FOR IMMEDIATE RELEASE
August 14, 2006
CONTACT: Jamie Loftus
SENATOR HUTCHISON: BUSH TAX CUTS CARRY FORWARD REAGAN'S LEGACY
WASHINGTON, DC -- In an editorial published today, U.S. Senator Kay Bailey Hutchison (R-TX), Vice Chairman of the Senate Republican Conference, marked the anniversary of the historic tax cuts signed by President Ronald Reagan on August 13, 1981. The following editorial, printed in the Dallas Morning News, praises the tax cuts that launched the Reagan Revolution and applauds the Bush tax cuts that have generated economic growth and prosperity.
Keep the economy growing; keep the Bush tax cuts
President Reagan proved relief works 25 years ago
By Sen. Kay Bailey Hutchison, (R-TX)
“When Ronald Reagan was elected president, America's economy was in crisis. The threat of deep recession loomed as soaring interest rates, rampant unemployment and an energy crisis created paralyzing stagflation.
But President Reagan had a plan for fixing our economic woes. Assisted by the Federal Reserve, which tightened monetary policy to control inflation, he pursued a fiscal policy of deep tax cuts despite ridicule by ivory-tower economists.
Twenty-five years ago, on Aug. 13, 1981, Mr. Reagan signed into law the Economic Recovery Tax Act, which led to the greatest period of economic expansion in our country's history. This economic achievement is as much a part of Mr. Reagan's legacy as his challenge to Russian President Mikhail Gorbachev to tear down the Berlin Wall and his ultimate victory in the Cold War.
By cutting marginal tax rates across the board by 25 percent, he created an economic stimulus that ushered in the 1980s. These tax cuts were followed with additional cuts in the Tax Reform Act of 1986, which led to savings that spurred investment in the 1990s. The lasting result was clear – sustainable economic strength for our country.
Tax cuts allow people to keep more of what they earn. They encourage workers to invest, save or spend their own earnings. Today, economists and policymakers concede that the Reagan tax cuts generated tremendous economic growth that increased tax revenue. In 1994, President Clinton's Council of Economic Advisers concluded, "It is undeniable that the sharp reduction in taxes in the early 1980s was a strong impetus to economic growth."
We have learned from the leadership and vision of Mr. Reagan. In 2001 and 2003, President Bush fought hard for major tax cuts, and Congress passed the Jobs and Growth Tax Relief and Reconciliation Act of 2003. The Republican-led plan cut income tax rates across the board, expanded the size of the lowest tax bracket, reduced the marriage penalty and increased the child tax credit.
The bill also directly stimulated investment by chopping taxes on corporate dividends and capital gains. Previously, high taxes on dividends discouraged investment and dissuaded corporations from rewarding shareholders. Corporations utilized debt rather than equity in order to grow, and this additional burden of debt was one cause of corporate bankruptcies during economic downturns.
The tax cuts of 2001 and 2003 halted the downturn in our economy. Since then, our country has enjoyed an extended period of low unemployment, high productivity growth and a favorable climate for investment. Over the last three years, tax receipts have increased nearly 35 percent, and the stimulus is continuing. In 2005, we had the largest single rise in tax revenue in American history – $274 billion dollars.
Over 5 million jobs have been created since August 2003, and the economy has grown for 18 consecutive quarters. Unemployment is 4.8 percent, lower than the 20-year historical average of 5.6 percent, and we are ahead of schedule to meet Mr. Bush's goal of cutting the deficit in half by 2009. Our economy is accomplishing all of this despite 9/11, the war on terror and recovery from Hurricanes Katrina and Rita.
Unfortunately, tax relief provided in the 2001 and 2003 tax cuts was not permanent. In 2011, the top dividends tax rate will return to 39.6 percent and the capital gains tax will again climb to 20 percent, while the income tax cuts, the repeal of the death tax and marriage penalty relief also will all disappear. Allowing these cuts to expire would erase years of economic growth and pass along an unfair financial burden to millions of hardworking Americans who form the backbone of our economy.
"It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget." These are not Ronald Reagan's words, though he surely would have agreed with this sentiment. This was said in 1962 by President Kennedy, who also championed historic tax cuts.
In promoting the extension of the Bush tax cuts, I will continue to uphold the proven principle of lowering taxes for the American people.”
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