A Bailout vs. A Hand-Up
By: Michael Reagan
FrontPageMagazine.com | Friday, December 19, 2008
Who needs gigantic bailouts when there are far less costly and more effective ways to deal with the economic crisis, such as those I’d use if I were president of the United States.
To begin with I’d give the economy a powerful shot in the arm by eliminating a lot of federal taxes that are hobbling economic growth.
There is a better way to boost our economy than the socialistic programs now being both used and considered. It’s called free enterprise, and it works by loosening the death grip now strangling America’s small business community, which provides the majority of jobs in this country.
I’d start by reinstating the tax deductibility of the interest rates we now pay banks on vacation or second homes, cars, motor homes, RVs, boats and yachts.
Instead of following the lead of the Governor of New York by putting a luxury tax on these items -- thereby killing the free market -- I’d revive the market, and those houses in foreclosure and owned by banks would find eager buyers seeking to invest in real estate.
If buyers knew they could write off the interest that they would be paying a bank on the loan, you wouldn’t need a government bailout, because the people with money to invest -- not government -- would be the ones who would bail out the economy.
Giving them a tax break for getting involved in the economy by investing in income-producing real estate is the sensible way of bailing out the marketplace.
What are we thinking when we plan to give General Motors a bailout with money we don’t have? Why should we need to borrow from our grandchildren and great-grandchildren and their offspring?
Instead, why not allow us to deduct the interest on a second home we might buy? Do the same with boats, with RVs, with second homes, with automobiles.
We’d undo much of the damage the downturn in the economy has done to our retirement accounts, causing most of us to lose at least 25 to 30 percent or our retirement savings.
Moreover if we also cut taxes on capital gains to zero and slash corporate taxation by half, the economy would grow and the nation’s economic engine would be restarted and roar into life, and it would all happen with raising one cent of taxes.
We’d do it all without socialism and without bailouts.
Think about it. Giving the automakers huge barrels of money doesn’t do a single thing about motivating people to buy cars, and if people don’t have an incentive to buy cars most won’t, and you’re right back where you started, only a lot poorer.
People need an incentive to buy a car. What’s the incentive? If, however, you give them a tax break as a reward for buying a car they have an incentive.
With the economic downturn, the boat business is in the tank. Nobody is buying boats, yet the Governor of New York wants to kill the boat business by adding a five percent luxury tax to the cost of buying a boat? Why not just order boat sellers to go out of business and be done with it?
Years ago a tax on yachts was imposed and the results on the economy were staggering. I was in the business of selling boats at the time, and the taxes simply killed the business in the United States.
The tax did boost the economy, except it wasn’t the U.S. economy. People kept buying boats, but not here. They bought them in Venezuela and Mexico and a host of other foreign countries, had them registered in those countries, and then had somebody take them to the United States.
Why? To avoid the taxes.
Make the interest buyers pay on cars, boats, motor homes, second homes and investment real estate deductible, and you won' t need bailouts. The American people will do the job themselves.
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