Will Hyped 'Economic Stimulus' Package Be Tax Relief or Wealth Redistribution?
It’s an argument supply-siders make regularly – money is better used in the hands of individuals than in the hands of the government – assuming the money didn’t come from individuals in the form of taxes to begin with.
On January 18, President George W. Bush revealed what he said should be the components of an economic stimulus plan – a package that would be 1 percent of gross domestic product – $140 billion to $150 billion, according to Treasury Secretary Henry Paulson.
The January 18 Wall Street Journal reported the Bush administration “is mulling giving individuals and households tax rebates of $800 and $1,600, respectively, and letting businesses deduct half of their new equipment purchases.” Of course, the details of any legislation will first be determined by Congress.
The media have been receptive to that proposal, suggesting it would help the economy.
“Consumer spending is key to rescuing the weak economy,” CNN Washington correspondent Kate Bolduan said on the January 18 “CNN Newsroom” immediately following the president’s announcement. “Tax rebates are a leading proposal to do just that.”
Critics of the proposal, so far scarce in the coverage, argue this “stimulus” plan is not the answer because it is analogous to “robbing Peter to pay Paul” and could cost Americans in the form of taxes later down the road.
“It's like taking a bucket of water from the deep end of a pool and dumping it into the shallow end,” Russell Roberts, an economics professor at George Mason University and a research fellow at Stanford University's Hoover Institution, said on NPR’s January 16 “All Things Considered.” “Funny thing – the water in the shallow end doesn't get any deeper.”
“Congress wants to spend more (either through temporary tax rebates or more spending, or both) and pay for it all with a tax hike at some later date,” Kudlow wrote. “That tax hike could mean overturning the Bush tax cuts, or new surtaxes on high-end producers and successful earners.”
According to Politico, details about the economic stimulus plan will be unveiled after January 22 – when Speaker of the House Nancy Pelosi is set to meet with Bush. It is expected then to be revealed where this tax relief will be targeted.
Until more of the details are divulged, it will be unclear if this will be a tax cut or just a vehicle for the redistribution of wealth. Ed Lazear, chairman of the Council of Economic Advisers and adviser to Bush said on CNBC’s January 18 “Street Signs” this was a “tax cut,” not a “tax rebate” – implying the government wouldn’t be giving money back to you, but lessening the obligation of the money owed to the government.
Reporters have shown concern that any form of tax relief go only to those they deem “middle class” or “poor.” “Today” anchor Matt Lauer worried that tax rebates were going to go to the “rich” prior to the Bush announcement on the January 18 “Today.”