The tax cut myth

Don't Feed the Beast
Bush Should End This Tax Cut Myth

By Sebastian Mallaby
Washington Post
Monday, May 8, 2006; A19

George W. Bush is not the sort of president who reads journals such as the Atlantic Monthly. But at least someone at the White House should check out the piece in the new issue by Jonathan Rauch. For honest believers in tax cuts, it's devastating.

It's been a long time since honest believers argued that tax cuts pay for themselves. When you have extremely high rates of taxation -- say, 70 percent-plus -- there may be something to this claim: When rates are that high, the rich go to extraordinary lengths to evade taxes and aren't motivated to earn more, so it's not crazy to argue that tax cuts might boost tax receipts. But you have to go back to the 1970s to find tax rates that high. When the top income tax bracket is in the 30 to 40 percent range, nobody serious believes that tax cuts change behavior enough to pay for themselves.

Instead, tax cutters have clung to a separate faith: that tax cuts will force matching cuts in spending by the government. It's a faith that Rauch traces to the presidential debates of 1980. "John tells us that first we've got to reduce spending before we can reduce taxes," Ronald Reagan declared in reply to the independent candidate, John Anderson. "Well, if you've got a kid that's extravagant, you can lecture him all you want to about his extravagance. Or you can cut his allowance and achieve the same end much quicker."

(There is more here.)