Georgia film tax cuts spark movie boom

Georgia’s tax incentives for film companies provide an example of how low tax rates can spark an economic boom.  In 2008, Governor Sonny Perdue signed the Georgia Entertainment Industry Investment Act into law to create incentives for motion picture filming in Georgia. 

The heart of the law is a 20% tax credit for companies that spend a minimum of $500,000 on production or post-production of films in Georgia.  Companies can also get an additional 10% tax credit for including a Georgia logo on the finished project (subject to qualification).  The credit is transferrable in the case that the company has little or no tax liability in Georgia.  In some cases, companies can also get a sales tax exemption for goods and services bought in Georgia, an incentive introduced in 2002.

Two years after the act became law, Georgia’s film industry is booming.  Georgia is one of the top five locations to film and the most popular in the southeast. The increasing number of films being made in Georgia has led to more jobs for Georgians.  These jobs range from acting in bit parts to casting to providing logistical support for film crews.  Although many of these jobs are part-time or temporary, they do provide relief for those who are unemployed from full-time jobs.  In total, Georgia’s film industry provides almost 25,000 jobs and $1.28 billion in wages for Georgia workers. 

In addition to the tax incentives, film crews are also attracted by Georgia’s diverse locations.  The state has everything from beaches to mountains, farm fields to swamps, and small towns to major cities.  Production companies can also draw on experienced local actors for bit parts and background.

Many of the films made in Georgia have received critical and popular acclaim.  Some of the movies recently made in Georgia include The Blind Side starring Sandra Bullock and Tim McGraw, Zombieland starring Woody Harrelson, and Due Date with Robert Downey, Jr. and Zach Galifianakis.  Tyler Perry has also made a number of movies in Georgia that were also set in the state.

The economic impact of the tax incentives goes beyond the film industry however.  Property owners are paid when the studios use their property as a set.  In many cases, this includes government property as well.  Additionally, local hotels and restaurants sell food and rent rooms to on-location production crews.  Other Georgia businesses that deal with the production companies also earn sales revenues and, in the case of popular films, old production sites could lead to new tourism. 

Unlike the film companies, which get tax credits, the other businesses and local workers pay their state and local taxes in full.  By giving film companies a break on their taxes, the General Assembly helped Georgia’s film industry to grow.  As more film money comes into Georgia, jobs are created and Georgia companies do more business.  This translates into more tax revenues for the state.

It might be tempting to say that large movie corporations don’t need a generous tax break, but without these incentives many of the companies would have filmed elsewhere.  Along with them would have gone the jobs and other assorted revenues.  However, in Georgia the General Assembly realized that when it comes to taxes, if you cut it, they will come. 

Photo credit:

Francesco Marino
 http://www.freedigitalphotos.net/images/view_photog.php?photogid=809

Conservatives can find something to like in debt commission report

This week President Obama’s bipartisan debt commission revealed hints about its long awaited recommendations for reducing the national debt.  Since the commission was appointed by President Obama, a president who has increased spending to record levels, conservatives expected the worst.

In reality the debt commission recommendations include many things that conservatives can applaud.  According to the Wall Street Journal, the recommendations include many spending cuts as well as tax reform.  Many entitlement programs, the largest part of the federal budget, are on the chopping block.  The federal workforce would also be reduced under the plan.  Social Security would see a gradual increase to age 69 in the retirement age as well as an increase in taxes and cuts in benefits for upper income taxpayers.  The plan would also permanently ban the controversial practice of earmarking.  The defense budget would also see cuts.

Many conservative groups, such as Americans for Tax Reform, oppose the plan because it raises some taxes.  The commission’s proposals would eliminate many tax breaks, such as the home mortgage deduction, in exchange for lower base rates for both individuals and businesses.  The gas tax would also be increased incrementally.

While the plan is not perfect, it is a start.  One glaring omission is the tremendous costs of the new health care legislation.  However, conservatives need to realize that we are entering an era of divided government.  A plan originating in the House that focuses on spending cuts will never pass the Democratic Senate and President Obama’s veto pen.  Republicans should negotiate for as few tax increases as possible; both out of principle and for the practical reasons that tax increases hurt the economy.

The report of the debt commission is something that Republicans can work with.  Starting from this point, conservatives, including those members of the Georgia delegation, should use their newly won political capital to rescue the country from the brink of insolvency.

Doubtless, there will be opposition to entitlement cuts, but the question is not if, but when.  Either we can act responsibly now, or we can make even more draconian cuts in the future when the government can no longer sell its debt to finance its overspending.

Election myth: Does the GOP want to privatize Social Security?

A second myth being propagated by Democrats this election season is that Republicans want to privatize Social Security. The basis for this rumor is Rep. Paul Ryan’s Roadmap for America’s Future, although it can probably be traced back to President Bush’s attempt to reform Social Security in 2005. Neither plan involves the privatization of Social Security.

The root of the problem is that Social Security is broke. The Social Security trust fund into which Social Security (FICA) taxes are paid into is filled with federal bonds, essentially promises to repay or IOUs. Social Security taxes are not invested on the worker’s behalf by the government. Instead, current FICA revenues are used to pay current benefits.

As Baby Boomers retire in large numbers while the numbers of working Americans dwindles, the Social Security program is headed for a meltdown. In fact, this year Social Security will begin paying out more in benefits than it collects in taxes. The program is forecast to run out of money in about 2035. Clearly, doing nothing is not an option.

Under Rep. Ryan’s plan, Americans age 55 and older will not have any changes to their Social Security in any way. Younger workers (under 55) will be given the choice of remaining in the current plan or investing a portion of their FICA withholding into a private plan similar to the Thrift Savings Plans that federal employees already enjoy. The plan would also not affect people receiving survivor and disability benefits.

For those who choose to invest in the private plan, the government will guarantee their contributions in a manner similar to deposit insurance. The government will also approve investment choices. When fully phased in, contributions to the private plan will only average 5 points of the current 12.4 percent FICA tax. In other words, even if you choose the private plan, most of your money will still be going to the traditional plan. The government will also guarantee benefits at a minimum of 120% of the poverty level for the traditional plan and 150% of the poverty level for private plans. Finally, people in the private plans get ownership of their accounts. If they die prior to retiring, they can pass the money to their heirs. In the traditional plan, your Social Security “contributions” are lost except for a death benefit if you do not live to retirement age.

In summary, the Republican plan gives people choice, a right to keep their money, and most likely a better rate of return than traditional Social Security. Stock market investments almost always make money over the long run, even accounting for market crashes like the one in 2008. In contrast, Social Security pays a very low rate of return – often negative. This means that your “investment” in Social Security is probably not even keeping pace with inflation. Under Ryan’s plan, a person who chose a personal plan would likely earn a much higher rate of return and the government would guarantee his account in the event of a market crash.

The most important points to remember are:
1. No one over 55 would be affected by any changes.
2. Workers under 55 would get to choose their plan.
3. Private accounts would likely earn more, but would be guaranteed by the government at a higher level than traditional Social Security.
4. The only way to lose your Social Security money is to do nothing and let the plan go broke.

Budget cuts threaten Georgia parks

An often overlooked aspect of the national financial crisis and the subsequent political emergency is the impact on Georgia’s state parks. As tax revenues dropped in the wake of the financial collapse, Governor Sonny Perdue and the General Assembly slashed the Department of Natural Resources parks budget by almost forty percent, from $27.4 million to $16.8 million.

To read the rest of this article, please go to:

http://www.associatedcontent.com/article/5942978/budget_cuts_threaten_georgia_parks.html?cat=9

Obama's war on jobs

It is much easier for the government to screw up the economy than to fix it. This is a fact that that President Obama is probably coming to appreciate as he reaches the close of his second year in office. Although Obama almost certainly means well, the effects of his policies are what count. Overall the effect is similar to what would happen if President Obama had declared war on the national economy.

The financial reform legislation passed this week is only the most recent anti-business legislation passed by the Obama Administration. The new law guarantees future bailouts by giving the government the right to seize businesses to prevent their collapse. It also establishes new layers of federal bureaucracy to create new rules for banks and financial companies (with the notable exception of auto finance companies). The new law adds costs of compliance to business and makes credit harder to obtain in the midst of credit crisis while simultaneously failing to address the problem of Fannie Mae and Freddie Mac, the quasi-government entities widely credited as being a root cause of the sub-prime mortgage crisis.

The war on jobs began shortly after Obama took office with the passage of the stimulus package. Obama claimed that the passage of the American Recovery and Reinvestment Act would keep unemployment below 8% (http://www.time.com/time/business/article/0,8599,1910208,00.html). In reality the spending package spurred unemployment to continue rising to the 10% range, where it remains today. In Georgia, the unemployment rate has been even higher than the national average at over 10% (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LASST13000003).

The number of jobs created by the stimulus is disputed, but the fact is that when stimulus funds run out, so do the stimulus jobs. Jobs created by the $787 billion stimulus reportedly cost an average of $117,933 per job to create (http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1857) while not creating a lasting boon to the economy.

The second assault on the economy was in the form of government interference in the auto industry. The Obama Administration pumped billions of dollars into General Motors and Chrysler in an unsuccessful attempt to prevent the companies from restructuring in bankruptcy. During this process, Obama not only interfered with the control of private companies, he also short-circuited the bankruptcy process and contract law. Obama’s bailout deal placed unions above secured creditors of the companies (http://www.cbsnews.com/stories/2009/05/07/politics/otherpeoplesmoney/main4997900.shtml, http://online.wsj.com/article/SB124109550079373043.html). Ultimately, the Obama Administration even forced the CEOs of both companies out and gained the right to appoint members to the boards (http://www.worldcarfans.com/109050119091/chrysler-bankruptcy-announced-by-obama---ceo-nardelli-to-step-down, http://www.washingtonpost.com/wp-dyn/content/article/2009/03/31/AR2009033101521.html). When the US government arbitrarily usurps contract law, it makes businesses less likely to engage in contracts that they are not sure will be honored. This ultimately costs jobs.

The third assault against the job market was the passage of Obamacare. Like the new finance reform law, Obamacare requires many new costly reports, including the new requirement that businesses issue a 1099 to every business or individual from whom they purchase more than $600 in goods or services (http://money.cnn.com/2010/07/09/smallbusiness/irs_1099_flood/index.htm). Additionally, Obamacare is already health care more expensive to businesses (http://www.businessinsider.com/henry-blodget-obamacare-already-jacking-up-health-insurance-costs-for-businesses-2010-3). As a result, businesses are cutting benefits to workers and hiring as few new employees as possible. Some companies are also considering additional layoffs to cut the new costs.

The next attack on jobs will likely come soon. It could be an attempt to ram through the carbon cap-and-trade tax bill that will dramatically increase energy costs. Hopefully, there will not be time to pass this bill before the election.

More likely, it will come in the form of the expiration of President Bush’s tax cuts. These across-the-board tax cuts that affected all Americans are set to expire at the end of 2010 unless Congress acts. If the cuts expire and taxes increase, it might suck as much as a $1 trillion from an economy that is struggling to recover. In spite of the fact that Democrats usually refer to them as “Bush’s tax cuts for the wealthiest Americans,” taxes were cut for all American and if they expire everyone’s taxes will increase (http://www.smartmoney.com/personal-finance/taxes/how-the-expiring-bush-tax-cuts-affect-you/). There will be less money for consumers to spend and less money for businesses to hire new employees.

One possible cause of these anti-business and anti-job policies is that President Obama doesn’t have a single person in his administration that has ever run a business (http://www.weeklystandard.com/Content/Public/Articles/000/000/016/619dvjlm.asp). They don’t know that their ideas are hurting the job market because they have never run a business. Obama appointees come almost exclusively from government and academic circles. They don’t understand free markets and have no idea what they are doing. The uncertainty derived from sweeping anti-business reforms certainly has a chilling effect on the economy as business owners hunker down to see what will happen next.

Sources:
http://www.time.com/time/business/article/0,8599,1910208,00.html
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LASST13000003
http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1857
http://www.cbsnews.com/stories/2009/05/07/politics/otherpeoplesmoney/main4997900.shtml
http://online.wsj.com/article/SB124109550079373043.html
http://www.worldcarfans.com/109050119091/chrysler-bankruptcy-announced-by-obama---ceo-nardelli-to-step-down
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/31/AR2009033101521.html
http://money.cnn.com/2010/07/09/smallbusiness/irs_1099_flood/index.htm
http://www.businessinsider.com/henry-blodget-obamacare-already-jacking-up-health-insurance-costs-for-businesses-2010-3
http://www.smartmoney.com/personal-finance/taxes/how-the-expiring-bush-tax-cuts-affect-you/
http://www.weeklystandard.com/Content/Public/Articles/000/000/016/619dvjlm.asp

July 17, 2010
Bedford, MA



Photo credit:
graur razvan ionut
http://www.freedigitalphotos.net/images/view_photog.php?photogid=987

Why Soaking the Rich is a Bad Idea

I am a pilot for a fractional jet company. My company supplies private jet shares to the rich and famous. The public perception is that these airplanes are toys that the rich buy so that they won’t have to rub shoulders with the masses. Liberals believe that the government should increase taxes on the rich, such as my company’s customers. The idea of taxing the rich is a tempting one, but in reality it is counter productive.

When taxes are increased on the rich, the rich obviously have less money to spend on items like shares of our corporate jets. Perhaps, they will put more of their money into tax shelters or foreign investments where tax laws are more favorable.

If a rich businessman doesn’t get to buy his jet, who is hurt? The most obvious answer is my company and its employees. If my company doesn’t sell a jet share, then the salesman does not get a commission, additional pilots are not hired, and jobs for support employees such as dispatchers, schedulers, maintenance coordinators, and administrative workers are not created.

Equally obvious is the loss to the aircraft manufacturer. Manufacturing jobs may be lost as aircraft orders dwindle. This also applies to subcontractors who work sheet metal, electricians who build avionics, craftsmen who work wood and leather for aircraft interiors, and the manufacturers of the thousands of parts that are assembled together to create a working airplane.

The damage does not stop there, however. The rich guy will not fly his jet around the country. When he does not visit local airports, local businesses called Fixed Base Operators (FBOs) don’t sell him fuel. Local businesses do not sell him catered food for his trips. Local aircraft mechanics miss out on the opportunity to work on the airplane. Local and state governments lose tax revenue from the lost fuel sales and airport fees.

Because the non-owner may never visit many places that he would otherwise see, other local businesses will also lose revenue. Cars will not be rented or hired, hotel rooms will not be rented, and restaurants will not be patronized. Tourism will suffer as museums and other tourist attractions are not visited.

Because many trips on private jets are business trips and not pleasure trips, investment in local businesses may suffer also, especially in areas not served by airlines. A deal that would be made in person may not be consummated over the telephone. Difficulty in obtaining outside investment may cause local businesses to stagnate and not create new jobs, causing small towns to go into further decline.

The jobs that are lost or are never created are not the end. As each person loses his job or cannot find a new one, their troubles spread to others. As one person runs out of money, his inability to pay his bills or buy new products affects other people and businesses down the line. Businesses are forced to write off bad debt that they could have collected from an employed person. Sales fall because unemployed workers have less money to spend, causing businesses to cut back and hire fewer workers.

Ironically, as the economy slows in the aftermath of tax increases, the government takes in less tax revenue. This is because the slowing economy is shrinking. Revenues for businesses and incomes for individuals are falling, so a tax, even at a higher percentage, yields a smaller total revenue.

The good news is that, as we learn from the past, the opposite is also true. If we reduce taxes, then the economy grows and businesses thrive. When business thrives, jobs are created and incomes rise. This, in turn, leads to higher tax revenues for the government in spite of the fact that the government takes a smaller percentage of each American’s paycheck. This process has worked four times in the past hundred years during the 1920s (under Secretary of the Treasury Andrew Mellon), the 1960s (President Kennedy), the 1980s (President Reagan), and the 2000s (President George W. Bush).

Additionally, President Bush’s tax cuts had the effect of shifting more of the tax burden to upper income taxpayers. The top one percent of income earners currently pays about 33% of all income taxes versus 32% before. This is because the tax rates were lowered for Americans of all tax brackets with lower income tax payers realizing a larger percentage decrease than higher income taxpayers. The top 50% of income earners pay 96% of income taxes. On the other hand, the bottom 50% of income earners pay only about 3% of income taxes.

As President John F. Kennedy said, “a rising tide lifts all boats.” Tax increases, even on only one segment of the country, slow the economy and take money out the pockets of all Americans, even those not taxed directly. On the other hand, a tax code that allows Americans to keep more of what they earn helps us all.

Source:
http://www.ustreas.gov/press/releases/reports/factsheetwhopaysmostindividualincometaxes.update.pdf
http://www.heritage.org/Research/Taxes/wm327.cfm

Clinton and Obama Realize the Truth About Taxes

WASHINGTON — Both Democratic presidential candidates, who promise to curb the influence of corporate lobbyists in Washington, helped enact narrowly tailored tax breaks sought by major campaign contributors.
-USA Today


USA Today is reporting that Hillary Clinton and Barack Obama both used their influence as senators to win tax breaks for companies in their home states. The revelation that Hillary Clinton and Barack Obama passed tax breaks for their contributors is proof of the fact that their desire to raise taxes would be harmful to the country.

Obama's campaign had it right when they said that tax breaks "lower costs for customers and create jobs." If they trule believe that to be the case, then why not allow the whole country to reap the benefits instead of select companies in their home states?

If tax breaks create jobs and lower costs, then tax increases must eliminate jobs, raise costs, and generally be bad for consumers. To raise taxes or let the Bush tax cuts expire would cause the economy to shrink and raise the chances of a recession.

http://www.usatoday.com/news/politics/election2008/2008-02-25-tax-breaks_N.htm

Taxes and the Economy

The Democrats and Republicans have recently agreed to an economic stimulus package that includes tax rebates for many Americans. The idea of giving the taxpayers some of their own money back is a tacit admission that more leaving money in the hands of taxpayers is good for the economy.

In fact, tax cuts almost always prove beneficial to the economy. Since the 1920s, tax rates were cut by Presidents Coolidge, Kennedy, Reagan, and Bush. In each case, instead of costing the government money, tax revenues actually increased after the tax rates were decreased.

To understand why this is true, think of a tax as a punishment. For example, “sin taxes” on alcohol and tobacco are meant to decrease the use of those substances. Environmentalists have recently proposed increasing the federal gas tax in an effort to curb carbon fuel consumption. An income tax works the same way. As tax rates rise, people are discouraged from being productive. Why should they work more since, when they do, the government takes an increasingly large share of their paycheck?

When tax rates are decreased, the opposite is true. People are encouraged to work more and earn more money because they keep more of what they earn. The government’s share, although smaller in percentage, is greater in terms of actual dollars, because the taxpayer’s paycheck is larger.

The benefits of tax cuts do not stop there, however. Since the taxpayers have more disposable income, they are able to spend more. Higher spending helps businesses to earn profits, which are taxed, but which are also reinvested into the business. As the business grows, it hires more employees. More people earning a paycheck means more tax money for the government as well.

If lower taxes are such a good thing for the economy, then why is lowering taxes so controversial? One reason is that unless you look closely at the data, you won’t realize that lower tax rates means more tax revenues. Another reason is that many politicians use class warfare and a “tax the rich” philosophy to win votes.

Taxing the rich is a bad idea for several reasons. First, in the US, the people in various income groups are constantly churning. The people who earn the least frequently see their earnings rise dramatically, while the people who earn the most often see their earnings decrease. There are no static rich and poor classes in the US.

Second, the rich already pay a disproportionately large share of federal income taxes. According to the US Treasury, the top 5% of taxpayers earn 30% of all income, but pay 53% of the taxes. The top 1% of taxpayers pays 33% of all taxes. The top 50% of taxpayers pay over 90% of taxes. On the other hand, after President Bush’s tax cuts “for the rich” (according to his opponents), the share of the bottom 50% of taxpayers fell from 4.1% to 3.4%.

Finally, the “tax the rich” philosophy imagines that the rich do nothing but live off of the work of the rest of society. This is not true. The rich are consumers and producers. They buy houses, clothes, cars and other items and services, which help to create jobs in companies that make and sell consumer items.

The rich are also producers. Most wealthy Americans are nouveau riche, not old money. Most wealthy Americans are rich because they worked hard and earned it. They created companies that, in turn, created jobs. These companies benefited society as a whole as well as their owners.

If the rich are taxed at higher rates, then they have fewer dollars left to either spend or invest into their businesses. Taxes that target the rich often end up hurting the poor. For example, when Congress passed a luxury tax on items such as yachts and expensive jewelry in the 1990s, the rich simply stopped buying those items from American companies. The jewelry industry lost 330 jobs and the yacht industry was nearly destroyed, costing 7,600 workers their jobs.

An even better solution than tax cuts would be to enact a tax plan that does not punish productive behavior. The Fair Tax, championed by presidential candidate Mike Huckabee, is such a tax. The Fair Tax eliminates income and payroll taxes in favor of a national sales tax. A prebate is paid to all Americans in an amount up to the poverty level. This ensures that Americans in poverty will pay no taxes. Workers keep all of their pay with no taxes deducted. There are no tax deductions, shelters, or returns to fill out. You simply pay a tax when you buy a product.

A plan such as the Fair Tax would tax consumption, so the wealthy would continue to be taxed heavier than people who consume less. People who wish to save money would be able to save more since no tax would be withheld from their pay.

Most importantly, with the penalties for production removed, the US economy would flourish. The tax burden on existing US companies would be removed stimulating growth, but foreign companies would also flock to invest in the US due to the business friendly tax climate.

If this sounds farfetched, it is not. Several countries in Eastern Europe, such as Slovakia, have already enacted business friendly flat taxes. As a result, their economies are booming. These countries have learned that Socialism is a drag on the economy and are running towards capitalism and free markets, while Western Europe and the US march towards socialism.

Easing the tax burden of businesses and individuals is one of the easiest ways that the government can stimulate the economy. Tax cuts are helpful, but our burdensome tax code is in dire need of overhaul. If we delay too long, we may find ourselves left behind by the rest of the world.



Sources:
http://www.heritage.org/Research/Taxes/wm327.cfm
http://www.ustreas.gov/press/releases/reports/factsheetwhopaysmostindividualincometaxes.update.pdf
http://www.opinionjournal.com/federation/feature/?id=110010377
www.fairtax.org
http://www.businessweek.com/magazine/content/05_39/b3952079.htm

The Power of Tax Cuts

Tax cuts are commonly misunderstood. Many new commentators and politicians refer to tax cuts as "costing" the country money or say that the country is not able to "afford" tax cuts. This view is overly simplistic and is not supported by economic data.

First, the money from the tax cuts is viewed as government money being given back to the taxpayers. In reality, tax cuts allow taxpayers to keep money that they government would have otherwise appropriated. People get to keep what they earn instead of giving it to the government.

Second, it is usually not realized that tax cuts often generate more revenue that tax increases. Presidents Reagan and Bush (41) both cut taxes. In both cases, tax revenues increased. Also in both cases, the economy grew much more strongly after the tax cuts than before. During both periods, inflation and unemployment fell to very low levels and the economy recovered from recessions.

To understand why tax cuts work, consider a tax as a punishment for something. For example, a tobacco tax is a punishment for smoking. It is assumed that if the price of tobacco rises, then fewer people will smoke. While that theory does not take addiction into account, it is true to some limited extent.

Taxes on income work the same way. If the government takes an increasingly large share of your take-home pay when you earn more money, some of the incentive to earn more money is lost. Similarly, dividend taxes encourage people to do something other than invest their money in stocks and mutual funds. Capital gains taxes discourage capital investment and entrepreneurship.

On the other hand, if taxes are decreased, then you keep more of the money that you make. By keeping more of every dollar that you earn, you have the incentive to work more to earn more. Low dividend taxes encourage more savings and investment. Lower capital gains taxes encourage people to invest in the economy.

Increased investing is probably one of the most important facets of tax cuts. Investing isn't just for the wealthy. If you have a 401k or a mutual fund, you are an investor. By putting more money into the nation's businesses, the economy grows. As businesses grow, they earn more profits and have to hire more workers. The government reaps the benefits of taxes on the profits and the income of the new employees.

If this doesn't sound right to you, ask yourself what a local government does when they try to attract a business to their area. Often they give the business a package of incentives that includes a lower tax rate. When a business pays lower taxes, they have more money to hire workers, research new ideas, market new products, pay their stockholders, or give to charities within the community.

Tax increases do the opposite. Money that could be invested in private industry is instead sent to the government. This causes the economy to contract and growth to slow. An example of this was when President George Herbert Walker Bush agreed with Congress on a tax increase in 1990. This led to a recession and ultimately cost the first President Bush his re-election campaign.

Does that mean that the rich and the corporations are not paying their fair share of the nation's tax burden? Not at all. According to the most recent data available (2005), the top 1% of taxpayers pay 39% of all taxes. The top 5% pay 59%. The top 10% pay 70% and the top 50% of taxpayers pay over 96% of all taxes. That means that the bottom 50% of taxpayers pay only slightly more than 3% of taxes.

History has proven time and again that raising taxes slows the economy and can often lead to a recession and lost tax revenues and jobs. Cutting taxes does the opposite. It spurs the economy and helps create jobs. Most importantly, tax cuts keep more money in our pockets instead of the government's.

Our tax code is complex and badly in need of a complete overhaul. Until it can replaced with something simpler, easier to understand, and more friendly to business and investment, and ultimately, the taxpayers, keeping the tax cuts in force is the next best thing.