Resurrecting the Investment Tax Credit

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RESURRECTING THE INVESTMENT TAX CREDIT…Bruce Bartlett says Republicans need a stimulus plan of their own, and they need to offer up something more than just the same mindless tax cuts they always do. They need better tax cuts. Cleverly, he recommends an idea already promoted by a couple of Democratic economists in good standing:

In promoting investment, Republicans can even use the theories of economist John Maynard Keynes, which are much in vogue today. In the Keynesian model, investment spending provides just as much stimulus as consumption spending. But investment spending is really better, as common sense tells us.

….To stimulate investment, Republicans might consider resurrecting a Democratic tax idea from the Kennedy Administration — just as Jack Kemp did in 1977. This idea, named the Investment Tax Credit, reduced the cost of machinery and equipment by giving businesses a credit of 7% (later 10%) of the purchase price against their tax liability. In 1981, Kennedy adviser Walter Heller argued that the ITC really marked the beginning of supply-side economics.

Another political virtue of the ITC is that Obama economic adviser Larry Summers and Clinton Administration economist Brad DeLong are the principal advocates of the importance of machinery and equipment to long-run growth….In a 1992 study for the American Council for Capital Formation, DeLong estimated that a 10% ITC would boost economic equipment investment substantially and raise the rate of real economic growth by as much as 0.3 percentage points per year.

The ball’s in your court, Brad. What do you say to that?

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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