2012 Corporate Tax Structure:
With the top tax rate set at 25%, corporate incomes above $75,000 would not be taxed at the Marginal Rate.
Last, but certainly not least, are the proposals regarding the Gold Standard and the Federal Reserve System. Republicans are considering using a Gold Standard to value the U.S. dollar, evidenced by the plan to audit the Federal Reserve over the previous four years and the plan to create a gold commission to explore the feasibility of a gold standard. Ideally, a Gold Standard would restrict the ability of the Federal Reserve System to increase the money supply (thus raising inflation), since the value of the currency in circulation could not exceed the value of the gold held in U.S. reserves and depository insitutions.
So Mr. Man, Why Is All This So Bad?
In a recession, simultaneously cutting both government spending and revenue has a negative impact on the economy through increasing unemployment and raising the national debt. On the spending side, most of the proposed cuts to government spending involve reductions in federal payrolls, entitlements, benefits, and discretionary projects. Reductions in these areas raise the unemployment level directly through layoffs of government employees, cancellation of government projects (e.g highway construction) and elimination of government agencies. Debts also increase here as incomplete projects that are funded with allocated funds are canned due to lack of funding, adding liabilities on the federal balance sheet.
On the income side, reductions in federal revenue through tax cuts or tax incentives further exacerbate funding and staffing concerns for federal projects brought on by spending reductions. Also taxation tends to be the government's primary source of revenue, meaning that reductions here force the government to seek out alternative sources of income. Usually governments turn to their central banks to either increase the money supply, which raises inflation, or sell bonds on the open market which increases the overall debt. The struggling nations of in the Euro area are a prime example of the ineffectiveness of such policies on stimulating economies in recession.
Continued in Part II