Following the bill’s defeat, congressional conservatives took to the airwaves, explaining what should be included in the legislation in order to persuade other conservatives to vote for it. Their additions: cutting the capital gains tax and cutting corporate taxes. Watch a compilation:
From the beginning of the bailout process, conservatives have been advocating tax cuts, claiming that they will fix the current financial crisis. Today, the Washington Times editorial board reiterated this idea, saying that tax cuts will fix “some of the structural problems behind the mortgage meltdown.”
But these tax-cutting proposals do nothing to address the mortgage crisis and don’t help troubled homeowners. They amount to little more than a conservative hand-out to the wealthy and corporations.
As the Wonk Room has previously noted, most capital gains flow to millionaires. Conservatives argue that a cut in cap gains will cause capital to “flood” into the market again, thus solving the crisis. But as Michael Ettlinger notes, this wouldn’t happen because “this money would have to come from somewhere. If it’s interest bearing accounts, the banks would be hurt by as much as Wall Street benefited.”
As for corporate taxes, the U.S. rate is already in line with the G-7 average, and the U.S. raises below the OECD average in corporate tax revenue. An analysis by the Center for American Progress found that corporate profits do not trickle-down, and thus giving corporations tax breaks would not alleviate any of the pressure on the economy.
The legislation that failed to pass yesterday was already short on provisions actively aimed at helping those facing foreclosures. Any restructuring of the bill should address that shortfall – and focus on the root of the crisis – instead of turning the legislation into a gift for corporations and the richest Americans.
UPDATE: On Hardball today, former Rep. Tom Delay proposed suspending the capital gains tax for two years. Host Chris Matthews responded by saying “you guys have wanted that forever…you’re going to reward the people that blew it.” Watch it: