Why have the tax cuts been so bad?

Each of the front-running Democratic candidates has promised to raise taxes, to remedy the “disastrous” tax cuts that President Bush put into place.  What I’ve somehow missed from them, though, is any explanation about why the tax cuts are so disastrous.  I’m not saying the Dems don’t have an explanation.  I’m just saying I haven’t heard it.

There are a couple of things that I am aware of, though, and they seem to indicate that, in terms of both your and my economics and the government’s economics, the tax cuts have been a good thing:

First, the economy continues to do well, despite wars and oil prices.  This is probably because people have more money to work with, to invest with, to buy with, and to feel secure about.  Second, almost certainly because people are allowed to hold onto their money to make money, there’s more tax money available for the government.  The unsurprising byproduct is that tax revenues have been increasing.  (Although the NY Times, which resolutely refuses to believe that people, not government, make money, keeps expressing surprise that lower taxes actually result in higher government revenues, as you’ll see here and here in its annual articles about the revenue increases.)  And third, with increased revenues you get regular news reports that the budget deficit is shrinking, with 2007 marking the third year in a row that it’s done so (a benefit unfortunately offset by a spendthrift Congress and White House, both of which are working hard to increase the national debt).

So, to me, it looks as if the tax cut resulted in more, not less, money for the government.  And if that’s true, the Democratic promise to increase taxes the moment they get into office should inevitably decrease the money supply.  While it’s true that, in the short term, only you and I will have less money and the government will have more (that is, it will now have more of my money), as time goes by, and people whose money is being hijacked by the government stop being productive, the government will end up having less money too.  That sounds like a bad deal all around.

If I’m wrong, please explain this to me.  Absent a convincing coherent explanation, I’ve got to believe a pattern showing that lower taxes result in higher government funding, while higher taxes, within a year or two, result in lower government funding.

8 Responses

  1. Foolish mortal. The Democrats say “What is the government’s, is the government’s. What is yours is open to debate.” Or more appropriately, “What is yours is the government’s, until the government allows you to have some.”

    If you apply reason, the wisdom of the tax cuts is clear. But the left doesn’t use reason; it uses emotion. “The rich need to pay their fair share!” This plays well to the voting masses who have been told, by the same liberal candidates, that the rich don’t deserve anything they have, and it has all come at the expense of the working class.

    This is similar to the story recounted on talk radio yesterday about the luxury tax the Clinton administration implemented on the purchase of new yachts. The theory apparently was, if you can afford a $10 M yacht, you can afford higher taxes. After the tax was implemented, the yacht industry went into the tank. What happened, though, was that all the hourly employees who worked building yachts had incomes fall (if they kept their jobs at all). This, of course, shrinks that tax base and decreases tax revenues. All quite reasonable. But as I said, reason plays no part in liberal politics.

  2. If reason played a part, they would be citing a Democrat hero — JFK — who cut tax rates across the board, resulting in vastly increased revenues to the federal treasury.

    I expect them to ignore RR, who did the same thing, and ignited the longest period of growth in the American economy ever seen…..

    It’s a lot like the war — their rhetoric isn’t aimed at any results except immediate advantage in the election, and the devil take the hindmost. I guess they figure they’ll deal with whatever happens, later on….always blaming someone else for the bad stuff.

    It’s the Iraqis or the U.S. citizenry who will pay the price.

  3. To a Liberal/Lefty, money is only a necessary “evil”. Ask them to define “money” in economic terms (i.e., a “medium for the barter of value”) , they have no clue. They do know, however, that everybody else has too much of it and they don’t have enough of it. It just isn’t fair!

    Conservatives see value as something that is created through human intellect and, therefore, a limitless commodity. Liberal/Lefties see value as part of a fixed pie. What one takes for themselves must necessarily be taken at the expense of someone else. Only the “government”, therefore, can be trusted to share that pie equally among its deserving subjects (conservatives need not apply).

  4. Of course they (Dems) aren’t actually worried about the deficit. I don’t think anyone believes that. While I agree with what you guys before me have said, I believe that the Democrats also have a more insidious purpose.

    They want to take money out of individuals hands, and they want to put ever more people under government benefits, whether it’s welfare, education, healthcare or whatever. It doesn’t matter what. The goal is to decrease independence and increase the % of people dependent on them. It’s working, too.

  5. Oh, and yes, raising taxes right now will inevitably decrease govt. revenue.

  6. It’s been said, many times, that liberals don’t live in the same world as the rest of us. In this world, changes in the legal and social environment bring about changes in individuals’ behavior. But the notion that the changes in incentives resulting from changes in tax law are immune to Congressional displeasure is as unpleasant to the liberal mind as the proposition that someone who’s dead set on killing you should be struck down forcibly, rather than “negotiated with.”

  7. One of my favorite examples of the effects of tax policy is the former sick sister of Europe, Ireland. Once they reduced their punitive tax regime to the most tax friendly in Europe, their economy exploded. It now remains the fastest growing economy in Europe with one of the highest standards of living and lowest rate of unemployment. This approach doesn/t work well with the democratic penchant of vote buying.

  8. “That government is best which governs least”
    – Thomas Paine, or perhaps earlier by Thomas Jefferson

    A corollary would be:
    “That government which governs least requires the least taxes.”

    That’s why a reduced government and reduced taxes almost inevitably leads to an economic boom.

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