As you know, tax cuts are red meat to both sides of the political spectrum. They really should be less tasty than they are. If they were less tasty, if they attracted fewer attacks, we might think more clearly about our options.
Suppose I suggest we should cut taxes. Or not raise taxes. Or keep the Bush cuts from dying at the end of the year. Because if they die, we will get a big tax increase.
When I do that, some readers cry “Right on!” And some want to dispatch me to the hottest furnaces of Hell. (You would be surprised what people write to you when they disagree with your columns.)
All right. I understand why some people want to raise taxes on the rich. Or why they do not want big earners to get a tax break. And the subject is worth debating. But not today, thanks.
But, another reason why people do not want tax cuts is because they believe the cuts will lead to deeper deficits. They blame tax cuts for much of our deficit. They say, and write, that when Reagan engineered tax cuts we ended up with budget deficits. They say, and write, that when Bush II engineered tax cuts we ended up with budget deficits. Which leads them to say if we cut taxes or keep the tax cuts we will worsen our deficits.
Far be it from me to tell them they are wrong. I get enough nasty emails as it is.
However, the record shows that most of the times we have reduced tax rates, we have seen government revenues go up. From Treasury Secretary Melon in the twenties, to Kennedy in the 60’s. From Reagan to Bush. Time and again, when we reduced various tax rates we have seen revenues increase. We have seen this happen in other countries as well.
My point is that it is not the tax cuts which have fed the deficits. Because they increased the revenues for government. So they should have led to reductions in deficits.
Clearly they did not. And why not? Because administrations allowed or encouraged more spending. Congresses increased spending and presidents did not fight them.
It is the increased spending that increased our deficits. The increases in spending were greater than the increases in the revenue. This is no different than Mom coming home with a $5000 pay increase and Dad buying $10,000 worth of goodies to celebrate.
That is a good subject to debate. And when we do, it is not always easy to justify the higher spending. Whether it is or not, it should be a separate debate.
Meanwhile, we ought to leave the subject of tax cuts and lower tax rates out of the debate about deficits. That is because such cuts usually lead to higher and higher revenues.
Incidentally, if you Google the subject (do lower tax rates increase revenue) you will find an article from Heritage Foundation that supports this. Another article on the Laffer Curve does too. You will also find an article from rrickets.ba that argues the opposite. Read them all. Maybe you will find the rrickets article more convincing, but I will be surprised if you do.
From Tom ... as in Morgan.
For more columns, for Tom’s radio shows and new TV show (and to write to Tom): tomasinmorgan.com.