Tax Cut Working Group

A Coalition For Lower Taxes And Limited Government

May 1, 2003

Hon. William M. Thomas

United States House of Representatives

Washington, DC 20515

Dear Congressman Thomas:

Soon you will be fashioning a tax reduction bill. We hope you will choose that combination of cuts most likely to stimulate our economy. Also, it is our recommendation that you choose the method of “scoring” those cuts which most accurately reflects real world, human responses to the incentive effects of those tax cuts.

Some have argued that in light of the costs of the “war on terror,” especially its Iraqi component, and the rising deficit, we cannot “afford” a tax cut. On the contrary, we can ill afford not to reduce taxes if we are to expand rapidly the size of the economy so it is better able to both handle the war and move more swiftly in the direction of tax/spending equilibrium.

One of the most growth-inducing tax reduction opportunities involves elimination of the double taxation of dividends. There are numerous, compelling reasons to end this double taxation:

– Its demise will immediately affect stock prices, with the consequent positive impact on investor attitudes and outlook.

– Lowering the taxes on dividends will reduce the cost of capital for businesses, leading to increased investment from domestic and foreign sources, vastly improving our international competitiveness, job creation and economic growth.

– Double taxation is intrinsically unfair and, contrary to claims by some that this provision would disproportionately “help the rich,” about half the dividend relief would flow to the 18 million seniors who file tax returns. This would have the additional benefit for seniors of reducing the amount of their Social Security income subject to tax, increasing their “take home” pay immediately.

– Because the elimination of this particular double tax will have such an immediate and dynamic impact on economic growth, Heritage’s calculation of revenue loss for this portion of the President’s package is a mere $143 billion over 10 years, not the $400 billion calculated by the Joint Committee on Taxation.

Another key objective should be to spur capital spending, especially among small businesses that are such an engine of job creation in America. Current year expensing of machinery and equipment purchases should be enhanced.  

  Acceleration of the 2001 cuts on individual tax rates would have a similarly significant growth-inducing effect.

We urge you to make these and other cuts in the tax structure of the United States. This is good tax policy, will spur our economy and help all taxpayers.

Sincerely,

Lewis K. Uhler/George Pieler

National Tax Limitation Committee

James L. Martin

60 Plus Association

Charles W. Jarvis

United Seniors Association

John Berthoud

National Taxpayers Union

Richard Rahn

Discovery Institute

Fred L. Smith

Competitive Enterprise Institute

Robert B. Carleson

Free Congress Foundation

Joseph L. Bast

Heartland Institute (IL)

Richard Olivastro

Coalition for Connecticut

Karen Kerrigan

Small Business Survivors Committee & Women Entrepreneurs, Inc.

Lawrence W. Reed

Mackinac Center for Public Policy (MI)

Gary S. Palmer

Alabama Policy Institute

Bob Williams

Evergreen Freedom Foundation (WA)

John McClaughry

Ethan Allen Institute (VT)

Betsy P. Chapman

Maine Public Policy Institute

Don Racheter

Public Interest Institute (IA)

Grover Norquist

Americans for Tax Reform

Dan Clifton

American Shareholders Association