Drinking the low-tax Kool-Aid
Blessings of Low Taxes Remain Unproved
By EDUARDO PORTER, NYT
The proposition that low tax rates produce higher economic growth has been a central plank of the Republican platform since I was a teenager.
In 1980, “The Blues Brothers” were making the jump from “Saturday Night Live” to cult status on the silver screen when Representative Jack F. Kemp of New York, an economic adviser to President-elect Ronald Reagan, warned that taxes were “strangling the ability of the private sector and the American people to grow and expand and invest and save.” He laid out a plan to cut taxes, pare loopholes in the tax code and curb federal spending.
In 1996 Steve Forbes, the magazine publisher, donned the low-tax mantle just in time for Yahoo’s I.P.O. and La Macarena. Running for the Republican nomination on the promise of a “pro-growth, pro-family tax cut,” he cornered the eventual nominee, Robert Dole, into promising cuts of his own.
Since then, we have had a dot-com bubble and a housing bust. The new standard-bearer for lower tax rates, Representative Paul Ryan of Wisconsin, is for the first time younger than I am.
But while the message has not changed, the track record of the last three decades does not bear out the core proposition of Republican economic doctrine.
The argument has proved extraordinarily successful. Under Republican presidents, the top income tax rate fell as low as 28 percent, less than half the 70 percent level it was in 1980.
(More here.)
The proposition that low tax rates produce higher economic growth has been a central plank of the Republican platform since I was a teenager.
In 1980, “The Blues Brothers” were making the jump from “Saturday Night Live” to cult status on the silver screen when Representative Jack F. Kemp of New York, an economic adviser to President-elect Ronald Reagan, warned that taxes were “strangling the ability of the private sector and the American people to grow and expand and invest and save.” He laid out a plan to cut taxes, pare loopholes in the tax code and curb federal spending.
In 1996 Steve Forbes, the magazine publisher, donned the low-tax mantle just in time for Yahoo’s I.P.O. and La Macarena. Running for the Republican nomination on the promise of a “pro-growth, pro-family tax cut,” he cornered the eventual nominee, Robert Dole, into promising cuts of his own.
Since then, we have had a dot-com bubble and a housing bust. The new standard-bearer for lower tax rates, Representative Paul Ryan of Wisconsin, is for the first time younger than I am.
But while the message has not changed, the track record of the last three decades does not bear out the core proposition of Republican economic doctrine.
The argument has proved extraordinarily successful. Under Republican presidents, the top income tax rate fell as low as 28 percent, less than half the 70 percent level it was in 1980.
(More here.)
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2 Comments:
Discussions of whether or not taxes "hurt the economy" sidestep the issue. The issue is, does it work to take from those who work and give to those who don't? Is it intelligent? Is it ethical? Is it sustainable?
No one questions the use of government revenues to build and maintain infrastructure, manage natural resources, provide emergency response/rescue, work toward better working conditions, public health and medicines, or education. But if this is all we did, the Federal budget would be about 20% of what it is (defense and entitlement programs roughly splitting the remaining 80%).
The question lies across my street, where two "disabled" people have lived employment-free lives for seven years. In that time, they have extensively remodelled their home, bought new cars, TV's, a 4-wheeler, and just last week took delivery of a $2000 leather couch. I work 50-60hrs a week (I'm salaried) at my full time job and have another part time job on the weekends to make ends meet. I have hand-me-down furniture, I drive the same car I drove when I was in college 10yrs ago (which was 8yrs old when I got it), I watch the same 1994 Sony TV, use the same 12yr old computer. My cell phone is a flip phone. I don't have cable TV or internet, and I live in a 1300sq.ft. house with no A/C or dishwasher that was built in 1948. I'm not trying to tell a sob story, but I'm trying to paint a picture. If the government takes $3,000/yr (it takes far more) from my family and gives it to my neighbors across the street, does that hurt the economy? Of course not - they will spend it as sure as I would've. But is it right? I earned it with my own hands.
No, it is not. And let's be honest - the current system is a spoils system - bread for votes.
Lowering taxes increased government revenues in the 1920's, the 1960's, and the 1980's. IF the tax rate is 0% government revenue will be approximately $0. If the tax rate is 100%, government revenue will be approximately $0 - the Laffer Curve exists. Intelligent people can and do disagree on what tax rates produce the optimum level of government revenue but to pretend that the only way to raise more revenue is to raise tax rates is to deny reality. My personal opinion is that those on the left side of the aisle are using the force of government to go beyond providing for the common good (not individual citizens but our country as a whole) by using taxation of a tool to make life more ‘fair’ for all. Trying to create a heaven on earth is precisely what will make it hell for everyone.
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