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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: Lazarus_Long who wrote (13302)	10/22/2003 9:34:23 PM
From: Dayuhan	Read Replies (2) \| Respond to of 793559

My main complaint about this debate is that, like so many of its kind, it is reduced by both sides to a simplicity that renders it completely irrelevant. The statement that “lowering taxes raises revenues” is patently ridiculous. It is true that in some circumstances a reduction in taxes could contribute to economic growth and therefore to an increase in revenues. The mere fact that a lowering of taxes is followed by increased revenue does not establish causation: there are far too many variables involved for any causative relationship to be established merely on the basis of correlation. If you lower tax rates to zero, there will be no revenue. If you raise taxes to 100%, there will be no revenue. If you reduce revenue and increase spending at the same time, the result, at least in the short term, will probably be a deficit, unless you begin with a large enough surplus to cover the shortfall. The question is not whether there is some universal rule defining the relationship between revenue and taxation, but what is the appropriate level of government spending at any given point in time, and what tax structure is best suited to generate the revenues necessary to support that spending. The recent tax cut was, I think, justified, given the macroeconomic environment and the need to provide material and psychological support for a recovery that was, at the time, quite weak. It is arguable, though unpopular, that the skewing of the benefits of the cut toward the wealthy was legitimate: the wealthy are more inclined to invest their surplus income, and the stock markets did need a kick-start. (It could also be argued that skewing the cuts to benefit the working class would generate a larger marginal increase in consumer demand, but this is not the place for that argument). I also believe as a matter of principle that the cut should have been accompanied by proportional spending cuts, including cuts in the military budget, which could, I believe, be made at a substantial level without impairing the nation’s ability to defend itself. I worry when I see a government that has the will to cut taxes, but lacks the fortitude to tell any constituency that their share of the pie will be reduced as a result. It is very likely, if the economic recovery continues, that government revenues will rise, even on a lower tax rate. This will not mean that the tax cut caused the rise in revenues. The tax cut will be one of many contributing factors in an economic recovery, and no one of those factors can be designated as “the cause” of increased revenues. “Tax and spend” is an irresponsible philosophy and a lousy way to run a government. “Tax less, spend more”, which is what we have now, is no better.