Cutting back tax
How one hand is chopping off the other
by Nancy Ahern
May 15, 2003
The arguments pull from the core of the ideological differences
that used to mark the Democratic and the Republican parties.
Once upon a time, Virginia, you could actually distinguish
Yes, we're talking tax cuts. More specifically, we're talking
about President Bush's proposed $550 billion (on its way down
thanks to those meddling Congress-critters) tax cut plan aimed
at "[creating] jobs by removing obstacles to economic growth."
Dem politicos call it "reckless", and even Federal Reserve
Chairman Alan Greenspan has indicated that while he continues
to believe that the the elimination of the double-taxation
of stock dividends would have long-term advantages for the
economy, in light of rising federal budget deficits, any further
tax cuts need to be offset with, among other things, cuts
in government spending to keep the deficit from becoming unmanageable.
Cuts in government spending? Well, duh.
Of course, that strikes deeply into the heart of all that
the more socialistic of the Democratic party members hold
dear. They simply cannot conceive of holding down spending,
remaining within a strict budget, and letting the oiled machinery
of a healthy economy do what it does best.
Cutting Dem Down to Size
Let us take some of the arguments offered against Bush's
tax cut proposal one by one, however, shall we?
U.S. House Rep. Stephanie Tubbs-Jones, an Ohio Democrat
is quoted as saying in a radio address that "a tax cut of
this size, directed to the privileged few, will not help our
Ah, yes. "The privileged few." A brief jaunt through the
of Representatives Joint Economic Committee's (JEC) reports
reveals that "new Internal Revenue Service (IRS) data show
that the top one percent of tax filers paid 37.42 percent
of federal personal income taxes in 2000, the latest year
for which data are available."
That would be those few who are privileged enough to pay
the bulk of the tax burden, yes? The privileged few who also
invest in businesses, or have built and run their own, who
provide jobs -- or would, if they could afford to, except
that thanks to the economy and the excess burden of the federal
tax system fewer companies are willing to hold steady or accelerate
their investing. Unlike other post-World War II recessions,
consumer spending has been remarkably stable during this recession,
but business investment took a nose-dive.
Tubbs-Jones, in touting the Democrat's smaller tax-cut
package, offered the opinion that businesses will invest in
jobs in "if they're allowed to write off more of those investments
on their taxes.
Well, that would be lovely, except that businesses do
not pay taxes. Taxes on businesses get passed down
to the consumer in the form of price increases. If taxes become
onerous and they are passed on to the consumer, the price
of the product is raised so high that not many consumers will
purchase it. Since the present recession seems to be caused
by a lack of capital, spending the accelerated depreciation
and investment tax credits will do a lot of good to turn this
economy around. Additionally, this proposed tax cut would
encourage businesses to invest and increase by reducing the
tax burden on them. The House JEC report states, "By accelerating
[the Economic Growth and Tax Relief Act Reconciliation
Act]ís marginal individual federal income tax rate reductions,
expanding and extending [the Job Creation and Worker Assistance
Act]ís bonus depreciation, reducing the double taxation
of dividend income, and lowering the tax rates on capital
gains, this bill will reduce the excess burden of federal
taxation and improve the incentives for individuals and firms
to engage in economically productive behavior."
Senator George Voinovich [R-OH] argues that the cuts are
"unwise when the administration is projecting $300 billion
in deficit spending."
While any thinking, responsible conservative is opposed to
deficits, they must be looked at in the proper perspective.
For example a $10,000 debt to the wealthy is not as significant
as a $10,000 debt to some family living on the margin of welfare.
According to one person who has managed financial success
through conservative investment practice over the years, deficits
should be looked at in relation to the Gross Domestic Product
(GDP) -- the reduction in taxes of $750 billion would be less
in terms of the relationship to GDP than we lived with under
the Democrats for the past 35 years.
What worsens things is a government that has the attitude
that people cannot be trusted to spend their own money, and
therefore will take it from them in the form of taxes and
decide how to spend it for the peoples' good. What happens,
though, is that the government will spend that money, not
on what does the most good, but on what they believe will
generate the most votes for their party. Says my economic
expert, "If you give the government $100 they will spend $110."
To see this, you have only to note that every state, with
the exception of Colorado, is in economic trouble right now
because they are required to balance their budget each year.
When revenues were skyrocketing they spent the money. Now
that revenues have declined they cannot pay for the entitlements
legislated in during the fat years. Colorado alone has managed
to avoid that problem, because Colorado has mandated a more
conservative approach to taxation, spending, and f inances.
The federal government and each state would do well to remember
Sloppin' the hogs
Of course the arguments offered by the Dems are hogwash
-- especially where they suggest smaller, more nibbly-sized
tax cuts. They are proposing things for political expediency.
More likely, the would rather see the economy continue to
sink, as that is their only hope to defeat Bush in 2004. Their
fiscal policies tended to exacerbate -- not help -- the natural
business cycles that lead to recession. If Bush, with his
tax cut proposals and conservative policies manages to help
turn the economy around, he and his party are guaranteed political
success for a very long, prosperous time. The only additional
thing I would encourage President Bush to do is to make sure
he gets Governor Bill Owens of Colorado somewhere on his cabinet.
2003 Tocqevillian Magazine