Politics

Economist weighs in on Obama, Romney tax plans

Tuesday, July 17, 2012

The burden of taxes and their impact on job growth will be one of the dominate issues of the presidential campaign right up until Election Day. The Bush-era tax cuts are set to expire at the end of the year. Republican candidate Mitt Romney wants to extend them for everyone. President Barack Obama wants to let cuts for the wealthy expire.

Tuesday in Pennsylvania, Romney accused the president of wreaking the economy.

"He's crushing economic freedom, crushing economic freedom with taxes," Romney said.

But the fact is federal taxes are at a historic low. A report from the Congressional Budget Office shows over the past 30 years they've never been lower.

Economist Alan Auerbach is director of the UC Berkeley Burch Center for Tax Policy and Public Finance. He says there are many other factors involved in the economy other than the tax rate.

But that is not what you hear on the campaign trail.

"And I think what's interesting is the correlation between lower rates and stronger growth and I think that's an important lesson," Karl Rove said.

"It would be an important lesson if it were that simple," Auerbach said.

Auerbach says there is no one policy fits all.

"You have to look at specific policies in specific circumstances to see what happens," he said.

In a down economy tax cuts aren't effective in getting businesses to hire.

"If there's no demand for products for a company, the company is not going to expand its operations," Auerbach said.

Tuesday in Texas, Obama said the way to get the economy moving is let the government hire workers for public projects and pay for it by taxing the wealthy.

"We're sure not going to spend that money better on tax cuts for me," he said.

But over the long term, lower tax rates for the wealthy have spurred investment.

"To invest more to start more business to hire more people," he said. "Some of this response does occur, from the evidence we have lower tax rates will encourage all the things I just mentioned."

Asked to take sides on extending the Bush tax cuts, Auerbach wouldn't side with the president or Romney. He'd like to see a major reform of the tax code. There was a bipartisan measure to do just that in the Simpson Bowles plan a year and a half ago, but it didn't go anywhere.

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Tags:
taxes, barack obama, mitt romney, elections, politics, mark matthews
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