When the tax rate is high, fewer people will take the risks and invest the sweat equity necessary to make a new business successful. Reducing tax rates thus leads to an acceleration of new business formation. Similarly, the repeal of the death tax will reduce another disincentive for businesses to form and expand. Facing high tax rates in life and an estate tax at death, many existing business owners are discouraged from expanding their businesses. For example, a Tax Foundation study some years ago found that the death tax presented a business owner with the same disincentive effects as a doubling of the income tax rate.
Recessions put enormous financial strains on family incomes.
What they need is a tax cut to help weather the storm. President-elect Bush wants to double the per child tax credit and dramatically reduce the marriage tax penalty. When the economy slows dramatically, many low-income families and individuals suffer. A recession destroys the jobs of many recently employed, especially those in marginal jobs. At such times, the Federal government's programs will help, but the real help for the truly needy comes from charitable organizations.