corporate tax rate (including the corporate capital gains tax rate) from 35 percent to no more than 27 percent, which is the approximate average of the world’s leading economies–the nations of the Organization on Economic Cooperation and Development. This tax reduction will promote U.S. competitiveness, encourage companies to keep their operations (and jobs) in the U.S., and spur continued economic expansion and growth.

Permanently Extend Small Business Expensing. Small businesses create two-thirds of all new jobs in America, and employ nearly 59 million Americans — more than half of the nation’s private-sector workforce. Women own a quarter of all small businesses, minorities are nearing the 20% mark, and Hispanic Americans are opening their own businesses at a rate three times the national average. Current law allows small businesses to write-off purchases of equipment of up to $125,000 per year, rather than depreciating hose assets over time. Making expensing of equipment and other small business items permanent will encourage greater investment and growth.

Update and Simplify Depreciation Schedules. The current depreciation schedules are outdated and in many cases do not reflect the realistic useful life of an asset. This is particularly true for investments in high technology. For example, computers must be depreciated over three years, even though they become obsolete in half that time. The Thompson plan would simplify and update these schedules to allow American businesses to make the investments they need to compete and create more high-quality jobs.

Expand Taxpayer Choice. The Thompson plan would give Americans greater choice about how to pay their federal taxes. This plan is based on a proposal developed by the House of Representatives Republican Study Committee that would provide taxpayers the option of remaining under the current, complex tax code or opting for a simplified, flat tax code. The simplified tax code would contain two tax rates: 10% for joint filers on income of up to $100,000 ($50,000 for singles) and 25% on income above these amounts. The standard deduction would be more than doubled to $25,000 for joint filers and $12,500 for singles. The personal exemption amount would be increased to $3,500.

Therefore, a family of 4 would be exempt from income tax on the first $39,000 of income. The simplified tax code would contain no other tax credits or deductions. It would also retain the 15% tax rate on capital gains and dividends. This approach would dramatically simplify taxes for tens of millions of Americans. In addition, the larger standard deduction and personal exemption amounts will still provide significant tax relief to families with children. This proposal would serve as a stepping-stone to fundamental tax reform.

Go Fred!

1 Comment

  1. President Bush did a fine job trying to help big business grow without choking them and chasing them out of the country. We can’t squeeze the companies that provide American jobs, otherwise they will simply continue to disappear.

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