Great Expectations

President Bush called for Congress to make recent tax cuts permanent in his weekly radio address Saturday:

Congress needs to do its part by making the tax relief we passed permanent and burying the death tax forever.

Stability in a tax code is important for economic growth because people make economic decisions based on their expectations of the future. Therefore they take into consideration their future tax liability when making current decisions. An unstable tax code makes long-term decisions difficult and leads to slower growth of the economy. The President’s Tax Reform Panel and Congress need to address the stability of the tax code in any reform effort. Tax reform without the expectation of stability will be ineffective. See the Tax Foundation’s work on tax reform and look for new releases on tax reform soon.