“I will cut taxes – cut taxes – for 95 percent of all working families, because, in an economy like this, the last thing we should do is raise taxes on the middle class.”
- Barack Obama -
You rarely see anyone, even Democrats, offer up the idea of tax increases as a solution to economic contraction, but there’s a first time for everything.
TaxNews.com reports that the Organization for Economic Cooperation and Development has recommended a move away from income taxes towards consumption and property taxes to stimulate economic growth (emphasis added):
On tax policy, the OECD says that some of the tax measures taken in response to the crisis could prove beneficial to long-term growth and should be left intact. For instance, tax credits and direct grants for R&D can help counter a slump in innovation and, if well focused, can promote green initiatives. However, because the crisis has wreaked havoc with public finances, some taxes which were cut will need to be raised, the OECD argues.
The report recommends in general shifting the composition of taxes away from income and toward consumption and land. For instance, to strengthen growth, the U.S. could introduce a form of value-added tax, potentially making up for the loss of tax revenue as a result of extending previous income tax cuts to the majority of taxpayers.
An increase in consumption and land taxes will surely hasten the growth of the public sector, but I don’t see how taking money out of circulation and giving it to inept government officials who have a long and rich tradition of utterly wasting it will stimulate general economic growth.
Reducing the spending power of consumers, whether they be rich, middle-class or poor, won’t jump start the economy, but rather, push it into further decline.
The truth is, our elected officials will never do the hard work of eliminating waste unless and until they are forced to do so by an electorate that refuses to allow them to increase its taxes every time they encounter budget difficulties.
In short, if all the government can ever do to cover budget shortfalls is increase our taxes, the public sector will be in a state of perpetual growth funded by the perpetual decline of the private sector.
Creeping nationalization.
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1 response so far ↓
1 Daniel Grow // Mar 18, 2010 at 6:18 am
Well, OECD survey is first economic survey on India and it is the third largest economy behind the US and China in terms of real prices and purchasing power. India can definatly reach the level of 10% GDP growth till the end of 2009 but as we know prblems is waiting for us.
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