Do lower taxes mean higher incomes? Do higher taxes mean more federal revenue? I just finished reading several debates about the economics of "Republican" politics. The first debate tore asunder Bush's campaign promise of 2000 that said that lower taxes will result in higher incomes in 2000. After I got done reading Mr. Cates arguments, which were well-supported and showed, without a doubt really, that lower taxes did not translate into higher incomes, I thought, well, why would they? Just because GW promised this during a campaign does not mean that American conservatives were persuaded by this argument or even that they cared. What conservatives believe has little to do with increases in income. We believe that our government should spend what they take in (which, I believe, had they done would have left us in a better financial position today) and that increased taxes will not make everyone happier. In fact, we're convinced that increasing taxes is going to result in increases in spending and with that spending, wasting. And if we follow all of this to its logical conclusion, given that it has now been proven beyond a shadow of a doubt that between 2000 and 2008, this country's inhabitant's income did not increase, but decreased significantly, it should then be posited that raising taxes will increase incomes significantly (OK, maybe not significantly, but it always sounds so erudite to say "significantly").
OK, I don't have any big studies that I want to go and track down, after all, this is a blog that I do in my spare time and since I do not take unemployment or AFDC or food stamps (as I probably could), I need my spare time to work on my consulting projects. ANYway, lets look at the opposite of the disproven political promise by our dyslexic president: More taxes will lead to higher incomes. OK, OK, maybe the "opposite" isn't what the author of the debate would support either, but lets have a little fun with it.
Let's say that we tax me and my family 60% of our income. Well, would that be after the deductions for our house, 2% of medical expenses over and above the total of our itemized deductions, and any other things that I can dredge up out of the tax code? Oh, and I suppose I'd better go back and figure out how many of the things on that fun K-1 schedule I get to take off any income I would be claiming; there are all sorts of mysterious deductions there. I'm not sure what all of them are, but I remember some of the more reasonable ones like charitable donations and something called 179 recapture. Oh, but that was an add-in, never mind, it's all becoming a muddle and I'm getting further and further from my point. Well, no, I've arrived at my point! Yes, there it is. Our tax code so completely screws with our AGI, how can we possibly truly understand what policies are effective? I can tell you absolutely that I don't want a flat tax, but that's only because I love all my deductions! What kind of terrible tax rate would I have if I didn't have my deductions!
I guess I just made a great argument for a reasonable flat tax, sigh. Let's pull it together folks, remember that campaign slogans do not make good tax policy and we must fight to put our economy back in the game by simplifying our tax code, spending less than we take in in revenue and stop outsourcing jobs to countries that do not allow their people the same freedoms that we have.
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