Brian Wesbury at FT Advisors has an alternate stimulus plan that would actually stimulate the economy:

Why not eliminate corporate taxes all together? During FY2008, the US Treasury collected $304 billion in corporate taxes – elimination would cost roughly half of what the Obama stimulus plan may cost and just 30% of this year’s budget deficit. Imagine how the elimination of corporate taxes would change investor perceptions about investment, even for auto companies. Another option would be full (100%) expensing for any investment made by any company in 2009. This would encourage spending and investment.

Individual income tax receipts were $1.15 trillion in FY2008. A 50% reduction in tax rates would cost less than the Treasury’s TARP proposal. Lower tax rates would take the sting out of any pay cuts unionized workers at auto companies might be forced to accept. Another option would be to allow all capital losses by individuals to be written off in full for 2008, rather than limiting them to just $3,000. This would limit the selling of profitable investments this year to absorb those losses for tax purposes only.

There are many positive alternatives (including these) that are not being formally discussed. This is a mistake. And more to the point, the last time the government tried to bail out the economy with drastic action, we ended up in the Great Depression. If we really want to “change” the way government and the private sector interact, why is the US government still trying the same old policies that failed in the past? Tax cuts have worked before, so if deficits don’t matter, why not try a different kind of surge – a private-sector, incentive-creating one?



Corporate taxes should be cut regardless of the state of the economy. The US has the second highest corporate tax rate in the world, a world where companies have the option of locating their factories where they are most welcome. A lower corporate tax rate would encourage US companies to keep operations in the US rather than outsourcing. It would also attract more investment from foreign companies who want to sell their products here.

President elect Obama may find cutting individual tax rates politically difficult. Cutting corporate taxes has bi-partisan support with Rep. Rangel already endorsing the idea. This is something that is politically feasible and would actually help the economy. Obama should embrace it.

Print Friendly, PDF & Email