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MONDAY, FEBRUARY 13, 2006
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EDITORIAL

Good idea, wrong approach: Get facts about tax impacts

The Bush administration wants to create a "Division on Dynamic Analysis" within the Treasury Department. Its purpose would be to study tax policy. The administration seems quite sure that its research will support the theory that tax cuts mean more money for the government in the end.

Current "static" methods of analysis are shortsighted, in the administration's view. These methods look only at direct effects on certain taxpayers, and they don't consider how tax changes affect the economy's overall growth by changing the behavior of consumers and businesses.

For example, cutting taxes to wealthy people and businesses might cause them to invest more, buy more, hire more and make higher profits — ultimately raising tax revenue.

It's an attractive theory, somewhat like having your cake and eating it too. We hope it's true. We're not saying it's wrong, but we must note that after cutting taxes under President Bush, the federal government went from a budget surplus to a deficit that the Congressional Budget Office expects to be $337 billion this year.

Vice President Dick Cheney, however, already knows what the Division on Dynamic Analysis is going to conclude. He told the Conservative Political Action Conference last week that "despite forecasts to the contrary, the tax cuts have translated into higher federal revenues."

We'd love to see evidence to support or disprove the less-is-more theory, but we doubt it's going to come from the same administration that told us Saddam Hussein possessed weapons of mass destruction and now downplays global warming. The objectivity of any studies that come from this administration will be debatable.

Here's a better idea: Take the Division on Dynamic Analysis' $513,000 budget and award grants to respected university economists who will try to figure out the truth.

That would provide some protection against what another President Bush once called "voodoo economics."

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