Term Paper on "Tax Cut Policy on Public Debt"

Term Paper 5 pages (1450 words) Sources: 0

[EXCERPT] . . . .

Tax Cut Policy on Public Debt

Discuss the impact of tax cut policy on policy debt

Proposal of a tax reduction is for the greater part caused by the anticipated federal excesses that are currently sufficiently big to extinguish the publicly held federal debt. Botheration regarding extinguishing of public debt has not been a concern for 165 years. In the opinion of Greenspan, the budding primary strategy is to deal with the inference of keeping extra funds after a stage wherein the debt held by the public is successfully abolished. Thereafter he reasoned that lesser taxes were healthier compared than more expenditure as to route to provide a solution regarding the dilemma of inadequate public debt. Indeed the plummeting of the stock of publicly held government bonds might be prevented by letting the Social Security trust fund to put in their money in an extensive collection of securities; inclusive of corporate shares. A decrease that catered to reduce tax deformities will encourage outlay and long-term economic development. (We Really Need a Tax Cut)

Reductions in minor rates of taxes are particularly striking as they enhance inducement to be employed, keep savings and allocate funds for investment. Another good reasoning was that tax reductions takes away proceeds from Washington and thus prevent Congress from expanding them. Ronald Reagan appreciated this matter when he advocated for income tax reductions during the 1980s. To combat an economic slump, the Bush Plan must be modified to abolish the steady introduction of tax reductions. Or else, the possibility of decreased tax rates incites people to put off earnings. This aspect of the 1981 tax reform might have caused the 1982 slump. An associated proposal, lately put forth is that any type of tax cut be implemented with retrospective effect from Jan 1, 2001. The precise method through which this retrospective effect is attained is less important till people consider that insignificant tax rates for 2001 are not more than those in the coming years. (We Really Need a Tax Cut)

As the Presidential candidate for his initial regime as well as a candidate, President Bush was an ardent supporter of tax reductions. Hence tax reductions have been constituent measure of his fiscal policy during his initial regime and there is every possibility it is going to continue during the coming four years. At present let us look what the tax reductions were during his first period as President and its effect on the economy of the country. President George W. Bush ratified the Economic Growth and Tax Relief Reconciliation Act of 2001 - EGTRRA during June, 2001. In a departure of his promises, the Act seems to benefit individuals with higher earnings. It gives the benefit of greater tax concessions to the groups having higher incomes compared to the middle income groups. A cut has been proposed in the highest slab of income tax rates along with some more concessions in the Estate tax and generation - a tax holiday up to the year 2009, which will be annulled in the year 2010. While Bush took office it was anticipated that a huge surplus budget is in store. This warranted the tax reductions, which he was in favor, and resistance was less. This has not established to be a reality and the rising deficit with tax reductions has been debated intensely. (the Bush Tax Cut: One Year Later) controversy is that EGTTRA will affect a cut in revenue of $1.35 trillion or perhaps unto $1.7 trillion up to 2011. Any one of these figures will surpass the excess that was obtainable in 2001. Apart from that disconcerting is the long-term situation. The fiscal deficit which was anticipated to be 0.7% of GDP before EGTTRA is currently expected to be hiked by roughly 1.43% of GDP. More hostile adversaries make more serious assertions as regards its consequences on the economy and the typical American civilian. It is alleged that the revenue income in 2004 has been the least since 1950. Besides, more damaging is the assertion of the invasion of $500 billion from the Social Security to counter the revenue loss. Besides, every American household consisting of four members will have to bear an added load of $52,000 more as regards of its contribution to the national liability. Therefore we witness contrasting demands on a tax reduction strategy, which was expected… READ MORE

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