Our View - Thursday

Economic stimulus?

Tax reform would be better boost

Something’s wrong with the tax code when Democrats and Republicans agree that some $150 billion must be returned to businesses and families in a desperate attempt to save the sagging economy. It’s as if leaders of the left, right and center discovered in unison that bloated government bureaucracies don’t fuel economies. People drive economies, with billions of spending decisions made 24 hours a day, seven days a week.

With that in mind, and faced with economic gloom and doom, politicians suddenly want families and businesses to spend. So they’re proposing tax rebates that could result in early summer checks in the mail. One of the latest proposals would return $500 to single adults, $1,000 to couples, and $300 for each child. Though it doesn’t sound like much, $1,900 to a family of five can mean new tires for the car, new shoes all around and one extra night on the town. All that means new activity for businesses, their employees and vendors and everyone down line. It’s a simple equation: a windfall, even a small one, can bring the people who comprise an economy out of hibernation.

The best part of the plan would restore $50 billion to the private sector by allowing businesses to write off an additional 50 percent of capital improvement expenses. That means 2008 will be a great year for, say, a trucking company to expand its line of trucks. More trucks leads to more drivers and lower transportation costs. It means money will go to a truck dealer, which will spend money with a manufacturer, and cash will flow through multiple channels.

Our concern is that initial outlines of the plan call for making the business tax relief temporary. By making it an option only in 2008, businesses will be encouraged to act immediately, which will instantly benefit the economy. In doing so, however, businesses will move up anticipated 2009 investments to 2008, thus setting up a future investment slump when the incentive is gone. A better proposal would give generous incentives in 2008, while establishing permanent reforms that would also reward capital investment in future years.

Our concern with the proposed tax breaks to individuals and families involves the exclusion of Americans who succeed. Congress, in a soak-the-rich move, is likely to limit rebates to low-and middle-income Americans. The stimulus package is supposed to return money to the private economy, period — not just select groups. Wealthy Americans have money tied up in government, just as lower-income Americans do. Furthermore, wealthy Americans are more likely than others to invest their rebates in ventures that produce goods, services and jobs.

Returning billions to the rightful owners is a great idea, but not if government plans to pay for it with borrowing that will burden future generations. With the rebates must come massive spending cuts for entitlements and foreign wars. If Congress needs to return billions to save the country’s economy, one fact should be clear: government has taken more than the private sector can bear. Tying up money in Washington, via excessive taxation, produces only economic sludge — a commodity that has never found a market. Washington should move quickly with reforms — including spending cuts and permanent tax breaks for the rich and poor alike, and businesses big and small.

Health care reform: It’s a joke

One of the worst ideas ever proposed with a straight face will come before the Colorado Legislature today. The state’s Blue Ribbon Commission on Health Care Reform wants a law to force every Coloradan to buy health insurance. It’s like solving homelessness with a law that says every person must buy a house.

Subsidies to the poor and other costs would amount to $1.1 billion out of the gate, and the commission has no plan to pay for it. The law would extend insurance coverage to nearly 800,000 people who don’t have it now. Yet commission members, in a meeting with The Gazette’s editorial board, said the state already faces a worsening doctor shortage, even without a mandated increase in demand for services. Creating more demand, without a means to increase services, can mean only two things: soaring costs and rationing.

Based on the commission’s own findings, 25 percent of the state’s uninsured have incomes of $50,000 or more, 13 percent earn $75,000 or more, and 6.4 percent earn six figures and up. That means thousands have simply chosen pay-as-you-go health care, or have decided to avoid plans that cost more than they’re worth. They’ve exercised their rights as American consumers to not buy something.

The commission claims that insured families pay a “hidden tax” of $934 to cover the uninsured. An economist on the health care commission, however, says the figure is grossly inflated from about $84 because it doesn’t account for care that’s paid out of pocket, through private philanthropy, or with Veterans Administration or workers compensation payments.

But here’s the most troubling part. Commissioners can’t say their program would reduce the fictional $934 burden, and admit that it could actually increase under their plan. No thanks. It makes the current system — in which the uninsured are at no loss for care — look pretty darn good.

The proposal, which commissioners refer to as an untried “pioneer” idea, can’t possibly work. It makes no sense, to commission members or anyone else. We hope it’s DOA in the Legislature today. May it rest in peace.