Gregory D.

Lee

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April 14, 2008

Rebates OK: Democrats Admit Tax Cuts Work

President Bush proposed, and Congress quickly passed, an economic stimulus package in the form of tax “rebates” that could total $150 billion dollars back in the pockets of most Americans.

The president and Congress agreed that as much as $600 would be returned to individual Americans, or $1,200 per couple, and even more to households with children. The reason given for the rebates is that it will give the economy a needed shot in the arm and likely avoid or lessen a recession. Does any of this sound vaguely familiar? The president’s proposal should forever end the debate whether or not more money in the hands of taxpayers stimulates the economy.

Republicans have long maintained that when people pay less in taxes and have more of their own money to spend, they will do just that, as evidenced by the Reagan tax cuts reversing the disastrous Carter years. The additional spending stimulates the economy as demand for goods and services increase. More people are employed, and they pay taxes that fill the treasury’s coffers.

But the Democrats have for decades argued the opposite. So why are they suddenly embracing the idea of more money in taxpayers’ pockets now? Are they admitting that lowering taxes work every time it’s tried, or are they demonstrating that they have no core principles? Which one is it?

In case you’re keeping score, someone whose adjusted gross income exceeds $75,000 gets nothing. But someone who earns at least $3,000 and doesn’t pay income taxes gets $300 of your tax dollars to spend as he or she pleases.

The Democrats maintain that lower-income people who do not pay income taxes should receive a rebate because they are the group most likely to spend the rebates, thus achieving the intended goal of stimulating the economy. Well no kidding. I guess their theory is based on the outrageous FEMA debit card giveaway program for Katrina victims who promptly used them to buy everything from alcohol to breast implants. Spending someone else’s money is always easy.

Democrats contend that any rebates “rich” people receive would be deposited into their bulging bank accounts and forgotten. They think the wealthy should pay a disproportionate amount of taxes, also known as redistribution of income, simply because they are successful and they “should give something back.”

The Democrats also argue that these “working poor” may not pay income taxes, but do pay payroll taxes, and thus should be entitled to a rebate. Well, the last time I checked, I pay FICA and Medicare taxes too, but I don’t qualify for a rebate because I earn too much money. However, I do see their point.

Payroll tax money is co-mingled with income taxes in the treasury’s general fund and is used to pay for everything, not just Social Security and Medicare. Contrary to what Al Gore claimed in 2000, there is no “lockbox” for Social Security or Medicare tax money that is waiting to be disbursed when you reach retirement age. It’s all thrown in the mix with income tax revenues. Because the amount of money you pay for these programs is based on a fixed percentage of your income, it is just a clever way of raising your overall income tax rate whenever you get a raise; don’t let anybody tell you otherwise. And Barack Obama says as president he’ll remove the cap you pay on FICA taxes.

Why not just lower everyone’s FICA and Medicare tax rates by say, half? Keep it that way for a few months to see what good it’s doing. This way everyone would immediately benefit from the lower taxes, and the economy would start turning around sooner. It would also save all the administrative costs involving cutting checks and mailing them to millions of households.   

Congressional Democrats see rebates as an election year opportunity to buy votes with your tax money. It will be interesting to see how long it will be before they revert back to their tired mantra of raising taxes to pay for their out-of-control earmark spending.

Gregory D. Lee writes for North Star Writers Group. He can be reached through his website: www.gregorydlee.com.

© 2008 North Star Writers Group. May not be republished without permission.

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