The Politics of Tax Cuts

Democrats have always ranted about tax cuts not being paid for or tax cuts being the reasons the government has high deficits. They are relatively successful because the Republican PR machine does such a poor job of rebutting it.

First of all, a basic understanding must be communicated to explain the difference between tax revenues and tax rates. Tax cuts are not an actual cut in taxes at all but a reduction in the rate at which income is taxed. Lowering tax rates always increases tax revenues because it encourages investment and spending behavior. This is similar to a store struggling in its' business because sales are sluggish and overhead is always increasing. Does a store like this ever attempt to fix their malaise by simply increasing the prices on their products, when sales are already down? Of course not. Just the opposite. They'll likely run some sales, reducing their margins per item but make up for it in increased sales as a result. When tax rates are reduced, economic activity increases resulting in both businesses paying more in taxes and hiring more people who also pay taxes. This is the reason revenues to the government always increase when tax rates are reduced.

Liberals have never understood the concept. Most are simply too ignorant to grasp it and these are the people, many educated in our intitutions of higher learning, who would never succeed in business themselves. A few do understand it perfectly but keep to their ridiculous rhetoric because, with help from their friends in the main stream press, it continues to play well politically. In their thinking, increasing the rate on the wealthy's income, which has always resulted in a reduction of revenue to the treasury, is somehow an increase in "revenues". Even our poorly educated average high school students should be capable of seeing that for what it is - a farce.

As long as Republicans continue to allow this foolhardy debate to be lead by Democrats and keep talking to everyone as though they were speaking to an audience of lawyers and accountants, socialists politicians will continue to get elected and a strongly needed tax reform bill will never get passed.

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Comment by Chas Jones on May 26, 2012 at 4:04pm: The federal Treasury does NOT receive to little revenue ... in fact, it confiscates far more from our people than necessary or reasonable.

We have a SPENDING CRISIS!

We are spending literally TRILLIONS of dollars UNCONSTITUTIONALLY!

Return to ONLY constitutional spending AND a system of intelligent taxation and folks will work to earn, retain, and grow their wealth. They will then, in their own self-interest, either spend, save, invest, or share their wealth as THEY see fit.

Add to this a reduction in "ideological" regulations and minimal moral, ethical, and scientific regulations and our nation will not only prosper and our economy steadily grow, but wealth from across the globe will return to our nation as the safest haven for others ... capitalizing even more growth and prosperity.

Comment by Jerry Morris on May 26, 2012 at 1:41pm: All the talk about "taxing the rich more" because they can afford it, is a recipy for economic dissaster. Historically, every time it has been tried, revenues sink rather than increase. In opposition to how revenues increase when tax rates are reduced, as described in James's article, we get reverse results by increasing the tax rates.

The idea that the rich "can afford to pay more" may be true, but they can also better afford to adjust their incomes when needed to avoid increased taxation.....and they do just that. This often means pulling back some of their investment capital, which leads to companies having to lay workers off. Theoritically, some of the most wealthy indiviuals in this country (those with multimillion $ net worths) could go several many years without making a dime of income and live quite nicely with no worries. While the middle class earners would be suffering within months, and lower income earners would begin suffering immediately.

Comment by James Herbert Harrison on May 22, 2012 at 12:14pm: Good point, John. You're right on. I was actually going to address that in a near future blog.

Comment by John Gaver on May 22, 2012 at 12:05pm: Worse yet, when the GOP addresses tax cuts, they allow the Dems to paint the tax cuts as tax cuts for the "rich". In fact, almost all tax cuts in the last 50 years have benefited the middle income earners more than the rich and it can be proven with publicly available IRS data (thought the IRS goes to great lengths to make that "publicly available" data hard to find).

In only one year of Dubyuh's administration did the top 1% pay less of the tax load, based on income, than they did when Dubyuh took office. Furthermore, when he left office, the top 1% were paying 5.6% more of the tax load, based on income, than when he assumed office. But middle income earners were paying less tax, based on income. There is a whole chapter in "The Rich Don't Pay Tax! …Or Do They?" about just this misconception, along with sources of the data and calculations to determine the truth.

Certainly, Republicans need to better address the difference between tax rates and revenue levels. But even more, they need to better challenge the Dems and media, when those organizations try to paint any tax cuts as being tax cuts for the rich. It's easy to prove otherwise, if they will just do it.

We need to do everything that we can to get our elected representatives on topic and keep them there. In that regard, just last evening, I gave a copy of "The Rich Don't Pay Tax! …Or Do They?" to Rep. Ted Poe, at a TEA Party meeting. Two days earlier, I delivered a copy to Rep. Kevin Brady's office. I'll be taking copies to other local congresscritters, as well. I'm also setting aside about 30 copies of the books that I'll have with me at the TX GOP Convention, to give to congressmen who stop by the FairTax booth. They seem to be too easily distracted from the real issues, so I'm doing everything I can to give them the logical ammo to fend off Dem attacks on tax cuts and tax reform.

If you have a strong argument that GOP congresscritters aren't using, then it may be because they haven't though about it. So send them any such logical arguments. Then if they don't use them, you know that it's not because they haven't thought about it, but because they have an underlying reason for not wanting to succeed.

Comment by Rich Knoch on May 22, 2012 at 7:46am: There are two ways out of the economic swamp which we've knowingly and unknowingly been constructing for decades . . . . obama just added the quicksand.

1) National Bankruptcy, with its domino affect all over the world . . . . which seems to be obamas goal.

2) The Fair Tax which would increase our competitiveness with other nations of the world, bring trillions of dollars back into our economy and is just that . . . . a FAIR TAX.

The Fair Tax would save billions of non-productive hours currently used to collect, document and file income taxes, enable massive cut-back of the IRS . . . whose remaining members would be tasked with auditing and finding the spending corruptions in government; i.e., turned inward on the government, as a true Internal Revenue Service should be doing . . . anyway☺.

It has hundreds of other positive points http://www.fairtax.org/site/PageServer?pagename=HowFairTaxWorks

Comment by James Herbert Harrison on May 22, 2012 at 7:30am: Couldn't agree more, Chas. I, for one, am a big supporter of the Fair Tax Bill and believe the country is doomed financially without it. More about that on my weekend blog.

Comment by Chas Jones on May 22, 2012 at 2:25am: Well written James and correct:

However, sound policies for constitutional and well reasoned taxation and for the total means by which revenue flows into government coffers are desperately needed. The "progressive" system of unequal and unconstitutional, as well as anti-Biblical, taxation must end.

Taxes, tariffs, fees, etc. should exist to generate the approximate revenue needed to support constitutional government. Currently, vastly more revenue is taken from the people than is needed to fund constitutional government.

We need to demand and FORCE government to live within the funds We the People consent to provide. We must end governments unconstitutional confiscation of ever increasing wealth from the People.

Comment by k.t.borland on May 21, 2012 at 9:59pm: IT'S ALL about POWER!That's All they want!From time IMMEMORABLE!

Comment by Roger Davies on May 21, 2012 at 9:30pm: It's not about the tax. It's about CONTROL!!! How many times must it be said?!