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March 31, 2006



I do not believe the notions of raising taxes will increase government receipts and lowering taxes will lower government receipts. Dick mentions these ideas as if they are givens. We cut the capital gains tax rates and the government revenues from capital gains has dramatically increased. Same goes for the Bush tax cuts he refers to. We do not have a lack of government revenue problem. Tax revenues are higher than any point in history and continue to increase even when we cut tax rates. The problem, as I see it, is Washington's insatiable desire to increase non-discretionary spending (Medicare drug benefit, Medicaid, Social Security, etc.) Raising tax rates will not bring more revenue to the government and will not fix the fiscal problem we are in. Imagine Bill Gates or Warren Buffet in a cash flow cruch (I know, you really have to stretch here). Would we advise they need to increase their incomes to cover rampent spending sprees? No, they don't need to earn more. It makes a whole lot more sense to tell them they need to spend less.

Dick Lepre

I agree that this problem is complex. What my proposal (http://www.loanmine.com/rw499.html) does is to let Congress do the spending but to create a Fed-like entity to set tax rates. This entity would be chartered to do what is best for the long-term interests of the economy. That might be to lower taxes. That might be to raise taxes. I am in no way suggesting that tax increases are always the way to offset deficits. I am most certainly suggesting that I have no confidence that politicians can make this decision. The hope is that such an entity can have the same success with fiscal policy which the Fed has with monetary policy.

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