Junto Boys

The Washington Post Wants Higher Tax Rates

The Washington Post calls the latest tax cut dangerous. They blame Reagan’s tax cut for running up deficits. They go on to say that no one will have the resolve to stop the spending and therefore, the people should be resigned to the fact that they will always pay high taxes or face the music. That is a static model based on the idea that tax rates have nothing to do with productivity. But everyone knows that people take more risk when the rewards are greater. Why should you risk your money to create a business when the government is ready to take half when you succeed? And if you fail, you’re on your own.

What WaPo doesn’t say is that actual tax revenues increased every single year after Reagan’s tax cut was passed. The tax cut gave incentive. The incentive created growth. The growth led to more actual dollars going into the federal treasury. So why is it inconsistent to say that Bush is cutting taxes in order to generate the revenue that will pay for this spending? It’s not inconsistent, but many people use the revenue argument to protect the tax code, so they can use the tax code for social engineering.

Many in government are less worried about revenue, because they can print money anytime they want to pay for programs. They like a complex tax code because it allows them to single out behavior for reward or punishment. A good example is the earned-income tax credit for children. Children are good, so let’s reward that. Another example is the 30%-50% tax that we pay for gasoline. We want people to conserve, so we will charge them higher than market price to drive their cars. Go up and down the tax code and you will find inequity and decisions based on social policy. When taxes decrease, the government has less flexibility to reward or punish behavior, and that’s what the “enlightened” really hate.