All we can really rely upon to judge the economic value of tax rate reductions is the economic reaction to tax cuts in the past. Fortunately, Bush has history firmly on his side. The 1964 Kennedy income tax rate reductions spurred a bull market expansion and budgets in near balance through the 1960s. The 1981 Reagan tax cuts ushered in 7 consecutive years of prosperity and 15 million new jobs. The 1997 capital gains cut corresponded with a bull market rally in the stock market and a surge of investment spending and venture capital funding for new businesses.

The critics argue that the 2001 Bush tax cut has failed to provide any juice for the economy. But there's a good reason for that. Seventy percent of the tax cuts haven't taken effect yet. All the more compelling reason to speed up the tax cuts so they can provide immediate economic aid. Especially critical is to chop the highest and most economically punitive tax rates. Roughly two-of-every-three Americans who pay the top income tax rate are business owners or sole proprietors. If you want jobs, you need financially healthy and confident employers with dollars to invest.

The dividend tax cut will have the same salutary effect on larger businesses. For example, John Rutledge, a respected Wall Street economist, has estimated that ending the double tax on dividends increases stock values by roughly 10% or an $800 billion increase in wealth, reduces businesses cost of raising investment capital by 25%, and helps stimulate a recovery in the battered high technology and telecom industries most. Many stock analysts, including economist John Rutledge of Kudlow and Co., believe that passing the dividend tax exemption and the acceleration of income tax rate reductions could add another 5 - 10% or so to equity values. That's the equivalent of a $500 billion to $1 trillion instant boost in wealth.

Clearly, even Americans who do own stocks that do not pay dividends or who own stocks in tax free 401k plans or IRAs will benefit from the dividend tax cut because of the increase in the valuation of stocks.

The 1981 Reagan tax cuts ushered in 7 consecutive years of prosperity and 15 million new jobs. The 1997 capital gains cut corresponded with a bull market rally in the stock market and a surge of investment spending and venture capital funding for new businesses.

Roughly two-of-every-three Americans who pay the top income tax rate are business owners or sole proprietors.

John Rutledge, a respected Wall Street economist

has estimated that ending the double tax on dividends increases stock values by roughly 10%

businesses cost of raising investment capital by 25%

Many stock analysts, including economist John Rutledge of Kudlow and Co.

passing the dividend tax exemption and the acceleration of income tax rate reductions could add another 5 - 10% or so to equity values. That's the equivalent of a $500 billion to $1 trillion instant boost in wealth.

Clearly, even Americans who do own stocks that do not pay dividends or who own stocks in tax free 401k plans or IRAs will benefit from the dividend tax cut because of the increase in the valuation of stocks.

Even if it happened, which is unlikely, it would only be a boost in paper wealth. That disconnect between paper wealth and real wealth is what brought us the current recession.

editted to add: (side note)I am surprised that the euro is doing as well as it is. What do you think of that currency? There's no paper below the value of 5 dollars (only coins) so I felt like a kid in a candy store when I went to buy anything. The first time I saw it, I thought, 'I should short this, because clearly they don't expect this stuff to retain its value'. Glad I didn't short it! Hopefully, this war craze will end and our currency might be reflected positively.

So these tax cuts supposedly took effect immediately...in stark contrast to the claims that we shouldn't be expecting to see any benefits from Bush's first one yet. Interesting. But then, the 1997 investment boom didn't really have anything to do with tax policy anyway. It happened because we had already been in a boom for five years (hmmm...why?) and because of new technology (Internet, optical networking, biotech).

About a year ago I did a simple analysis of economic growth vs. changes in tax policy, for various lags between the two. The highest correlation I found was at 11 years, for tax increases, but even that didn't seem statistically significant. Anyone else can look at the same numbers and see the same lack of a pattern for themselves. There are just too many other things that affect the economy more.



So reduce the income tax rate. Eliminating the dividend tax has an entirely different effect on a mostly different group of people.



There's a phrase that always makes me confident in the source's objectivity, all right...just like the association with the Cato Institute. Respected by whom, I wonder. When one makes an appeal to authority, it should at least be to an authority likely to be recognized as such by others.



That would be a pretty neat trick, considering that many stocks don't give dividends - and this is particularly true for the smaller companies that drive economic growth and job creation. I'll save my comments about the "double taxation" canard for another time.



Total garbage. I work for a startup (not my first) in a fairly senior role, and I was often called in to help with M&A stuff at my last job. I've seen this process up close and personal, and these tax changes have no effect whatsoever on the cost of raising investment capital.



Another appeal to (effectively anonymous) authority. People should be getting better at recognizing this trick by now.



Even if it happened, which is unlikely, it would only be a boost in paper wealth. That disconnect between paper wealth and real wealth is what brought us the current recession.



Clearly? Hardly. Saying something's clear doesn't make it true.

QUOTE 
Roughly two-of-every-three Americans who pay the top income tax rate are business owners or sole proprietors.


So reduce the income tax rate. Eliminating the dividend tax has an entirely different effect on a mostly different group of people.

Platypus, the king of calling "ad hominem" and then using ad hominem...hmmm.

Attack the argument, not the source.  You did this to some extent.

Many economists feel the dividend tax cut will spur a different sector of growth.

That being said, is there a book I can read (lets try and pick something objective ) about tax cuts? Or is there any other information? And again, where is the money coming from to fix up America, since it seems we're doling out cash to other countries right now.

What are the reasons that this tax cut is OK, and will work? Because, again, it just seems the same old "rich stay rich, and get richer" scheme.

Today President Kennedy has proposed a ten billion dollar tax cut in order to stimulate economic growth and employment. Over a period of three years, Kennedy hopes that this fairly large tax cut will level out the high wartime and postwar tax rates that are in effect today. In fact, Kennedy believes that the high tax rates are harmful, not leaving enough money in private hands to keep our country's economy in a growing and healthy state. Although Kennedy knows that by taking this risk, the result will be harsh on the Federal government, he put fourth five main and convincing reasons why a tax cut of this sort will do good for both the nation's economy and for the individual US citizen.

If Kennedy's tax cut were to come into effect, the results would slightly offset the goals and aims of the Federal government. In a time of war, the main priority of the government is to not appease public good and not to rebuild the economy but to concentrate on winning the war no matter what it may take. With our nation on the brink of nuclear war and in a strong conflict with Russia, we need to have our objectives set and focus on what we need to do to succeed. Also, with the effect of this tax cut, the Federal government and other large corporations would not benefit from the tax cut, resulting in a loss of money. If Kennedy takes this leap into our economy and temporarily disregards the war, we must only expect to have the Federal government intervene on this situation.

On the other hand, the president has good reason to follow through with this tax cut, marking five good reasons why his action would greatly help us as a whole. The first reason, and perhaps the most important one is straight forward. A tax cut means more jobs. The after-tax money received by the
ordinary consumer and investor means more spending money, which means more production, which gives more opportunities for employment. Employment will, in turn, reduce teenage crime and keep kids off the streets. The second reason stated by Kennedy brought up the issue of another recession. He expects that a tax cut would reduce the chance of recession by "keeping this present drive from running out of gas". The third and fourth reason for having a tax cut are related to the improvement of profits and marketing. Through a tax cut the American market would rise considerably, with people using their after-tax money to expand the market and create new 'ideal' machines. A tax cut also means higher family income and business profits. Finally, Kennedy stated a fifth reason why the US needs a tax cut. "A tax cut can help us balance our international accounts and end the overflow of gold by helping make the American economy more efficient and more productive....". This last reason proved to be the most popular one, regarding the situation we are in. The obvious competition that we are in right now (arms races, both nuclear and space) would greatly improve if what our president says turns out to be true.

The idea of a tax cut during this time seems to be way out of the picture but at the same time, it brings about advantages to both national and international affairs. In the long run, the tax cut can help us with both our economy and our position in the war but one question remains: Do we have that much time? It is a serious risk and if the proposal made by Kennedy is taken under consideration, I can only expect this proposal to remain tied up in the senate for quite some time.

To no extent. I've already explained this: when one attempts an appeal to authority, the nature of that authority becomes relevant and questioning it is entirely valid. To say otherwise would be to make argumentum ad verecundiam an unstoppable weapon. There's a much more detailed explanation at http://www.nizkor.org/features/fallacies/a...-authority.html, and another at http://gncurtis.home.texas.net/authorit.html and a third at http://www.intrepidsoftware.com/fallacy/aa.htm if you're interested in educating yourself.



Yeah, in the pockets of wealthy campaign donors, and therefore in the campaign coffers of Bush, Cheney et al. Your appeal to "many economists" is merely a repetition of your earlier fallacy, because opinion among economists is in fact sharply divided regarding whether the dividend tax cut will spur growth. Why don't you tell us who some of these "many economists" are, and why they would make the claim you attribute to them? That would actually be helpful. We could actually spend time discussing the merits of those arguments, instead of arguing about whether they should be taken at face value.

Didnt mean to imply the information that you gave out mspigpen wasnt objective! I was just trying to find more info. I asked for a book, because it being Im in Europe, I pay for my internet time, and dont always have the time to lookup websites.