TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, January 27, 2009

CTJ: House Democrats' Stimulus Plan Better Than Republicans' Plan

Citizens for Tax Justice has published Tax Cuts in House Democratic Stimulus Plan Better Targeted Than Those of House Republican Plan; National and State-by-State Estimates of Effects of Tax Cut Proposals in Appendix.  Here is the Conclusion:

Lawmakers who are serious about reviving the economy should recognize that tax cuts will be less effective than government spending. There is no certainty that tax cuts will ever result in the sort of immediate spending that economists agree is needed to boost demand for goods and services. But to the extent that Congress feels compelled to cut taxes, the sort of tax proposals included in the House Democrats’ bill (H.R. 598) promise to be far more effective than those included in the Republican bill (H.R. 470). This is because the Democrats’ plan would immediately put money in the hands of those who are most likely spend it quickly — low- and middle-income working families.

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Well of course low and middle income families are most likely to spend the money quickly - they don't have the extra cushion in their income to NOT spend it. The flip side is that to the extent the money sent to these families is more than they've paid in taxes, that additional money is coming from people who work to make it and are being disincentivized to work harder.

Personally, I think we should all recognize that the economy built on our previous free-spending, debt-borrowing ways was simply too large. We need to realize that the economy must shrink to something that is sustainable in the long run.

Posted by: well duh | Jan 27, 2009 5:53:19 AM

What would you expect CTJ to say? They've never met a tax cut they supported, except rebates. The evidence on rebates is that they are never an effective stimulative device.

Posted by: drtaxsacto | Jan 27, 2009 7:10:27 AM

CTJ has the right to say whatever it likes. But there's nothing "better" or "worse" about one plan or another, it's a political difference. Democrats are essentially using the economic crisis as an excuse to do things, like spend more on education, environment, etc. that they wanted to do anyway. Republicans are using it to promote tax cuts that they too would want regardless of economic circumstances. They too have a right to do whatever they want, but it has nothing much to do with tax policy, and I find the perversion of policy debate into an excuse for predetermined positions depressing.

Posted by: mike livingston | Jan 28, 2009 8:14:34 AM

There is enormous controversy over whether a spending program provides a multiplied boost to the economy. Its simply an evidence starved (e.g., spending didn't resuce our economy in the 30s or under Ford, and it hasn't worked after 20 years in Japan) theory.

Given the ongoing debate, the first quoted sentence drains the credibility from what follows.

Posted by: guy in the veal calf office | Jan 28, 2009 11:21:13 AM