Nobel Prize Winner: Tax cuts were too small

The 2004 Nobel Prize for Economics winner, Edward Prescott, said on CNBC that the Bush tax cuts were too small.

“What Bush has done has been not very big, it’s pretty small,” Prescott told CNBC financial news television.

“Tax rates were not cut enough,” he said.

As I’ve said before, tax cuts were great for the economy. The wealthiest Americans are now paying a larger share as a result of the Bush tax cut:

A report from the nonpartisan Congressional Budget Office…shows that Bush’s tax cuts have been “progressive” — that is, they have shifted the share of the overall federal income tax burden toward the wealthy and away from lower-income earners….. The report also shows that Bush managed to craft a tax reduction package that even benefits the lowest-earning taxpayers who already pay what amount to negative income taxes. That’s right, thanks to various refundable tax credits, before the Bush tax cuts the lowest-earning 20 percent of income earners not only paid no income taxes — on average they received money from the Internal Revenue Service.

Do I agree with increasing/escalating tax cuts? Yeah, I probably do. It’s been shown to spur on the economy & tax revenues time and time again:

  • lower taxes gives people more a greater share of their income
  • larger incomes lead to increased purchased and savings
  • increased savings mean banks have more money to loan and do so more freely
  • increased loan availability leads to capital spending by businesses
  • increased capital investments lead to larger revenues
  • larger revenues lead to more taxes collected by the government

It happens every time. We’ve got an awful lot to pay for & none of it’s going to get any cheaper, I’m afraid. If we take advantage of a rebounding economy, we can increase our tax revenues today & use the compounding effect of interest to help secure the nation’s finances.