Tax Policy Could Break U.S. Economic Stalemate

- "Changes in income tax rates in isolation have virtually never set the U.S. economy in an entirely different direction. Nonetheless, as the sharp turning points of 2008/2009 fade behind us, tax scenarios that could mean fiscal tightening of 2% of GDP or zero represent quite meaningful differences to the 2011 outlook."
- "Our base case U.S. economic view embeds tax increases close to 0.8 percent of GDP, similar to the Obama administration’s proposals and a bit less than we assumed earlier this year. Compared to our earlier views, a scenario of forestalling all tax increases now seems possible, if not probable, in our view."
- "While income tax increases for the highest earners would affect a small minority of tax payers, it would be a drag on a relatively large share of income and spending. According to the Congressional Budget Office, across all sources of income, the top 5% of income tax filers accounted for 44% of all
federal tax liabilities in 2007. It would also affect the employers of millions, if not the millions of small business (S-Corp and proprietors) employees directly."
- "The case for a stronger recovery in the U.S. is clearly centered on reviving business expectations amid a massive precautionary liquidity buildup in both the business and household sectors that could be put to more active use. Some certainty and consistency on tax rates could eliminate a barrier to action."


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