Some of us believe that tax cuts stimulate the economy. Here is an opponent of tax cuts who, inadvertently, I'm sure, helps make the case for us:
But if they were repealed in a year, the Bush tax cuts could spur a burst of economic activity in 2008. If people knew that their tax rates were going up next year, they'd work to make sure that more of their income is taxed at this year's lower rates. Investors would likewise have a giant incentive to cash out their capital gains now to avoid paying higher taxes later. In 1986, stock sales doubled as taxpayers rushed to avoid the capital gains tax rate increase scheduled for 1987. If people pour their stock gains into yachts and fast cars, that's pure fiscal stimulus.
Get that? If people know taxes are going up (the practical effect of repealing tax cuts), they will engage in economic activity now, so as to avoid the effects of the increase. Of course, once the increase kicks in . . . but never mind that. So, if tax increases depress economic activity, tax cuts ... anyone, class, anyone?
