Tax Voodoo
I heard it again today. The idea that the government takes in more tax dollars if it lowers taxes. This time it was Wisconsin senatorial candidate Ron Johnson on Joy Cardin’s Wisconsin Public Radio show. Let’s have a listen.
One might make the case that Geithner is wrong; that raising any taxes on anyone is a bad idea in these economic times. But that isn’t what Johnson is saying. He’s flatly saying that cutting taxes increases tax revenue, full stop.
Do you believe him? I don’t. There may be a theoretical point at which cutting taxes does increase tax revenue, but the idea that we’re at such a point, or that this principle is axiomatic and true under all circumstances, strikes me as complete bullshit. Need more? For the wonkish, here’s an article discussing why tax cuts that pay for themselves are myths and here’s another.
July 27th, 2010
There may be a theoretical point at which cutting taxes does increase tax revenue, but the idea that we’re at such a point, or that this principle is axiomatic and true under all circumstances, strikes me as complete bullshit.
Agreed. There are a multitude of factors that affect how much tax revenue is generated. And in a system this large those factors are constantly in flux. There is no magic formula to come up with “the” magic number of equilibrium. The best they can do is work within a range and adjust for varying sizes of Federal budget, macroeconomic conditions, and the population’s overall demand for government services.
July 27th, 2010
I’m not an economist, but I’ll go even further: a set of circumstances in which a tax cut increases tax revenue over what it would have been otherwise would be a very rare set of circumstances indeed. Like, it’s never happened and isn’t likely to. Like, maybe if we had a 95% income tax rate which had choked off private investment altogether–then maybe the secondary effect of increased economic activity might offset the direct loss in tax revenue.
July 27th, 2010
Kike still doesn’t work for the anti-span question.