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TAX
AND SPENDING REDUCTION: How politicians can raise revenues and get re-elected!
Even with his stunning re-election, Americans remain concerned that President
Bush is not aggressive enough in addressing Washington’s pork-barrel spending.
Bush has yet to veto a spending bill. But only by controlling spending will the
deficit shrink and real tax reform – an issue raised by Bush as a major goal in
his second term – be attainable.
Still, it is a hopeful sign that tax reform is on the agendas of many federal
and state policymakers.
During the presidential campaign, Sen. John Kerry, D-Mass., indicated he would
move to repeal Bush’s tax cuts and use the revenue to shrink the deficit and
enact new programs. However, such policy usually leads to more spending, less
revenue than anticipated and growing deficits.
The Joint Economic Committee of Congress claims that every dollar of higher
taxes means $1.59 of new spending. A study by the committee found that
fast-growing states have low tax rates while those with rising tax burdens grow
slower than states with a stable or falling burden.
This news does not bode well for Kentucky, which is ranked by the Tax Foundation
as having the sixth-worst business tax climate in the nation.
But with some new and friendly faces in the legislature, Gov. Ernie Fletcher now
has his best opportunity to successfully reform Kentucky’s antiquated tax
policy. Fletcher should push for lower tax rates, which – as opposite as it may
sound – would likely improve government’s revenue stream.
President John F. Kennedy once quipped that: “It is a paradoxical truth that tax
rates are too high today and tax revenues are too low and the soundest way to
raise revenues in the long run is to cut rates now.”
But policymakers should also keep in mind that cutting taxes without controlling
spending does not strengthen an economy – whether in Washington or Frankfort.
Sources:
“Striking at the Root: Developing a State Tax Reform Agenda” by Bob
Williams, president of the Evergreen Freedom Foundation
“State Business Tax Climate Index” by Scott Hodge, J. Scott Moody and Wendy
P. Warcholik, Tax Foundation
The
Bluegrass Institute for Public Policy Solutions
is an independent, non-profit, non-partisan center,
which analyzes local and state laws and regulations, and presents free-market
solutions to the most pressing issues that face Kentuckians.
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