December 8, 2005

Taxation

Everything You Need to Know about Tax Policy in Two Sentences

Carroll Andrew Morse

I realize tax-policy discussion can get dull. Fortunately, today’s Washington Post explains the entire issue in just two sentences. Read carefully and ponder…

Although the federal tax revenue has grown since the passage of the 2003 tax cuts -- from $1.9 trillion in 2004 to $2.1 trillion in 2005 -- the tax revenue measured against the size of the economy remains below the 2002 level and well below the level of 2001, when the first of Bush's five tax cuts was passed. "The argument that tax cuts will grow the economy and pay for themselves is very attractive, but it's just not true," [Maya] MacGuineas said.
Maya MacGuineas is president of the Committee for a Responsible Federal Budget.

Now consider the sequence of events and the response that brought about the publication of these two sentences…

  1. The federal government cuts tax rates.
  2. After the tax-rate cuts, the government collects $200,000,000,000 more in revenue.
  3. But high-tax advocates are unhappy because, even though the government is getting more money, the government is getting a smaller percentage of the total economy.
  4. But increased economic activity does not involve an proportional increase in government activity. So even though the government provides pretty much the same range and scale of services before and after the economic growth spurt, the government takes in more money after the economic growth spurt.
So what then is the rationale for advocating higher tax rates when tax revenues are increasing anyway? Is it possible that high tax-rate advocate want high taxes for their own sake, as a scorecard of how effective their lobbying is and as evidence of how compassionate they are?

6:01 PM
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Excellent debunking of the taxaholics that permeate in DC.

Posted by: taxcutter at December 8, 2005 8:34 PM

The Left is driven by ideology, not logic or fact.

Their ideology revolves around the worldview that there is a cosmic injustice because some "have" while others "have needs" - no matter that "haves" may have earned it (e.g., behaving responsibly, gettting an education and working diligently) and those "having needs" effectively chose their situation (e.g., dropping out of school; having illegitimate children they can't afford).

To the Leftist ideologues "justice" involves taking from the "haves" and redistributing to "the needy." It is an end - the end - in itself.

We see this same dynamic here in RI. Logic and experience demonstrate that a positive business climate provides more jobs, and therefore more opportunity, for the "needy" to rise up. In turn, punitive tax rates make for a negative business climate, thereby lowering the number of jobs and lowering opportunities for the "needy."

Yet the "advocates" for the "needy" in RI - such as Marxist ideologues at The Poverty Institute - successfully lobby the Democrat General Assembly to impose punitive tax rates in Rhode Island.

Their ideology is assuaged, but what they advocate goes against all logic and real-world experience.

Posted by: Tom W at December 8, 2005 10:19 PM