Posted on 08/28/2008 9:54:25 AM PDT by djsherin
Barack Obama's tax advisers recently posted a piece in the Wall Street Journal about their candidate's tax plans. Their article was designed to triangulate, painting their candidate as a tax cutter and the Republican opposition as a secret tax raiser. It was well written and well argued — not that you can really trust anything you read about what candidates will or will not do once in office.
In any case, I was discussing the piece with a person whose politics are certainly left of center. She said to me something along the following lines:
I'm really not sure I understand all this tax talk. The government taxes us to get money to do what it wants to do. But it seems like what they do — whether going to war or funding new projects — is never discussed in terms of money they have or don't have. I mean, Bush cut taxes, right? And the reduced revenue should have restrained him. But he spends on whatever he wants. The tax cuts didn't seem to reduce his power at all. Why is this?
It's a good question. Why is it that talk of tax policy doesn't seem to have a relationship to policy generally? Whether it's a bailout of subprime mortgage holders, large investment banks, or going to war, whether or not the resources exist to do these wonders rarely enters into the equation. Why is it that tax cuts don't curb the government? And why do politicians not feel the need to tax us more when they spend more?
(Excerpt) Read more at mises.org ...
This is an excellent article, written concisely at a level that just about anyone can understand. I hope it gets very wide exposure. Thanks for sharing it.
Justice does exist in the world, whether people
choose to practice it or not.
The men of ability are being avenged.
The avenger is reality.
Its weapon is slow, silent, invisible, and men
perceive it only by its consequences - by the
gutted ruins and the moans of agony it leaves
in its wake.
The name of the weapon is: *inflation*.
Both by AYN RAND
If the author didn't immediately blow this fallacy out of the water, then the entire article is worthless. Reduced tax rates invariably lead to higher revenues as long as the rates are above the diminishing returns point.
Now, off to check the whole article...
The problem is that while the gov’t and politicians have tax policies, they do not have spending policies. The reason for this is that no one is ever held accountable in congress for anything short of a serious felony, and even then they will likely walk.
Accountability is the main problem, at least in my mind.
As it stands now, politicians have no cost in promising more spending...it gets them elected. However, if the spending must be accompanied by enough of a tax increase to fund it, politicians might be forced into choosing which spending projects to fund via higher taxes. And you can bet voters will watch who is raising their taxes and for what purpose. Until such accountability comes into being, don't expect any change in behavior by politicians.
The tax cuts resulted in record revenue for the treasury.
When a nation has poor leaders, the leaders do not suffer, their people do. Thus it has ever so been, and thus it remains. The “leaders” will do what the want and the Devil take the hind part.
Cutting taxes doesn’t always increase revenue. It depends what the tax rates are that are cut and to what rate. Cutting taxes from 99% to 50% (or any rate above zero really) would undoubtedly raise revenue. Cutting rates from 30% to 1% would not raise revenue. There’s a lot of speculation as to when cutting taxes leads to increased revenue, and it’s alomst impossible to know since one would have to know all market decisions based on tax rates, which is impossible. I believe there is an ideal rate and I would speculate it would be around 30-40% but I have no idea, and obviously thta is a rough estimate anyway. I could just as easily see it be around 20%.
But I agree with you on the basic premise that tax xut does not necessarily imply some proportional loss of revenue for the government. Cutting taxes does lead to increased market activity. The question is does cutting taxes lead to ENOUGH market activity to make up for the cut rate. And like I said, this differs depending on the rate rate cut and to where the new rate is set.
Item 2: The last time the National Debt decreased from one fiscal year to the next, was the year ended December 31, 1960.
The tax cut wasn’t the only factor. I agree it helped in this case, but the point is that it doesn’t matter if taxes are raised or cut, the government keeps spending and for the past 35 years or so the trend has been that it doesn’t take in enough taxes to cover its spending.
A balanced budget amendment was one of Regan’s most important goals. He mentioned it in every SOTU. If the government couldn’t borrow, then it would have to make do with the taxes we gave it, and cutting taxes would be a restraint on policy.
“government is the only entity that can take a valuable commodity like paper and render it worthless merely by applying ink’ Ludwig Von Mises
“A tax cut means higher family income and higher business profits and a balanced Federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education, and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the Federal Government will ultimately end up with more revenues.” - John F. Kennedy, September 18, 1963, radio & television address to the nation on the tax reduction bill
The article is saying not that tax cuts (or tax rate cuts) are bad or irrelevant, but that the government seems to continue to spend regardless of tax levels and it can do this because it is able to borrow and print money.
As for the debt, wasn’t it decreased slightly under Clinton’s administration (read Republican Congress) when we had surpluses (which btw Clinton fought and later took credit for)? I’m not saying it was a significant chunk out of the debt, but I believe it did take a small bit out.
“government is the only entity that can take a valuable commodity like paper and render it worthless merely by applying ink’ Ludwig Von Mises
But then, he didn’t know about Nancy Pelosi’s book.
Hey, I’m not arguing against lower taxes. I’m just saying there is some optimal point of revenue collected. That’s not necessarily a good thing as it probably means the government is also spending a lot. I’m just saying that it exists.
Personally I don’t think the income tax should exist and government spending needs to be drawn WAYYY down thus lower taxes as well. Maybe having a tax to scale down the national debt over “x” years wouldn’t be bad, but it would have to be specifically appropriated for the debt.
Free piece of advice: buy as much real estate as you can leverage during the current downturn to profit from the next inflationary cycle. With real inflation at somewhere around 50% (counting fuel+food), 250k houses will go to 500k over the next 5-7 years just to keep pace.
The republicans forced a balanced budget amendment on slick willie.
That said, we were facing a recession in full bloom when 9/11 happened.
That is what life is all about. The unexpected, and we got the worst possible thing to happen on our soil.
Americans will rebound and make their lives meaningful without any help from the likes of the obama/biden clan.
If you don’t think raising taxes matter I could not disagree more.
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