Another Misdiagnosis: Marginal Rate Reductions and Extensions of Tax Cuts Expiring in 2010 Not the Right Medicine for the Economy’s Current Ills

Publication Date: January 2008

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Aviva Aron-Dine

Research Area: Economics

Keywords: Economic projections; Recession; Tax code; State budgets

Type: Report

Abstract:

There is a serious debate to be had about whether cutting corporate or individual tax rates or extending the 2001 and 2003 tax cuts would strengthen the economy in the long run. But corporate and individual rate cuts, and extensions of tax cuts that are not scheduled to expire until December 31, 2010, simply are not credible as economic stimulus proposals.  Where proposals like temporary extensions of unemployment benefits, aid to state governments (to help them avoid cutting programs or raising taxes during a recession), temporary increases in food stamp benefits, and tax rebates to low- and moderate-income households would quickly direct funds to individuals and institutions likely to spend them, across-the-board marginal rate cuts and extension of the 2001 and 2003 tax cuts would do little or nothing to augment aggregate demand in the near term.