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An Honest Stimulus: Tax Cuts Instead of Rebates

By Jim DeMint

You can always count on politicians in Washington to be generous with your hard earned tax dollars. The most recent example of this comes as the President and Congress are preparing to pass an economic stimulus package in response to signs of a slowing economy. This comes despite the fact that many indicators still point to continued economic growth, albeit at a slower rate.

Amid the buzz of various proposals one plan is becoming increasingly likely. The President and congressional leaders have proposed writing taxpayer funded government checks for between $300 and $1,200 per person. These rebates will be one-time handouts designed to spur consumer spending.

But an economy that is facing slumping home sales, a credit crisis and nose-diving markets will not be rescued by temporary cash handouts. History has taught us this lesson repeatedly.

Washington sent Americans $300 tax rebate checks in 2001, but the handouts did little for real economic growth and Congress went back to the drawing board. Instead of making the same mistake again, President Bush and Republicans pushed for pro-growth tax cuts in 2003.

In the wake of these 2003 tax cuts capital gains, income and dividend tax rates were lowered. This long-term tax relief gave individuals and businesses incentives to work hard, save and invest in the economy. The result was the creation of over 8 million new jobs, a significantly increased rate of growth for the GDP and a skyrocketing stock market.

In short, the economy boomed in 2003 where it fizzled in 2001.

Now just 5 years later, Washington continues to prove it is dysfunctional by not learning the lessons of 2003. In need of another economic kick-start politicians are proposing handouts because they are politically expedient, even though we know they will not produce lasting results.

The need to "do something fast" is trumping the need to do something that really helps folks struggling in today's economy. We are proposing eating only desert while forsaking a healthy diet. Unfortunately our long-term economic health will suffer as a result.

Congress should abandon the rebate proposals that have proven ineffective in stimulating the economy and embrace a pro-growth package that will help America remain an economic leader around the world.

Any proposal that comes before Congress should include provisions that strike at the heart of the matter.

It's time to take uncertainty out of the economy by making the 2003 tax cuts permanent. Doing so would allow individuals and companies to plan for their economic future.

We must alleviate the burdens on our small businesses. We can do this by enacting provisions that allow small businesses to write off more of their business expenses thereby creating an incentive for these businesses to invest in assets that help their organization grow and create new jobs.

We have to cut the top corporate tax rates in our country. There is no reason that companies doing business in Europe should have an advantage over companies doing business here. Currently the top rate for European companies is 25% compared to the top rate for American companies of 35%. Cutting the top corporate tax rates will enable American companies to compete on a global scale and create more jobs for Americans.

We should encourage more investment by cutting taxes on capital gains for both businesses and individuals.

Finally, it is past time to cut government spending and reign in the out of control congressional earmarking practice. Wasteful and corrupting pork barrel spending just proves to economic investors that the government is not serious about economic vitality and future growth.

Enacting these provisions would be a shot in the arm for the economy over the long term instead of a short-term blip on the radar registered by cash handouts.

Such an approach would be a signal from Washington that Congress is serious about helping people in this economy. It would show that Congress is big enough to step out of the way and let individuals and companies do what they know how to do best: be productive drivers of the world's greatest economy.

Jim DeMint is a U.S. Senator from South Carolina.

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