Tax cut stimulus: Here's a real-life example of how to stimulate the economy

If you think back, you will probably remember it -- the Cash for Clunkers program.

The idea was, you trade in your gas guzzler, the government gives you a tax break, and you purchase yourself a new, energy efficient car.

The program was so popular that it had to end early -- there were just too many people and too few dollars to handle the demand.

At the time, we pointed out that there were other applications that might work with this principle -- the idea that letting Americans, and businesses, keep more of their money might result in actually more spending, more stimulation of the economy and more jobs.

And based on the continuous arguing over increasing taxes in Washington, it looks like it is time to remind someone about the laws of physics when it comes to finances.

Here's the deal guys: When you take more money from working Americans to fund vast government bureaucracies, those taxpayers do not feel safer, taken care of or confident that their futures are secure. They feel worried.

And when most of us feel worried about our futures, we are much more careful with our money. That means we do not make big purchases; we are not as free with what we spend our money on; and we certainly do not trust our investment vehicles.

The same is true for businesses. If you do not know what kind of regulatory problems you will face, and you are not sure what taxes and health insurance are going to cost you in the coming year, you do not expand, add personnel or do anything that might set you up for a shortfall. That only makes sense.

Cutting taxes increases investment and results in more spending, which brings in tax revenue, and more employment and sales, which add more to the company's bottom line. Revenue is taxable, which brings in more money for investment in this country and local communities.

So, even if you cut, ultimately, you win.

This nation's budget problems are not going to be solved with tax cuts alone. There is still spending to curb and waste to manage. That is the only way to reach a balanced budget.

But if we put in the hard work, and do the right things now to boost the economy, our own Keep Your Cash for Spending program for taxpayers, perhaps it will be a distant memory sooner than we think.

Published in Editorials on November 17, 2011 10:19 AM