JEC Release Calling for Tax Relief in Stimulus Package

PRESS RELEASE

[2] "The counterproductive nature of the U.S. tax code must be considered in crafting an economic stimulus package," Saxton said. "The current tax system imposes heavy additional economic costs at current levels of taxation. In addition to the financial cost of raising each additional dollar of revenue, these extra economic costs amount to about 40 cents on the dollar. These extra costs arise from lost production, lower consumer welfare, and compliance and enforcement expenses. Economists refer to these costs as the excess burden of taxation, and their existence is widely recognized in the economics literature. A properly designed tax reduction would reduce these excess costs.

[3] "I wish more aggressive measures were politically possible, but proposals to accelerate the 25 percent personal income tax rate to become effective in 2002, and provide partial but still significant expensing of business investment, for example, would provide some economic stimulus and provide relief to many taxpayers. Unfortunately, some policy makers have strongly resisted such proposals arguing they unduly benefit the affluent and business firms.

[4] "However, the proposed personal income tax rate reduction is not targeted at the rich, unless you consider single taxpayers with taxable incomes above $27,950 rich. Married taxpayers with incomes between $46,700 and $112,850 are not rich either by any reasonable standard. Recent publications of the Treasury Department and the nonpartisan Congressional Research Service (CRS) confirm that the tax bracket under discussion is defined by middle class income levels.

[5] "Similarly, hostility to business and private investment would also be an inappropriate guide to tax policy. A majority of American households now directly or indirectly own corporate stock. This has led to a significant increase in public understanding of the operation of our market economic system and the roles played by entrepreneurs and business firms. Most Americans know that their mutual funds, IRAs, 401(k)s, pension plans, and other retirement and investment assets are primarily invested in corporate stocks whose performance significantly affects their economic welfare. Perhaps this is why those recently polled supported personal and business tax relief over other approaches for economic stimulus by a 2-1 margin," Saxton concluded.

[6] For more information on the excess burden of taxation, please visit our website at www.house.gov/jec.