The tax cut debate

For the most part, there’s no middle ground on the question of tax cuts and allowing the so-called “Bush tax cuts” to expire. People are either on one side or the other, especially since the theory of whether lower tax cut spurs economic growth remains a hotly debated point.

Daniel Gross, writing on Slate, raises five points to consider during the ongoing debate. One is that the people who were in charge at the time the tax cuts were enacted, are many of the same people who are clamoring for them to be made permanent, but they’re also the ones who made them temporary in the first place. Welcome to the exciting world of Congress!

But it’s on the question of economic growth that Gross, who certainly has a point of view, launches his more vigorous attack against conventional wisdom:

The bold and confident assertions made about the links between tax rates and economic growth, market performance, and prosperity are almost certainly wrong. Turn on CNBC or look at the Wall Street Journal op-ed page these days, and you’ll learn that we must keep tax rates on capital gains, dividends, and income precisely where they are because shifting them to different levels will retard economic growth. Keep this in mind: The people who designed the current, unsustainable tax system promised us that lower marginal rates, and lower taxes on capital and dividends, would boost the economy, promote investment, create jobs, spur market performance, and raise everybody’s income. They were wrong. (It’s no coincidence that these same people also warned us that raising taxes in 1993 would kill market returns and the economy. They were wrong then, too. They’re pretty much always wrong.) As I’ve pointed out, the years under the current tax regime have been a lost decade. Pick your metric–median income, employment, stock market returns, economic growth–the low-tax ’00s sucked. Yet proponents of keeping the tax cuts persist in making the argument: To avoid a repeat of the past decade, we must have the exact same tax policies as we did for the past decade.

The Wall St. community had a response. Appearing on CNBC today, Bernie Marcus, the guy who started Home Depot, launched an unusually strident attack on Obama administration policies:

“My solution is that you take a guy like Timothy Geithner and put him in a new reality show. It’s called ‘Timothy Geithner Does Small Business’, something like [the porn movie] ‘Debbie Does Dallas’, and it ends up the same way,” said Marcus. “Basically, what they’re doing to small business is very similar in this case [to what ‘Debbie’ did to Dallas.]”

Later, Marcus said the tea party movement is “a good thing,” because “we should throw everybody out who’s stupid.”