Newspaper article St Louis Post-Dispatch (MO)

Variety of Economists Find Fault with Tax Cuts Liberals, Conservatives Doubt Gop Proposal Will Benefit Economy

Newspaper article St Louis Post-Dispatch (MO)

Variety of Economists Find Fault with Tax Cuts Liberals, Conservatives Doubt Gop Proposal Will Benefit Economy

Article excerpt

ALTHOUGH SPEAKER Newt Gingrich called the tax cut before the House the "crown jewel" of the Republicans' effort to energize the American economy, economists generally deride it and the business community runs hot and cold on its most expensive provision.

"There's not a single part of this bill that I consider an improvement over the current system," said William A. Niskanen, an economist with the conservative Cato Institute. Niskanen says he is concerned that the tax changes would encourage more business investment in new equipment but not stimulate additional saving to finance it - and wind up increasing the already large amount of money that the United States borrows abroad.

Robert Shapiro, vice president of the centrist Progressive Policy Institute in Washington, said, "It's a tax bill defined by ideologists and political tacticians, not by businesses or economists." He doubts that Congress will find the $90 billion in annual spending cuts that will be necessary to pay for the tax cuts by 2005, when the full effect of the tax provisions kick in.

Henry Aaron, a liberal economist with the Brookings Institution, fears the tax plan would only accelerate the widening gap between the rich and everyone else - and lead to a new generation of tax shelters.

Even some experts who support the House tax package acknowledge some difficulty in quantifying its benefits for the economy. Stanford University's Michael Boskin, who was chairman of the Council of Economic Advisers under President George Bush, predicted that the House tax cuts would boost entrepreneurship, improve the efficiency of capital markets, raise stock prices in the short run and boost savings over the long run. But Boskin conceded that when similar things were tried during the 1980s, the results were often "ambiguous."

Officially, business groups are solidly behind the tax bill. Privately, meanwhile, some business lobbyists express reservations about the package. Published surveys of business executives have generally put tax cuts below regulatory reform, legal reform and balancing the budget on the priority list of business executives.

One leading business lobbyist said there were provisions of the tax bill his group cares a lot about - the elimination, for example, of the alternate minimum tax, which ensures that every corporation pays some federal tax each year - while other elements it considers marginal, such as a complex new formula covering how businesses depreciate their investments in plants, equipment and real estate.

"The leadership has made it clear that it's a package deal - take it or leave it - and so we're taking it," he said on condition that neither he nor his organization be named.

Here is how economists and business representatives generally view the three major provisions of the House tax bill:

$500 Child Credit

This provision holds little interest for the business community, although it is the most costly element of the tax bill, accounting for 37 percent of the tax reduction over the next decade, according to the Treasury. …

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