Bush has NOT cut taxes

While the occupation of Iraq is the major topic of debate in the 2008 presidential race, the candidates have also taken positions on George Bush's fiscal policies. We see Republican candidates supporting Bush's tax "cuts" and being asked to sign a pledge, a pledge they will all, except for Ron Paul, violate, promising not to raise taxes, while Democrats decry Bush's tax "cuts" and promise to at least consider rolling back the tax cuts should one of them take power.

In short, there is general agreement that Bush, and the Republican Party in general, is in favor of tax cuts. Let's consider the validity of this assumption. Do Bush's policies demonstrate that he's in favor of reducing taxes?

First, in order to consider how Bush's policies have affected tax burdens, I need to define the term "taxes." Taxes are a revenue source for the state and the state is the entity that has a monopoly, or at least claims the right to a monopoly, over the use of coercion within its political borders. Therefore, Hans Hoppe's explanation of taxation as "a coercive, non-contractual transfer of definite physical assets" (Economics and Ethics of Private Property, p. 28) provides us with a sound definition of taxation. Taxes are the takings of private property in order to fund the state. They are a form of aggression against private property.

We normally think of taxes as coercive non-contractual transfers that are based on the sale price of some exchange, such as excise taxes on the sale of goods or services, tariffs on imports, or income taxes on the sale of labor. Our federal government's largest revenue sources are due to taxing workers for showing up to work and earning incomes. In 2006, the federal government collected $1,044 billion and $838 billion, respectively, in income taxes and payroll taxes, which are a form of income taxes.

In addition to what we normally think of as taxes, the state also has the option of borrowing money by selling government securities in order to finance its spending. This is a significant form of finance as the federal debt, including intragovernmental debt, increased $574 billion in fiscal year 2006. Budget deficits are generally not considered to be a form of taxation and it's oftentimes useful to distinguish between revenues generated by taxing the sale of a good or service and revenues generated by selling securities. However, government debt is a coercive transfer of property from private hands to government coffers.

Those who lend the government money are purchasing a promise to take someone's property in the future in order to repay the loan. If the securities that are issued are to be repaid, then the state is simply shifting tax burdens away from current taxpayers on to future taxpayers. We should recognize that there is a current burden from government borrowing and that is the opportunity cost of the resources the state commands due to the revenues resulting from the sale of securities. However, we must also recognize that government securities are simply promises to take someone's property in the future and give it to the bondholder. This future aggression against private property is a tax. Deficit spending is simply another way of shifting tax burdens.

What about the case where the state incurs debt but later repudiates that debt? Suppose that the state borrows $100 from me with the promise to take $100 plus interest from someone in the future and use those funds to repay the debt. However, when the time comes, the state refuses to tax the future taxpayer and declares that the debt is repudiated. In this case, the state has taken $100 of my property as assuredly as if it had taken $100 from me in direct taxes. In fact, debt repudiation is another coercive non-contractual transfer of assets, in other words, it's a method of taxation.

There are also minor revenue options that we could consider. One method of generating revenues is for the state to sell its assets. The federal government owns a tremendous amount of property, including land. It owns 84.5% of the land in Nevada, 69.1% of the land in Alaska, and 57.5% of the land in Utah. The sale of Nevada could generate a significant amount of revenue. However, the federal government needed a revenue source when it originally acquired these assets. The government used tax revenues to purchase Alaska and the lands that are referred to as the Louisiana Purchase. If we trace the revenues generated through the sale of assets back to its original source we see that this is simply another form of taxation.

Suppose the state acquired the assets, say land, by laying claim to previously unowned resources? If the government claimed the right to own previously unowned property and then sold this property, would this be a case of government revenue that was not ultimately due to taxation? No. The state needs a form of revenue to enforce its claim on this property and to manage and maintain the property, and that revenue is generated by some form of taxation. Ultimately, the sale of assets involves a coercive transfer of physical assets.

Given the promises made before the war on and occupation of Iraq, promises that revenues from Iraqi oil sales would fund US spending on the war, we might consider the conquest and occupation of other countries as a form of public finance. But this is also a form of taxation. Instead of taxing domestic targets, the government is simply taxing the populace of the conquered state.

If the US government claims the right to the funds from the sale of Iraqi oil, this is no different than the government demanding to be paid from the sale of oil revenues in Alaska. In addition, tax revenues are required to initially achieve the conquest. Taxpayers may, in some cases, be able to shift their tax burdens onto others when the state conquers new territories, but this is an example of tax shifting, not an instance of government finance that is separate from taxation.

Other than revenue options that have already been discussed, the state, at least at the national level, may also have the option of creating new money. The price inflation resulting from the increase in the money supply decreases the purchasing power of incomes and savings. Printing money is a hidden form of taxation. Look at it this way, the state can take $100 of a taxpayer's money by taxing his income or the state can create money and reduce the purchasing power of that taxpayer's monetary assets by $100. In either case, the taxpayer has had $100 taken from him. Price inflation is a coercive transfer of assets, and printing money, therefore, fits the definition of taxation.

In 2006, the federal government collected $30 billion in "earnings" from the Federal Reserve. According to the CPI, the 2006 inflation rate was 2.5%. Given that the money supply, defined as M3, is about $11 trillion in this country, inflation decreased the value of our monetary holdings roughly $260 billion. We were taxed $260 billion and this hidden tax only generated $30 billion of federal revenues over and above the cost of funding the inflationary agency itself. Not only is price inflation a form of taxation, it's an inefficient way to fund the state. Given the current goals of federal spending, expanding the empire and the domestic welfare state, maybe we should be thankful for inefficient methods of taxation. Maybe inefficiencies like this decrease the government's ability to expand its reach.

Since all forms of government revenue are generated by a coercive, non-contractual transfer of assets, it would be accurate to refer to all government spending as some form of taxation. Now, what can we say about Bush's tax-cutting reputation? Simply put, it's undeserved.

Including the estimates for the 2007 budget, in the first six years of Bush's term in office, federal income tax revenues have increased 18% and payroll tax revenues have increased 26%, the money supply, defined as M3, increased 41% in just the first five years since Bush took office, and the federal debt has increased 52%, and is approaching $9 trillion, since the beginning of fiscal year 2002.

The most appropriate measure of the level of taxation is government spending. In seven years, from fiscal year 2001 to the proposed budget in fiscal year 2008, federal spending will increase from $1,863.2 billion to an estimated $2,901.9 billion, an increase of 55%. Actual spending in 2008 will probably top $3 trillion, so it's likely that federal spending will increase more than 60% in the first seven years of Bush's reign. The president has supported these spending increases and is pushing for even higher levels of spending.

Bush should not be credited with cutting our tax burdens. He has engaged in tax shifting and in hiding the burdens of his expansions of the welfare and warfare state, and he has demonstrated that he's opposed to lowering our tax burdens. Deep into his second term, we have plenty of evidence to show that Bush should be blamed for increasing our tax burdens at a phenomenal pace.

The Republican Party claims to be the party of limited government and economic freedom. Don't believe it. Republicans have shown that when they are in power they are even more fiscally irresponsible than their Democratic counterparts, and that takes some doing.

Mark Brandly is an Associate Professor of Economics at Ferris State University. Send him mail. See his archive. Comment on the blog.

Damned Right!

If you analyze it I believe the very heart and soul of conservatism is libertarianism. I think conservatism is really a misnomer just as liberalism is a misnomer for the liberals — if we were back in the days of the Revolution, so-called conservatives today would be the Liberals and the liberals would be the Tories. The basis of conservatism is a desire for less government interference or less centralized authority or more individual freedom and this is a pretty general description also of what libertarianism is. Now, I can’t say that I will agree with all the things that the present group who call themselves Libertarians in the sense of a party say, because I think that like in any political movement there are shades, and there are libertarians who are almost over at the point of wanting no government at all or anarchy.

* Interview published in Reason (1975-07-01)

Lower tax RATES have been in effect for several years now. As a result, no matter how counter-intuitive it may seem, tax revenues are UP, because of increased economic activity.

And with fewer “loopholes”, there is less strategy in planning for taxes, and more effort directed at maximizing overall cash flow. Maximized cash flow equals even greater economic activity, thus further expanding the tax base.

But perhaps it is time to kill the goose that lays the golden eggs, and examine its entrails to determine what it is that caused the goose to lay the golden eggs to begin with. Of course, it shall be impossible to resurrect the goose afterward.

All in the interests of science, right?

"Clever"... much more accurate than the "tripe" inside this crap that you posted. Being that I own three businesses and deal with the tax code in DEPTH... I can tell you that The BUSH Tax cuts has saved my companies and my employees $$$$$$$$$. If we can see and feel the effects in our lives every day... why can’t this leftist? I’ll tell you why... ‘toon propaganda... lie about the truth and spin it as 180 degrees from reality. Deny that which you will soon take away.

Markets will crash and catah styled times will come again if the TAX CUTS are allowed to expire. Jobless rates will soar... interest will skyrocket... an already depressed Real Estate market will collapse. Oil will be unaffordable. This will be the nightmare scenario that would prove this article wrong. I pray a TRUE CONSERVATIVE is elected... one that will extend the REAL AND WORKING "BUSH TAX CUTS"!

This leftist propaganda has NO PLACE on a Conservative board. Are you willy green?

LLS

What I've said all along. Bush is just a Republican, NOT a conservative

It appears a couple of passers by this morning haven't upgraded their kneepads yet, but no W is NO Conservative.

Then there's this:

I don't care who is saying it, this is spot on. Blackbird.

Markets will crash and catah styled times will come again if the TAX CUTS are allowed to expire.

You didn't understand the article did you (obviously). The essence is that increased government spending will have to be paid for sooner or later, and Bush along with his Republican compatriots in Kongress have increased government spending substantially.

The busbots are somewhat amusing in their rabid slavering defense of their little tin god. Like one of the morons said, this is a conservative board, but Bush is at best a moderate - “compassionate conservatism” = liberal spending of other peoples’ money. No child left behind, prescription drug give away to name just two of the more egregious examples, and let’s not overlook the constant stubborn Bush attempts to push amnesty for the millions of illegal Mexicans in the usa, but this is just another example of Bush’s lack of conservatism and is somewhat off topic.

Surely by now you would have realized that the Ludwig von Mises is a front for liberals? /sarc

The article is right, but I'm not a big fan of this sort of gross oversimplification. Not everything is taxes. Taxes are taxes, and spending is spending. Both are equally bad, but trying to turn government spending, debt issuance, expansion of money supply, into taxes is just, well...confusing to some people.

Republicans have shown that when they are in power they are even more fiscally irresponsible than their Democratic counterparts, and that takes some doing.

That statement is an absolute, BALD FACED LIE!

in the first six years of Bush's term in office, federal income tax revenues have increased 18% and payroll tax revenues have increased 26%,

Yes Martha, tax revenues do go up when you cut taxes and hence generate increased economic activity.

That statement is an absolute, BALD FACED LIE!

Actually your statement is a bald faced lie. No child left behind, prescription drug give away are Republican examples of fiscal irresponsibility. All you have to do is look at the INCREASES in spending under Bush. If he'd held the line of decreased government spending, then I'd agree, but he and his spendthrift Republican Kongress have been squandering the economic future of this country at a rate that the Clintons can only envy.

In seven years, from fiscal year 2001 to the proposed budget in fiscal year 2008, federal spending will increase from $1,863.2 billion to an estimated $2,901.9 billion, an increase of 55%.

Yes, yes the GOP/Bush have spent $$$ but it is completely DISINGENUOUS to not mention that during the time frame used above, we have been AT WAR. WAR IS EXPENSIVE.

Yes they have... the majority to create PROTECTION against the most dire of enemies that we have ever faced. What is the cost of replacement for a major US City? A huge amount of spending rebuilt Manhatten! We have spent little in comparison to a major mass attack. We also rebounded economically from the attack on 9/11.

We also experienced several major catastrophies... Katrina being the worst in the history of our nation. BUSH grew the economy and is shrinking the debt with this economic expansion... even with all of the spending. It is YOU that do not understand reality... your’s comes in the form of the written word... I receive mine in every day life.

You libertines were cool 100 years ago... but you risk your very existence (and OURS) in a world that hates you simply for the views that you hold. Your thinking (in today’s world) will get us all killed!

LLS

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Bush has NOT cut taxes

By Mark Brandly