Are they related? Yes; both the Federal Assault Weapons Ban of 1994 and the Economic Growth and Tax Reconciliation Act of 2001 were passed by the US House and Senate, and signed into temporary laws expiring in 10 years. That was the plan, ten years and both would end barring significant positive impacts and the resulting votes necessary to make them permanent. But that’s pretty much where the relationship dies if we listen to the political banter.
But as the 10 year temporary assault weapons ban came to a close it was quietly allowed to end. No fanfare, no public pronouncements about “new” assault weapons being loosed on the public, few pros—cons kicked about of the impact to the country or the future of Americans. The discussion was so limited it was virtually nonexistent. Today as our House and Senate considers another ban we hear much about “disarming” the public, “infringement of constitutional rights” and much more, some truth and some non-truth. Were there positive or negative outcomes as a result of the temporary ban? I’m not discussing the assault weapons ban except to say it was temporary, and then it expired just as it was intended and passed in 1994 to do.
However as temporary tax reductions came near to end we’ve heard a loud outcry about “new” taxes being livied on businesses and public, claims about the impacts to the country, and how horrible it will be for free enterprise impacting the future of Americans. On allowing the tax (temporary) reductions to expire the discussion points include one-liners like “no new revenue”, “budget cuts”, “shrinking government”, and “hurting the economy”. Really they are just the old taxes, nothing new at all about them.
If we think outcomes should count and we indeed want to look at potential impacts of the temporary law, here are a few talking points: The “old” tax rates (now temporarily reduced) were in effect for the period back when GDP growth was 5%, unemployment was running at 4%, and there were federal revenue excesses of $236.2 Billion, yes actually paying down the national debt verses running an annual deficit.
Since we’ve enacted these temporary tax reductions, we have GDP growth at 2%, 3Q 2012, unemployment at 8%, a $1.3 Trillion (2011) and $1.1 Trillion (2012) annual deficit, and a major migration of wealth from lower and middle class to the top few percent. All that in spite of the Heritage Foundation report predicting the temporary cuts would result in complete elimination of the U.S. national debt by fiscal year 2010. But hey, the Heritage Foundation has been wrong about inflation for ~5 years now too.
If we need more let’s couple that experience with the study discussed a few weeks ago analyzing the impacts of tax rates on the GDP, savings rates, and productivity. Now we have our own decade of personal experience as to what happened and a study from 1945 on telling us these past years are indeed NOT an anomaly.
As I mentioned in Low Taxes verses Economy:
- Lowering marginal tax rates does not increase economic activity nor impact the GDP.
- Lowering capital gains rates does not increase economic activity nor impact the GDP.
- Lowering marginal tax rates and/or capital gains tax rates does not increase saving and investment.
- Lowering marginal tax rates and/or capital gains tax rates does not increase U.S productivity.
- Lastly, lowering capital gains and/or marginal tax rates does make the wealthy wealthier and add to the significant and growing U.S income inequality.
I’m starting to like the sound of those “old” tax rates. So let the temporary tax breaks expire just like the temporary assault weapons ban. Or to be credible, we should at least call them “old” taxes. Old as in when the economy was fine, the deficit and talk of austerity nonexistent.