Investment Tax Credit

The presidential election hinged very much on economic issues, and both candidates focused on economic matters in differing degrees. This discussion involved several themes, notably rebuilding the weak economy and addressing the issue of the deficit at the same time. Whether this is even possible or not is uncertain. A theme in the Democratic candidates' campaigning was a change in tax policy, and here again there were several specific strands to this theme. The candidate called for increased taxes on the wealthy and reduced taxes on the middle class. He called for the use of the investment tax credit as part of an overall tax reform package. The tax policies promoted by Bill Clinton are reminiscent of the tax policies of John F. Kennedy in 1960, and the consequences for Kennedy were business mistrust and uncertainty such as is already being seen by Clinton for his new proposals. The investment tax credit in particular was suggested by Kennedy and was feared by the business community at the time because it had no idea how this would be applied or whether it would be of benefit or not. Segments of business today have called for an investment tax credit, but this does not mean that business is altogether happy about Bill Clinton's version of this idea. A comparison of the present situation with that of the Kennedy Administration may be instructive for determining the efficacy of the present proposal.

The investment tax credit was considered an old idea when it was r

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ction, his campaign rhetoric was dissected by the business community in a spirit of mistrust, and the business community seemed to fail to grasp how Kennedy intended to strengthen and rationalize the corporate structure: "Kennedy's 1963 tax bill was to be the device that finally raised corporate consciousness and cemented the then-fragile alliance between government and business" (Miroff, 203). The origins of the 1963 tax bill can be found in the preinaugural task force on taxation that had been commissioned by the President-elect and headed by Professor Stanley Surrey, later to be Assistant Secretary of the Treasury. That report recommended a sweeping, long-range tax reform bill which would broaden the tax base by closing loopholes, end all inequities of benefit to the few, and make possible as a result lower taxes for all. This was a reform tax bill and not a tax cut that was proposed. There was no intention for the government to take in less in revenues, and given the difficulties in the budget such an idea would have been disastrous. If the tax reform proposal was not implemented until 1963, it was because there was the necessity first of passing a smaller tax reduction bill that did not pass until 1962 (Sorenson, 427-42

Category: Economics - I