The further to the left or the right you move, the more your lens on life distorts.

Tuesday, May 02, 2017

Rates and Revenue

As I noted in my post a few days ago, whenever anyone suggests tax reform or simple tax cuts, the Democrats response is Predictable. The tax and spend party relies on their tired class warfare meme to kill any attempt at controlling spending and all attempts at reducing taxes. Thomas Sowell comments:
One of the painful realities of our times is how long a political lie can survive, even after having been disproved years ago, or even generations ago.

A classic example is the phrase "tax cuts for the rich," which is loudly proclaimed by opponents, whenever there is a proposal to reduce tax rates. The current proposal to reduce federal tax rates has revived this phrase, which was disproved by facts, as far back as the 1920s -- and by now should be called "tax lies for the gullible."
Unfortunately, the Democratic narrative relies on the innumeracy of far too many people (and most of its base) as well as fact-free arguments that fall apart when examined, even superficially.

The simple reality, bolstered by decades of government reports, is that reductions in taxes do spur economic activity which results in greater tax revenues. The Democrats focus on tax rates, while an honest political evaluation should focus on tax revenue. After all, it's the revenues, not the rates, which fund the many programs that the Dems can't seem to live without.

But the Dem obsession with "the rich" and their specific tax rate overcomes their ability to see the bigger picture. With more money in their pockets, the "rich" invest in businesses and they buy (houses, cars, appliances, etc.). In fact, that's true of everyone including the middle class. As that spending moves into the private sector, taxes are paid on it and tax revenues increase. The feds have more money, and from the Dem's point of view, that's a good thing, right?

The flip side of this might best be examined in microcosm. My original home state of Connecticut is deep blue. They have some of the highest state taxes in the Union, levied disproportionately on "the rich." WTNH out of New Haven reports:
HARTFORD, Conn. (WTNH)–Connecticut’s state budget woes are compounding with collections from the state income tax collapsing, despite two high-end tax hikes in the past six years.

It means the current budget year, which ends in just two months, is now seriously in the red and next year’s deficit has ballooned to $2.2 billion.

It’s happening because the state of Connecticut depends too much on its wealthy residents, and wealthy residents are leaving, and the ones that are staying are making less, or are not taking their profits from the stock market until they see what happens in Washington ...

The state only has $235 million in the so-called ‘Rainy Day Fund’ for emergencies. That means the Governor and the legislature will have to find $215 million in the next few weeks just to balance the books on the current year ...

Governor Malloy added, “The reality is that in Connecticut we get most of our money from very few people and that can produce some very wild swings.”
Gee ... what novel insight.

When "very few people" fund the spending and entitlements demanded by the many, there comes a time when you run out of other peoples money. That simple reality seems to have escaped the left-wing Democratic demagogues who will move heaven and earth to ensure that tax cuts don't happen. In the bargain, they'll ensure less and less tax revenue, continuing budgetary shortfalls, and fewer and fewer government services for the very people they purport to care oh-so-much about.


The Dems, of course, are criticizing every aspect of Trump's tax plan, including a plan to eliminate the deduction for state and local taxes. Because this would hit the highest taxing states the hardest and those states are predictably blue, the Dems are furious. Glen Reynolds writes:
The National Journal’s Ronald Brownstein calls this "an offensive against blue states," but as Brad Todd replied on Twitter, “I think what you mean is it ends imbalanced federal subsidy for big government at the local level.”

I think that’s right. States should be able to set their own levels of taxing and spending, but I see no reason why a Walmart cashier in Tennessee (which has no state income tax and low property taxes) should be subsidizing a hedge fund mogul in New York or a studio executive in Hollywood. It’s fine if blue states want to have higher state and local tax rates, as they do, but they shouldn’t be encouraged to do so by federal tax giveaways. And it’s the urban, coastal areas that have done best over the past 25 years, so it seems time for them to pay their fair share now.
Hmmm. Where's Bernie or Elizabeth when we need them. A Walmart cashier in Tennessee subsiding a hedge fund mogul in New York City. Where's the fairness? Where's the natural Democratic bias toward the little people?

I guess that only applies when the other guy's ox is gored.