TO
Posted on 12/16/2010, 1:23:52 PM by Rashputin
The Dishonest ‘Tax Cut’ Debate
It’s nonsensical to describe avoiding further damage to the economy as a “stimulus.”
December 16, 2010 - by Rand Simberg
The ongoing debate about whether or not to cripple the economy on January 1st through congressional inaction has been surreal.
Type the phrase “tax cuts” into the best-known search engine, and you’ll get over eleven million results (at least at the time of this writing). “Bush tax cuts” yields over seven million, even though what we’re really talking about is “Obama/Democratic tax rate increases.”
But most importantly, note the missing word in most of the discussion. Type a slightly altered version, “tax rate cuts,” and you’ll get an order of magnitude fewer hits. That is, for every time someone says that rates were cut, and will be going up in January absent congressional and White House action, (the factually correct description), ten people claim that taxes themselves will go up.
What’s the difference, you might ask? Well, that’s the problem. There’s a huge difference, but most people either don’t understand it, or ignore it. As I wrote a couple years ago:
When a politician says that he’s going to either cut or increase your taxes, he is engaging, wittingly or not, in a conceit and a deceit. He says it as though he has the power to do any such thing, when in fact he does not. He has no power except to reduce or increase the rate at which you pay taxes, whether on property, income, or whatever.
Think of it as the difference between a joystick and a mouse. With a computer mouse, you can point directly to the place that you want to be on a screen. With a joystick, you can only control the rate at which you move toward it, and in so doing, the target may move, and it may move faster or in a different direction than you can keep up with using your rate control. Politicians talk about tax cuts as though they have a computer mouse that allows them to pass a law and a specified amount of revenue will roll in, but the reality is that they have a slow joystick, with a nebulous relationship to the eventual goal.
For instance, he can raise your top income tax rate from, say, thirty to ninety percent. Did he increase your taxes by that amount? Only if you’re as stupid as he is. More likely, you’ll just cut back on how much you work, settle for the lower bracket, or do more work off the books, and he’ll end up getting less in taxes from you than before. So did he increase your taxes? Nope.
Similarly, he could cut your rate, and you might be motivated to go out and earn even more, perhaps enough more that you pay more taxes, even at the lower rate. So did he cut your taxes? No. But the wealth of the nation — including your own — was increased.
When the “cost” of a tax rate reduction is “scored” by the Congressional Budget Office (CBO), they do a “static” analysis, which means that they assume that the change in rates will have no influence on the behavior of the taxed, which is arrant nonsense. When a politician tells you that he knows how much revenue a tax change will result in, he is either lying or deluded.
So all this talk about a “stimulus” of $800M (or whatever fantasy number they come up with) via a maintenance of existing tax rates is just that – talk. Even if that were the correct number, it’s nonsensical to describe avoiding further damage to the economy as a “stimulus.” But the oldest man in the world doesn’t know the degree to which revenue will be reduced, or if in fact it will be reduced by preventing such an economy-bashing rate increase.
In fact, here’s an ugly fact for those who want to wage class warfare on “the rich.” By “Hauser’s Law,” there is no correlation between tax rates and federal revenue as a percentage of gross domestic product. It is stuck, over the decades, at about 19%, which means that any static analysis from the CBO is guaranteed to be wrong, and worse than useless.
The implication, in fact, is that the only way to increase federal tax revenue (and close the deficit) is to grow the economy, which means not just avoiding an increase in tax rates on the most productive parts and members of it, but perhaps even lowering them. But that doesn’t satisfy the economically ignorant Democrats, who even as they slander Republicans as “terrorists” and “hostage takers” (which, like “racists,” “haters,” “liars,” etc., is simply typical psychological projection of the left), are holding the fate of the economy hostage to their own insistence on continuing to enviously demonize and punish those who ultimately grow it. The economy will not recover until these class warriors are marginalized, though, sadly, it may take another election to do so, and we’ll have to continue to suffer for at least another two years.
Rand Simberg is a recovering aerospace engineer and a consultant in space commercialization, space tourism and Internet security. He offers occasionally biting commentary about infinity and beyond at his weblog, Transterrestrial Musings.
Someone needs to tell these people about the value of not letting the enemy pick the terrain for a battle. It's one thing to get ambushed, but it's just plain stupid to waltz onto a battlefield the enemy has carefully prepared and at the same time issue PR about what a great deal you're getting from the scum you're fighting.
There in no doubt the enemy understands the power of the pen. They select the phrase and we argue within that framework. Over and over and over again. And we lose. Over and over and over again. I am afraid we may not be as bright as we think we are.
I once believed Charles Krauthammer was a smart guy but even he fell for the bullsh*t that maintaining tax rates is somehow a detriment to the economy (vs increasing them, I guess) because it will “cost” the government money.
That is like saying if I don’t get an annual increase in January I am somehow losing money. You cannot lose what you never had.
Frankly I believe Krauthammer’s position on this was assigned him by FNC to make sure there would be 2 sides to the ongoing debate during the panel session of the Fox nightly news
Did we “lose” on Nov 2nd?
Pretty much everything related to government at all levels is dishonest, if not out-right corrupt; and the Republicans in DC have repeatedly demonstrated that they are not up to the task of correcting the course. If change is to come, it will come at the grass-roots. Time to get even more involved.
Yes! If we had WON, they would be AFRAID for their very lives to pull this B.S.! Isn’t it obvious that they don’t FEAR us?? We are simply an inconvenience.
???? Here is what he said:
"...the package will add as much as one percent to GDP and lower the unemployment rate by about 1.5 percentage points."
Even with the major changes we got in the last elections, too many people in DC think they're elected to “lead the sheep” rather than being a representative of those who elected them.
The problem started when “elected office” became a vocation.
Tax cuts occurred in 2001 and 2003. They stimulated the economy by allowing taxpayers to keep more of their money and those with businesses to afford hiring employees. What they are trying to fix now should never have occurred in the first place — an expiry on the tax changes. These became law and should have been permanent. What 0bama is trying to do now is to keep current tax rates rather than allowing the expiry of the current tax rates to push rates back up as they are set to do on January 1, 2011.
As the WSJ said in an editorial today, this is the 11th Congress’s final insult. Republicans need to stop the budget and spending bills and rewrite them in January when they control the House and have more sway in the Senate. Dems have no mandate to spend like crazy as they are trying to do in one last gasp now. Defeat the spending. Allow the tax rates to go up and see what happens as it will be the Dems who orchestrated that move.
What I saw and heard Krauthammer say (more then once) was this was a “gift to Obama” and would add 1 TRILLION to the deficit and it was something Obama could never have asked for (1 billion stimulus)and gotten.
He never once mentioned the other side of the equation regarding what would happen to both the economy AND the Republicans if they refused to allow the rates to stay where they are and instead allowed them to rise like the left wants.
What I read is not what you saw/heard. I have more faith in the written quotes than what you remember he said.
Go to his website. It has the actual words of his opinion piece.
I have more faith in the written quotes than what you remember he said.
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LOL, surely you jest? How about this. “Today Charles Krauthammer said when asked about the tax compromise, “I neglected to say the alternative to the compromise, that of allowing rates to increase, would likely bring on a deepening recession”
OK, all fixed...right? I mean it’s a QUOTE and we all know QUOTES are far more accurate then what one actually HEARS themselves......right?
What is your point. He said INCREASING taxes was bad for the economy.
So, increasing taxes is bad for the economy and yet the libs somehow GAIN by keeping them low due to the demands of the republicans, which BTW totally and royally pissed off the base.
Like I said, Charlie is on the pipe
Why do you say the libs gain by keeping them low?
I still don’t understand why you think increasing taxes is good for the economy and how the libs gain from this.
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