Deputy Treasury Secretary Argues For Tax Cuts To Be Made Permanent

by Mike Godfrey, Tax-News.com, Washington

25 March 2004

In a speech to the Tax Executives Institute on Tuesday, Deputy Treasury Secretary Samuel Bodman called on Congress to ensure that soon-to-expire tax cuts are made permanent, in order to maintain the economic recovery.

“In light of our economy’s momentum, one thing is clear: we must make the President’s tax cuts permanent,” argued Bodman, continuing:

“The tax cuts have been the linchpin of the improving performance of the economy . . . and I am confident that if we make them permanent, we will continue to have above-normal growth for the American economy for a good stretch of years ahead.”

He accepted that the tax cuts had led to a higher-than-desirable budget deficit, but rejected any arguments that taxes should be raised to offset the fiscal gap.

“Deficits do matter. But raising taxes is not the answer. Higher tax rates are a powerful disincentive for growth, and would be the wrong medicine for our economy and its job-creating potential,” he argued, adding:

“But we need to keep in mind that the federal deficit is manageable . . . and, we will bring it down quickly. The President’s budget plan cuts the deficit in half over five years, bringing it to a level that is historically low as a percentage of GDP.”

Whilst citing the growing reach of the Alternative Minimum Tax as one of the “major problems” for the US economy, Bodman stated that temporary provisions contained in President Bush’s 2005 budget will also help provide a long term solution.

“These temporary provisions will keep the number of taxpayers affected by the AMT from rising significantly in the near-term. More importantly, they will allow the Treasury Department the time necessary to develop a comprehensive set of proposals to deal with the AMT in the long-term,” he explained.

The Deputy Treasury Secretary also put a case for reform of the international tax code:

“Our international tax rules, which largely date back to the 1960s, can impose burdens on US businesses not borne by their competitors from our trading partners. If we handicap American businesses in this way, we pay for it . . . and we pay for it in American jobs. Rationalization of our international tax rules means enhancing the ability of US businesses and American workers to compete and prosper in today’s global economy.”

He concluded: “President Bush, Secretary Snow and I are dedicated to keeping the tax cuts that have helped you help your employers over the last few years. We’ll keep telling Congress to make them permanent.”

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