We’re only a couple of weeks away from choosing our nation’s next chief executive. That means we’re also within weeks of charting an economic course through the end of the decade-a course that will be determined either by goofy, big government zodiac-gazing or by the compass of conservative, free-market economics.
There’s no mistaking the political mood in the country. As I mentioned recently in this column, the voters are weary of
Yes, everyone knows who caused the recession, who created the $399 billion deficit, who hamstrung business start-ups and investment, who helped send 2 million people to the unemployment line in the last two years. Everyone knows. Everyone except those most responsible: members of the
Unfortunately, public disgust won’t be enough to reform the system.
An impossible task? Not really. My colleagues at The Heritage Foundation have developed such a plan. Variations on this theme are possible. What is vital is to stop talking about the problems and start tackling them. Some suggestions:
Offer real tax relief to families.
The surest way to provide tax relief for families is through a tax credit-a dollar-for-dollar reduction in taxes. The Bush administration, finally responding to a flurry of tax-relief proposals from Congress, offered a meager tax credit for pre-school children earlier this year. Arkansas Gov. William Clinton, the Democratic nominee for president, is proposing a $500 tax credit per child, financed by higher taxes on the wealthy.
But after three years of higher taxes and declining income,
Reduce the tax on investment gains. As most business executives realize, compared with other advanced industrialized nations, the current top capital gains tax rate of 28 percent puts
Expand Individual Retirement Accounts. As with the capital gains tax, earnings on savings are taxed more heavily in America than in almost every other industrialized nation. This boosts consumption, but causes savings and investment in the economy to decline. Our plan would make all taxpayers eligible for tax-preferred IRAs. Money deposited in an IRA account would not be tax deductible, but both principal and interest would avoid taxation when the money is withdrawn. Shifting the tax benefit to the “back end” would spur savings and investment.
Establish urban and rural enterprise zones. Tax and regulatory relief for would-be businessmen is one of the best tools for luring entrepreneurial energy and capital to some of the more depressed areas of the country. Such a strategy benefits both businesses and workers-and in light of the April riots in
Housing and Urban Development Secretary Jack Kemp has been pushing enterprise zones for more than a decade, and my colleague Stuart Butler even longer than that, but the big-government paternalists have bottled up the legislation. Skeptics should look at the states: At least 37 states created more than 600 enterprise zones in the last decade, stimulating more than $28 billion in new investment and creating or saving more than 350,000 jobs. Strategies vary, but include investment tax credits, sales tax exemptions and property tax abatements.
Naturally, opponents of tax relief for families and tax reductions for businesses raise the specter of an even larger federal deficit. This is the hobgoblin of little minds that cannot change their way of thinking.
Deficits don’t result from tax cuts, but from spending beyond your means-now the defining feature of
If we’re going to repair the
There’s no question that federal spending can be cut: My colleagues have identified dozens of unnecessary federal programs that could be eliminated or reformed, from water subsidies to crop insurance programs. Meanwhile, if