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Tuesday, August 01, 2006

I Really Don't Like to Call Anyone Stupid, But.....

I don't know with whom I am more frustrated - politicians or the average guy on the street. Each is a target from time to time, and I get so ill with both, but I don't know who needs the blame. Is it the messenger of idiocy, or the recipient that accepts the idiotic message?

The Kerry campaign is seeking to present a choice to the American voter. That choice is "Health care for he poor, or tax cuts for the rich." He proposes to eliminate the Bush tax cuts to pay for health insurance for poor folks. For those really sensitive libs, let us forget for this argument the anecdotal heart string pulling. Let us instead concentrate on something more tangible and more policy-like.

First, tax cuts INCREASE the funds to the federal government. There have been 3 major tax reforms since 1960. JFK actually used a Reagan style tax cut, regains cuts that saved the American economy, and the Bush tax cuts. Each of these increased the revenue to the government by MORE THAN THE AMOUNT OF THE CUT. That is, there is not a finite amount of money in the economy. Money expands and contracts, and tax cuts expand money.

Secondly, for tax cuts to have their greatest impact, they should be paired with reduced spending. This is the part that never happens. Kerry wants to eliminate the tax cuts which will DECREASE the revenue to the government, and then use the entire tax cut to pay for health insurance for everyone. So, to Kerry, this is an even money proposition. Should I insert here that government programs typically encounter about a 50% over run?

Thirdly, and I should have made this point first, tax cuts vs. Insurance is an arbitrary argument. They have nothing to do with each other, and framing the debate in this manner is dishonest. This is where I get frustrated. People actually accept this at face value. Why is it that people think that politicians are so smart? They aren't any smarter than you or me. They just have money or the drive to be a politician. They are sitting in D.C. spending your money! Kerry says that by using the tax cuts to pay for this insurance that the other workers won't have to pay for the insurance. Where the hell does he think the money comes from? OTHER WORKERS!

And the media buys right into this also. No one made the point to him that ALL the money that flows (read stolen) to the federal government belongs to someone. There is no inherent right to this money. Now, the $200,000 tax cut floor does not apply to me, but one day I hope it does. There is a principal at stake here...private property and private wealth.

I urge you to honestly evaluate policy and the role of government. Don't buy into anything a politican tells you at face value.

4 Posts From Readers:

TM said...

Robert, the one problem I have with the tax cuts = increased government revenue is that from what I can see, this is just a talking point that has SOME anecdotal evidence behind it, but no real sound economic formula.

For example, if the tax rate is 100%, no one will work, because they will lose everything to taxes. So the tax revenue will actually be zero.

And if the tax rate is 0%, again, the tax revenue is 0.

So what we have here is a bell curve. At some point along the bell curve, we will have declining returns from tax cuts. For example, right now, the tax rate is approximately what,... 30% on a national average? Well, I agree in theory, we might get more revenue if we drop it to 25%. Maybe. But what if we drop it to .00000001%. Will we have more tax revenue? Of course not. At that point, the government is geting maybe one cent of tax revenue of for every 10 million dollars of income. So obviously this won't be enough to fund the government. So a tax rateof .00000001% isn't enough.

My point is, no one seems to be able to point to an average tax rate that is optimal, meaning a tax rate of (hypothetically speaking) 25% maximizes tax revenues. But at 20% or 30%, in both cases, tax revenues deline.

Now I know that it is impossible to say with total precision what the ideal rate would be. The economy and tax code is too complex for a perfect answer. But I am not aware of anyone who has even attempted to formulate an answer.

Both sides just say the same talking points.

"We need to increase taxes to increase revenues"
"We need to cut taxes to increase revenues"

Or how about:
"Raise taxes on the rich to increase revenues"
"Lower taxes on the rich to increase revenues (or stimulate the economy, etc)"

Nobody ever tries to formulate an actual number.

I don't expect you to do this, because I certainly can't.

But I would expect economists to try to estimate this number

Robert said...

Yes, there is a point of diminishing returns. Certainly a .0000000001% tax rate would be ineffective. But this is also tied to human behavior. The more money I have, the more I spend. Therefore, the less government takes, the more I have to spend.

I think a look at history is a good way to approach the subject. The three examples I mentioned are one side, the Carter years might be the other.

The human behavior aspect plays several ways, but the primary one is the disincentive to succeed. Knowing that it costs more to make more, people will satisfy themselves with what they have. Have you ever had a co-worker or employee who didn't want to work overtime because "the government will kill me in taxes." I have heard this hundreds of times. So, people dont work extra, businesses lose profits, and no one wins. Lower taxes would increase the productivity, businesses will make more profits, and can then pay higher wages.

It is complex, and I am not an economist. Maybe I should confine my argument to the one of morality. Just because someone CAN pay higher taxes, does this mean they should? Why do the people who recieve less of government services pay for those that recieve high levels of services and resources? Isn't this much like the communist line of "From each according to his need, from each according to his ability?"

Robert said...

Go the the latest Coulter post on Moxie. Kitt rages and I respond.

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