With the country struggling to get out of the worst recession in 60 years, our nation's political leaders are debating whether or not they should allow a series of federal tax cuts enacted in 2001 to expire. These tax cuts should not only be extended, we should make them permanent.
History has proven two important facts: tax cuts help stimulate consumer spending, business investment, economic growth, and job creation -- while tax increases impede economic growth and kill jobs.
In 2001 and 2003, Congress approved a series of tax cuts that are currently saving American taxpayers $135 billion a year. However, these tax cuts are set to expire in 2011.
Most Democrats in Washington, including President Obama, want to let these tax cuts expire. They argue that they represent "tax cuts for the rich," and they feel that these tax dollars are needed to help reduce the federal budget deficit, which will exceed $1.47 trillion this year.
While reducing the federal budget deficit is important, it should be done by reining in Washington's out-of-control spending, not by raising taxes on families and businesses.
The federal tax cuts benefit a wide range of citizens, including married couples with children, investors, and small businesses.
These tax cuts include reductions in individual income tax rates, tax relief for married couples, an increase in the child tax credit, a reduction in capital gains taxes, and important depreciation write-offs for certain business investments.
If we allow these tax cuts to expire, the result will be a federal tax increase of $135 billion on consumers and small businesses. This would be a devastating blow to an economy that is struggling to recover.
According to the nonpartisan Tax Foundation, if Congress fails to extend these tax cuts American families will see their total federal tax burden increase by $1,541 next year. Many families who are struggling to make ends meet cannot afford to pay higher taxes.
Apart from the impact tax increases would have on families and businesses, their impact on the economy as a whole cannot be overstated.
According to Mark Zandi, chief economist for Moody's Analytics, failing to extend these tax cuts would have an adverse impact on the American economy. In a recent interview, Zandi said, "If they fail to act that would be a serious mistake and significantly raise the odds that the economy would unravel back into a recession."
With the economy in very a fragile condition we should be doing everything we can to increase the disposable income of families and businesses. We do that by cutting taxes and controlling spending, not by raising taxes.
In my role as Virginia's chief jobs creation officer, I have met with more CEOs than anyone in Virginia government over the past seven months. These CEOs know what it takes to create jobs and get our economy moving again. If there is one thing they all agree on, it is the need to reduce taxes to encourage spending and investment.
If our political leaders in Washington are serious about revitalizing our nation's economy, they should make these tax cuts permanent, or at the very least extend them for an additional five years -- and end their out-of-control spending. This will send the correct message to business leaders and investors.
Making hard decisions like these is not easy, but we have shown in Virginia how it can be done. Earlier this year we eliminated a $4.2 billion budget deficit by reducing spending, and we have taken aggressive steps to create jobs in our state. As a result, we ended the 2010 fiscal year with a $220 million surplus.
The formula for encouraging economic growth is simple -- cut taxes, reduce unnecessary regulations, invest in proven economic development programs, reduce spending, adopt a long-term plan for eliminating the federal budget deficit, and empower the private sector to unleash the entrepreneurial spirit of America.
If our leaders take the alternate course of higher taxes and more regulation, uncontrolled spending and debt, and an overreliance on government at the expense of the private sector, they will insure that our economic malaise continues and the nation slips into a double dip recession.
