Give Us Back Real Tax Cuts That Will Stimulate the Economy

When two major tax deductions were eliminated in the early 1980’s, the way business was done in America fundamentally changed and a major incentive to ‘buy’ was taken away.

The 1980’s tax reform measure took away interest deduction on credit cards as well as reduced the full deduction of travel and entertainment expenses. Congress reduced the tax brackets on income as a benefit to the reduction of these offsets. The idea was to streamline the tax code and to simplify the tax paying process. What it really did was eliminate spending, which in turn during economic times like these could help generate growth to pull economies out of recessions.

What we know from past recessions is that there is only two ways to end one. First, you can innovate your way out. Second, you can spend your way out. With the current uncertainty in the capital markets and lending institutions, funding innovation in a large scale that would truly create an immediate boost to the economy is unlikely to happen soon. Spending to get us out of recession on the other hand could happen with the help of Congress and our President.

Last year’s tax cut through a rebate program was problematic because it was a one-time event. We received our check and we either spent it or used the money to pay for already purchased goods. We did however get a “short-term” boost. Prior to 9-11 it did appear that the economy was recovering. Now since 9-11 we are back to very uncertain times. The two industries that have suffered the most are the travel and leisure industries. The results of their near depression state has its worse effects on any local economy. In San Franciscowalking around to any restaurant you will see what impact our current economic state has had on their businesses. Tables are empty for lunch and dinner. It will only be a matter of time when these restaurants will be forced to close, creating vacant buildings that given their specialized use will remain closed until market conditions change. This is turn will create “blight” in the neighborhoods. That will lead to closing of other non-leisure business services that rely on the “foot traffic” brought about by the once successful restaurants and hotels that are closing. From there, the negative cycle continues to grow and negatively affect all the businesses that service the street businesses that were forced to close and so on.

By re-instituting full deduction of travel and entertainment expenses, as well as interest on credit cards, a sustained level of new spending will occur that will not only give our economy an immediate boost, it will also give our most depressed industries a window to see hope for survival. This could lead to new spending by these sectors to enhance services in anticipation of this new business. Advertising and public relations firms would immediately get new assignments to spread the word to spend and take advantage of these new tax credits. More people would need to be hired which means more office, retail and industrial space would need to be rented. Real estate brokers, architects, attorneys, and accountants will all be needed to support this upward cycle and what happens? A recession is ended!

Business people would have more buying power to spend more during business travel. Personal spending power would be increased to allow more vacation time spending to occur as well as promote more spending on discretionary items. The negative tax loss implication to the government would be replaced by added gain of new taxes generated through growth.

President Bush and others in positions of power need to make this bold move. Some will respond that this is nothing but a tax cut for ‘the rich’. America will need to respond by answering back that “no”, this is a tax cut that could save our jobs and improve the overall quality of our lives. It is also a tax cut that would help stimulate the ‘middle class’ of America to spend more. We have to face the fact that every time the “nay sayers” screams that a policy will only help the ‘rich’, they “without saying so”, always mean the ‘middle class and the rich’. The question I would put back to them is “who else” can buy us out of this recession?

Please take the time and write your Congressperson, Senator and the President showing support for this measure. So far we have not heard one politician suggest it, let’s have the people of America suggest it instead.