The Kind of Tax Cuts that will Really Help the Economy

On May 15, 2001, the Economic Growth and Tax Relief Reconciliation Act of 2001 was formally introduced in the House as H.R. 1836 by Rep. William M. Thomas. Not long after, then President George W. Bush signed the bill into law on June 7, 2001. The act basically made significant changes in several areas of the U.S. internet revenue code. It meant the implementation of tax reduction schemes on income tax rates, estate taxes and taxes on retirement plans. All these tax cuts are set to retire at the end of the year 2010 Congress decides to act and extend it further.

Today, there have been debates with regards to extending these tax cuts or not. We can clearly see the massive effect of the economic recession to the American economy. The high unemployment rates are attributed to the sudden collapse of financial institutions and business firms who felt the huge impact of the recession. Figures show that about 15 million Americans are still unemployed as of the moment. Many politicians believe that one of the short term solutions to these problems is an extension to the previously implemented tax cuts by Bush.

Democrats have shown less support for tax cuts while Republicans strongly oppose the idea of spending more. So what kind of tax cuts should be implemented then to generate jobs faster and help the economy recover? Simple, the kind of tax cuts that will generate more jobs is that one that business companies get only if they spend more money. One concrete idea was to implement a temporary cut in the payroll system so that employers will be relieved of the cost of employing people. By suspending the taxes that cover social security and Medicare, Washington will be able to lower the cost of keeping or hiring workers.

There are other viable suggestions that are presented by U.S. lawmakers. One solution was to implement an expanded tax credit that will benefit the new clean energy projects. Another is the expansion of tax credit for businesses that will increase their workforce or hire more employees. Although these tax cuts will generally not solve the long term economic problems that the nation has faced, it will certainly help avoid the resurfacing of newer problems such as a double dip recession. The most helpful thing that the government can do is to generate more jobs as people badly need it today. We may have long work to do but as long as we start now, we will be assured of victory in the future.