The False Narrative: "Paying for Tax Cuts"

N/A | August 16, 2010 | A. Huddleston

[BamaAndy]

Why do many reporters ask how we can pay for tax cuts?

[BamaAndy]

Virtually every time television or print “journalists” are discussing the issue of taxation lately the notion that tax cuts must be “paid for” is used at some point and repeated as if that action was part of the formula. The premise has become cliché and demonstrates nothing more than one lazy reporter repeating the phrase used by others. It is a false narrative. It is the lie of a shady courtship.

The producer earns income. Government taxes income, forcing the producer to had over a portion of his earnings under the threat of penalties ranging from fines to imprisonment. Taxes are necessary to fund government at the local, State, and federal level. It is a given that some method to raise revenue for a government is needed by a civilized society to carry out functions that are best performed by government.

Add to our system legislators at each level whose primary interest is to be reelected, maintain income and keep the opportunities built-in the office for more favor and income, we have a spiraling descent of promises in exchange for votes. Our votes send people to represent us in lawmaking. Inherent in that charter of representation is to vote on bills written to address needs and wants by some group or by most of the population. Some of the bills passed over the decades establish law concerning the involuntary surrender of income—from the producers of income.

Still, only the producer earns income. The producer generates income from selling goods and services to other producers (and non-producers—another subject). All the money centered in a government is derived from the producer.

To suggest that tax reductions must be paid for or that we cannot afford tax cuts is suggesting there is something inherent in government that deserves to be paid first—as if it was a producer. Government does not produce, it consumes.

Government exists to carry on the public demands of a society for certain functions such as national defense where a centralized command structure is the most effective working model. Other functions of different levels include roadways, fire, police, water, and sewage. It grants tax revenues to contractors who do produce and it hires its own workforce to perform some of the work demanded by the voting public. Governments also enrich themselves through taxes to employ people in agencies to write and enforce regulations born out of bills—another “benefit.”

There are producers in the country who if asked would not want to pay for something—or some number of things—the government funds. Add to the equation self-serving politicians and special interest groups, it is little wonder why there are serious questions about spending. Most politicians care nothing about working toward earning a consensus among producers. We are being tied up and thrown into a dark room. We are being robbed.

It’s not a question of paying for tax cuts; it is a question of “should we force people to pay more in taxes?” A more pertinent and important question is, “should we be taking the income we are taking?”

When I have read or heard some energy-deficient reporter suggesting that we have to pay for tax cuts, I choke back a little bile produced by an involuntary gag reflex. The statement hints towards a government as an owner of all income that is facing the dilemma as to whether it can afford a particular expenditure. It is as if it was a person deciding if he or she can pay for that diamond broach or not—or whether he should buy something less expensive or choose not to buy. It is as if the government is the producer and earns all the income. It does not.

Congress, our State legislators and our town administrators should, of course, bow to every taxpayer and be thankful for their kindness. We know about the prodigious spending. We know about the outrageous, the hideous waste over the years and compounded in the present day—yet another subject. Leave it as infuriating, insulting, and depressing—most of this mindless excess by politicians is nothing but currying favor for their survival in an office that guarantees them their own excess. They should have never been sent to that place but we are stuck with them nonetheless.

How do you “pay” for tax cuts? That is a silly question. That question is disingenuous, misleading—it is a false narrative. Instead, we should ask how the government justifies any, all tax rates. I would like to add that it would be nice in our courtship, if the government would at least demonstrate a modicum of respect after the forced sex act it performs on every producer.

[silverleaf]

Tax cuts pay for themselves

Tax cuts is letting people keep and spend their own money
That used to be a natural right. Now it is a privilege doled out by the govt?

These journalists are too stupid lazy or ideological to dig up the facts of what happened with tax revenue after Bush (and Reagan and JFK) cut taxes

[tm61]

the idea of “paying for tax cuts” is the height of liberal big government arrogance.

It openly states their belief that your income belongs to them.

[Son House]

Some more evidence(Christina Romer too);

Course of Economy Hinges on Fight Over Stimulus

http://online.wsj.com/article/NA_WSJ_PUB:SB10001424052748704720004575376923163437134.html

...Economists who say Mr. Obama should have relied more on tax cuts cite research of an unlikely source: Ms. Romer, his adviser. In a study she and her husband, David Romer, conducted before she joined the administration, Ms. Romer found large multipliers from tax cuts, which she concluded “have very large and persistent positive output effects.” Tax increases, she also found, hurt growth.

...A study of 91 fiscal stimulus programs in 21 developed economies between 1970 and 2007 by Harvard’s Alberto Alesina found tax cuts were more stimulative than government spending.

[chrisser]

Tax cuts always need to be “paid for”, but new spending? Nobody in the media ever questions where that money’s going to coming from.

[BamaAndy]

That’s the point. You nailed it better.

[BamaAndy]

You’re right—it works every time it is tried.

[BamaAndy]

I don’t agree tax cuts “need to be paid for.”. It is the same thing as saying the govrnment has a right to all income.

[BamaAndy]

Thank you for the link. Mr. Keynes was wrong when I was in econ 101 thirty years ago and still is... we learned the value and wisdom of Mr. Friedman.

[chrisser]

Nor do I. I guess my statement should have read: "The media always says tax cuts need to be paid for..."

[BamaAndy]

That’s right... they sure do. I am tired of hearing the same song from news readers.
I really believe many are government tools and nothing better, nothing more.

[TimSkalaBim]

Good points. And conversely, no one ever asks how the producers are going to ‘pay for’ new or higher tax increases levied on them. How would, for example, IBM ‘pay for’ an increase in corporate income taxes? By cutting elsewhere, as in jobs and production. How would a citizen ‘pay for’ a new tax on their income or a new excise tax on their purchases? By purchasing less of all the things that run the economy. To ask and answer these question shows how deceitful are the practitioners of the false frame identified by your post.

[BamaAndy]

The consequences of tax policy can be severe and I believe we are seeing it play out to our detriment.
Let us hope that we have a profound and historic November.

[Silentgypsy]

Liberal arts majors seem to shy away from things involving hard sciences (math, etc.) They also have faith in creative accounting.

[downtownconservative]

You’re right on. It’s all a matter of perspective. Media seems to naturally (these days) assume a governmental perspective. And the government is like the plant in Little Shop of Horrors. The more it’s fed, the more it needs.

Lower taxes is “loss of revenue” if you’re a government dweeb looking simplistically upon taxpayers’ money as your own.

And particularly as liberals, they do not begin to understand free market economy. In fact, they really don’t want to understand. And as liberals, (aka arrogant snob b@st@rds) they cannot imagine the business sector being smarter than they are.

The equation: healthy business=healthy economy=healthy government is 2+2=653 to these not-so-smart-Alecs.

[The Enlightener]

The issue should be framed in terms of the budget. The government should never be able to spend more than it took in the last year minus any interest on current debts. If we just adhered to that rule, tax increases or cuts would never be an issue of how they are "paid" for, since you can only spend what you made last year--you can't spend based on predictions of what your next year's income will be. There should be a limit set on borrowing confining it to a percentage of last years income(minus interest on current debt), and after that, no borrowing should be allowed(except in extreme emergencies). This way, the national debt would naturally limit spending, as the interest increases, the government would have to reduce spending, and would be more limited on borrowing, so the long term debt would eventually end up being paid over time instead of added to, since it would be much harder to borrow money as the overall debt went up because you have to subtract the interest paid on the debt from the government income.

Of course, such a system would never work because the government cheats. It makes up random projections that are always too rosy, it borrows based on such projections, and then if they still don't have money, they simply print more. Congress never passes a realistic budget, based on current revenues.

People don't notice it as much during economic booms because they don't feel the pinch as much when their wages are going up, but once a recession hits and wages stagnate or people start losing jobs, the government keeps taking more of what people earn, but people are earning a fixed amount, so the pain goes up every year until there is enough pressure to affect political change to reduce the tax burden. Because of bad decisions, unpopular legislation, and elitist attitudes in Washington, DC, that pressure is reaching a fever pitch in record time, so maybe this year things will finally change to make them more fiscally responsible.

[BamaAndy]

Thank you for the explanation. Spending has become a curse on our nation as pols basically pay for votes.
The non-productive vote.
The non-productive are increasing in numbers.
If the system does not change we will have a bankrupt nation in my view.
And the wretched crooked fingers of every pol will point to someone else as the culprit.

[Kellis91789]

All of this tax-rate-hike/tax-rate-cut discussion presupposes that the PURPOSE of taxation is to gather revenue and pay for government services.

Nonsense. As you’ve mentioned, it is not a mystery even to Dems (like Romer) that low marginal tax rates are pro growth and quickly generate MORE revenue than the punitive rates did. Check the statistics — the government garnered more revenue following the Bush tax cuts than before them. The top 1% of income earners paid more tax dollars at 35% than they did under Clinton at 39.6%, yet Zero wants to go back to the 39.6% rate.

Think for a moment about the economic boom that would result from a Constitutional guarantee that business would never again be taxed, and that individual incomes would never be taxed at a rate higher than 10%. World investment capital would flood into the US and create huge numbers of new jobs. The resulting 10% tax rate on all those incomes would generate far more tax revenue than the “progressive” tax scheme we have.

So if “tax cuts” pay for themselves - and history clearly shows they do - then obviously the purpose of a “progressive” tax scheme has more to do with CONTROL, and doling out favors, and buying votes, than it does with revenue.

[BamaAndy]

Now that would be a good tax law. We need a sea change in D.C.

[Kellis91789]

“The government should never be able to spend more than it took in the last year minus any interest on current debts.”

That sounds like a good idea, except all it would do is guarantee a spiral of higher and higher tax rates in an attempt to garner the revenue needed to spend on pork to buy the votes the pols need to stay in office. A hard limit on tax rates must accompany your tying spending to previous years’ tax revenues.