Kudlow: A Pro-Growth Plan from the Gang of Six

Larry Kudlow has some sound advice for conservatives to hold back from trashing the plan which was the first words out of the mouths of some Senators who didn't bother to listen because they had their minds closed when they went into the briefing.

This plan lowers the tax rate for all.  It does raise capital gains by 5% which is more than offset by the lower tax rates for not only individuals but for business.  It simplifies the tax code plugging up loopholes which some emails are tax increases.  Personally think all loopholes should be closed.  The fact that loopholes have been  put in the Tax Code should be stopped.  It was a way to pay back the big donors and the Democrats especially Franks and Dodd became experts at loopholes for donors.  If closing loopholes is considered a tax increase by some then bring it on -- I consider it a tax revenue increase which is what it really is.

Every plan has its drawbacks but frankly this pro-growth plan is much more than I would have thought the Republicans could get out of Senate Democrats.  This is not a win for Obama, Democrats, or Republicans but it is a win for the American taxpayers.  With this plan, Obama is willing to sign an extension to work out all the details and stop default in its tracks which is the right thing to do.  He has been backed into a corner by a group of six who worked to get the best deal possible and actually have a budget for this year and a framework for following years.   Not having a budget in place for two years has been weighing on the financial markets and investment because they didn't have a clue where all this was going. 

That balanced budget amendment which this Country needs and was passed by the House doesn't have a chance to pass this year or next but it sure does in January 2013 and will be sitting waiting for the new Republican President to be sworn into office.  Oklahoma Legislature including one Democrat has already signed on with a letter to the Speaker say they will be glad to vote for the amendment as soon as it hits the states.  Many states have balanced budget amendments that show it works. 

This is a start to get an actual budget in place that has not happened for two years.  With Sen Conrad retiring from the Senate in 2012, he seems to be more in tune with actually getting the job done.  The fear that some Democrats had of Obama when he was sworn in seems to be much less today after they have seen him operate for over two years.  In fact, as the support for Obama among the voters has been decreasing so has the support for him by some members of Congress.  That fear he had of retaliation towards members who didn't vote the way he wanted is probably now sitting in the Office of the Mayor in Chicago.  Rahm Emanuel seemed to be the real intimidator as Obama's attack dog and now with him along with Axelrod gone from the White House, a few more centrist Dems are spreading their wings and going against this President who now has more bark than bite. 

Larry Kudlow
July 20, 2011 5:00 P.M.

A Pro-Growth Plan from the Gang of Six
It’s a stunning reversal of the Obama Democrats’ class-warfare campaign.

There are a lot of known unknowns about the new “Gang of Six” budget proposal. But conservatives should hold back from trashing it. Why? There’s a large, pro-growth tax-reform piece in the plan that would lower tax rates across-the-board. This is a stunning reversal of the Obama Democrats’ soak-the-rich, class-warfare campaign.

The best part of the Gang of Six plan is a reduction in the top personal tax rate from 35 percent to a range of 23 to 29 percent. For businesses, the rate would drop in the same manner. And the corporate tax would be territorial rather than global, thereby avoiding the double tax on foreign earnings of U.S. companies. Finally, the plan would abolish the $1.7 trillion alternative minimum tax. That’s huge. It’s another pro-growth tax reform.

In a more perfect world, the Congressional Budget Office would score the pro-growth incentives of lower marginal tax rates in terms of a tax-revenue increase. That’s the history stretching back to JFK, Reagan, and George W. Bush circa 2003.

And right now, the Gang of Six package is the first real pro-growth tax reform of all the debt-ceiling plans. It acknowledges the need for a growth element in order to solve our budget bankruptcy and limit spending, deficits, and debt. It would boost the economy and broaden the base (by reforming or limiting numerous deductions). As a result, more income would be taxed at lower rates in a rising economy, throwing off a hell of a lot more revenues than we’re getting today. Rising revenues from lower tax rates are a good thing.

Now, there are glitches in this plan that cannot be overlooked. The biggest is the harsher treatment of capital gains. In a CNBC interview on Tuesday, Sen. Tom Coburn (R., Okla.) told me that the investment tax rate would rise to 20 percent from 15 percent. This is a black mark. It’s anti-growth. Coburn, however, also told me that the tax treatment of IRAs and 401(k)s would not change in this plan. That’s good.

Excerpt: Read more at IBD