February 3, 2009 | Factsheet on Taxes
No Jobs, No Growth, No Need
- Wrong Idea: Debt should make the economy more
competitive by purchasing assets that produce income - that is,
assets that earn a return greater than the cost of borrowing;
otherwise the debt becomes a burden on economic growth. The current
Senate bill being debated ignores this principle.
- Right Idea: The
most effective means of helping the economy recover is to improve
the incentives that drive economic activity, and that means
reducing tax rates on work, saving, investment, risk taking and
Economic Effects of the Trillion
Dollar Spending Plan
A Heritage Foundation economic analysis showed:
- No GDP Growth: The 10-year average increase in GDP is
only $72 billion. The largest increase in GDP comes in 2010 at $173
billion and drops off considerably thereafter, despite continued
government borrowing and spending.
- No Jobs: The 10-year average number of jobs created is
616,000. The maximum number of mostly temporary jobs created in any
one year as a result of this plan will be 1.8 million and that
isn't until 2011. Jobs growth actually declines over the next two
- No Investment: Non-residential investment, which drives
sustainable growth, actually decreases by an average $3.1
- No Need: According to CBO estimates, most of the
discretionary spending will occur well after the economy would have
recovered on its own.
Borrowing close to $1 trillion to purchase earmarks and special
projects, not only does nothing to stimulate the U.S. economy, but
it will actually further weaken it.
The American Option will create rapid growth in wages and
business incomes by reducing business taxes from 35% to 25%;
reducing the estate tax to 15%; keeping the tax rates on dividends
and capital gains at 15%; reducing individual tax rates to three
levels and permanently repealing the Alternative Minimum Tax
- Employment: Increases employment by a half million jobs
in 2009 and by 1.3 million jobs in 2010, and creates 4.8 million
jobs between 2009 and 2012.
- Families: Disposable personal income for an average
family of four would rise, on average, by $1,300 in 2009 and
quickly rise to more than $4,500 by 2013.
- No New Taxes: Without the pro-growth elements of this
plan, these families could expect their tax rates to rise 4
percentage points, from an effective rate of 12% to an effective
rate of 16%. This plan would keep the rate just under 13%.
- Small Businesses: The effective tax rates for small
businesses would fall from an average of 17.1% to an average of
14.8% and provide more than 2 million successful small businesses
with lower tax rates.
Twice the Jobs at Half the Price
Check out Heritage ideas for how to provide twice the jobs at
half the price at heritage.org.