In order to jump start the economy, Senator Jim DeMint's (R-SC)
economic stimulus plan--known as the "the American Option
Act"--proposes to aggressively and immediately lower taxes on
businesses and individuals. By cutting taxes, DeMint's plan
supports rapid growth of wages and business incomes, which in turn
will significantly help struggling sectors of the economy.
This potential for rapid growth will come as especially good
news to U.S. automakers, whose sales have slumped from
international competition and the slow economy. If current
forecasts for 2009 sales hold up, consumer spending on new
automobiles and lights trucks will have declined by 25 and 32
percent, respectively, by the end of 2009.
However, the DeMint plan strengthens the U.S. auto and light
Between 2009 and 2011, total sales of new automobiles and light
trucks would rise $24.5 billion once the DeMint plan is enacted. In
other words, with the plan, these sales would be $24.5 billion
higher than they would otherwise be.
Sales in 2009 alone would be $8 billion higher than they would
be without the plan.
The American Option Act makes such growth--in the auto industry
as well as the rest of the economy--possible by:
- Reducing business taxes from 35 percent to 25 percent;
- Making the tax policy changes of 2001 and 2003 permanent;
- Dramatically reducing the estate tax rate to 15 percent;
- Keeping tax rates on dividends and capital gains at 15
These tax rate reductions will substantially boost investment
and build stronger and higher incomes, largely through wage and
salary growth. Consequently, higher incomes and lower interest
rates will increase sales of automobiles and light trucks.
William W. Beach is
Director of the Center for Data Analysis at The Heritage
Show references in this report
Analysts in the Center for Data Analysis at The
Heritage Foundation developed these sales estimates using a
mainstream model of the U.S. economy, the IHS Global Insight US
Macroeconomic Model. Leading government agencies and Fortune 500
firms use this model to study how public policy changes will affect
key economic indicators.