Real Tax Cuts Can Jumpstart the Economy

02/16/2009 12:01 am EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

You can’t spend rhetoric. Especially empty rhetoric. President Obama was eloquent trying to sell his economic stimulus program to the American public in Elkhart, Indiana, and Ft. Myers, Florida, last week. And one homeless woman he met eventually did find lodging—but since that hour, hundreds more families have lost their homes.

Meanwhile, during Congressional hearings last week, Treasury Secretary Timothy Geithner violated the first rule of public speaking: If you don’t have anything to say, don’t say anything!

And then both fell into the trap of assuming that if you throw enough money at a problem, a solution will emerge. That’s the basis for creating a stimulus bill that only stimulates the spending appetite of the Friends of Democrats, who were left out in the past eight years of the Republican spending orgy.

Before the new administration took office, we were facing a $1.2-trillion deficit. Now we’ll be over $2 trillion in the hole for the year—and that’s not counting more bank bailout funds.

This is your tax dollars at work—or at play.

It’s not that it’s all a waste of money; it’s that there’s no direct link to jobs, growth, incentives, and multipliers in so many of the spending allocations.

Whatever happened to the idea of putting money directly into paychecks by cutting the payroll tax—FICA—the one tax everyone pays? Just a one-line proclamation would stimulate the economy and provide relief to families that have only one remaining income to fund their lifestyle.

Sure, FICA is supposed to fund Social Security. But since we’ve already gobbled up the so-called “Social Security trust fund” anyway, why not try to make hiring less expensive for employers, who pay half of FICA? Lower hiring costs could go a long way toward creating—or saving—those three million jobs the president keeps talking about.

The Fair Tax advocates are coming out of the woods. And maybe they have a point that will get some attention this time around. It’s a national sales tax with appropriate exemptions for basic spending.

There would be no income tax, either corporate or personal. Instead, you would give the government 23 cents on every dollar you spend—and only when you decide to spend it.

Without withholding, working people would get an immediate boost to the bottom line in their paycheck, as much as 50%! Now, that’s a stimulus!

The Tax Foundation estimates we Americans will spend $350 billion just complying with the current income tax code in 2009. Think of the savings if we collected taxes only on spending–instead of filing all those forms, paying all those accountants. They can join the bankers in the unemployment lines.

A side benefit: The underground economy would be taxed when they go shopping. And all the offshore corporate profits could be repatriated without the bit of taxes at a 35% rate.

Have you had enough of the income tax, which facilitates all this government stimulus spending?  Maybe it’s time to really think outside the box! What’s your opinion? Please comment and join the conversation.

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