Tax Relief Has Turned This Economy Around

With all the recent news spotlighting our healthy economy – from the milestone of the Dow hitting 12,000, to the growth in real wages, to the surge in corporate tax receipts and decline in the budget deficit – it’s remarkable that some Democrats still talk about their desire to erase the very tax relief that brought us out of recession and sparked sustained economic growth.

When Congress lowered taxes on marginal income tax rates and lightened the heavy tax burden on those who invest in the economy by reducing taxes on capital gains and dividends, we saw a clear turn-around in investment and job growth. Prior to the 2003 tax cuts, business investment had decreased for eight straight quarters, with an average growth rate of -3.8 percent. Contrast this with the economy’s performance since pro-growth tax relief was enacted:

*        Business investment has increased for 13 straight quarters at an average of 7.2 percent.
*        6.6 million new jobs have been created.
*        Real wages grew 2.2 percent over the past year.
*        The Dow Jones Industrial Average has increased over 36 percent since the 2003 tax relief, closing above 12,000 points for the first time.

By reducing the cost of capital and increasing incentives for people to invest in our economy, the tax relief has fueled economic expansion that has, in turn, led to strong growth in federal tax revenues. After declining from 2000-2003, revenues surged in 2004, 2005 and 2006. It’s also interesting to see that lowering capital gains tax rates has caused capital gains realizations to double from $269 billion in 2002 to $539 billion in 2005 – prompting a 45 percent increase in government revenue from these realizations.

To keep up this growth, we should make the tax relief permanent – not allow it to expire and hit American families and small businesses with the largest tax hike in modern U.S. history.