Barack Obama says he wants to include $300 billion in tax cuts in his proposed stimulus package, about 40% of the total dollars involved. The tax cuts would go to both individuals and businesses. The details are important, obviously. There will be a cap on personal tax cuts so that upper-income taxpayers don’t benefit; that’s bad, as it will make our income tax system, which is too progressive already, more progressive still. Likewise, the plan will “refund” taxes to people who didn’t pay them in the first place. That’s a bad idea, too.
Still, conservatives should be happy that the Democrats are willing to cut taxes at all. $300 billion, if it passes, will provide more near-term relief than either of the Bush tax cuts. And a considerable portion of the proposed cuts will go to companies, which should benefit the economy much more than additional federal spending. Corporate tax cuts will help to balance out the effect of our excessive corporate tax rates, currently, I believe, the second highest in the world. Who knows, maybe now that the the Democrats have acknowledged the beneficial impact of such cuts on the economy, they might be willing to consider permanent corporate tax relief.
Some Republicans are wary of Obama’s tax cut proposal, and it’s obviously important to see the details before trying to pass judgment. For now, though, Obama’s support for major tax cuts can only be seen as one more pleasant surprise from the incoming administration.