Saturday, October 30, 2010

Repeat after me: tax cuts don't pay for themselves

Here is an interesting new U.S. site we've come across, I Heart Taxes. Take a look at it. (They do a nifty line in t-shirts too.) It, in turn, pointed us towards something else we have blogged extensively about: the widely peddled notion that tax cuts somehow pay for themselves. (Our recent exchange with MP Roger Helmer was our latest in that particular series.)

Now we have the respected U.S. economist Mark Thoma weighing in:

Republicans are selling snake oil once again:
Some Republican Senate candidates have suggested that extending the Bush tax cuts — which are scheduled to expire at the end of the year — will actually be good for the country’s bottom line, as the economic growth that results will more than offset the trillions of dollars in lost revenue. “By extending tax cuts you pay down the deficit, you grow the economy by giving people more money,” said Colorado Republican Ken Buck.

Today, on Fox News Sunday, Pennsylvania’s Republican Senate nominee Pat Toomey joined this club, telling Fox’s Chris Wallace that “it’s not clear” that extending the Bush tax cuts — while also lowering the corporate tax rate — would increase the deficit...
But, of course, the Bush tax cuts did not even come close to paying for themselves. The Bush tax cuts cost us around $1.7 trillion in revenue from 2001 through 2008, in part because of weak output and job growth following the cuts (contrary to assertions about how the tax cuts would stimulate economic growth).

As for the cost of extending the tax cuts to the wealthy, the Tax Policy Center estimates that making all the Bush tax cuts permanent, as opposed to extending them only for the middle and lower classes, would cost $680 billion over the next decade.

The disappointing part is that the press still lets them get away with this.

Now read on . . .


Anonymous Anonymous said...

Repeat after me: tax cuts kill jobs.

If you need proof, look at the history of job creation following tax cuts.

Massive job losses from the 2009 Obama tax cuts.

Massive job losses from the 2008 Bus tax cuts.

Massive job losses from the 2001, 2002, 2003 tax cuts.

Massive job losses from the 1981 tax cuts.

There is no such thing as a free lunch, and tax cuts are the free lunch promise that economists refuse to acknowledge is bad for economic growth.

If economists were running businesses, they would deal with increased demand for higher cost services by reducing the prices of services on the basis that the money lost on each added money losing service will be made up in the increased demand generated for money losing services.

12:34 pm  
Blogger Robin Smith said...

Yes they do. Take VAT. A tariff that increase prices, puts labour out of work, employers out of business.

Also hugely regressive. The monopoly power, the big corporates usually, have far greater staying power and buying power. They can ride out any increases or hard times. The small guys, the real entrepreneurs and workers are swept away. That is exactly why they are the only ones that support higher taxes on production.

More unemployment, more welfare. All because of a tax.

So abolish VAT and production would increase. No revenue swap would be needed as there would be more people in work producing, off welfare, off vice.

VAT is a most insidious form of protectionism for monopoly power. Support VAT and support that. Its as bad as a trade tariff.

Once we see the truth in this with VAT we will recognise that all taxes on the production of wealth are immoral. And that what is really being protected by them is private property in land. Which should be taxed 100% (about £400bn annually) and would easily fund government. How stupid are we?

See here for more logic

VAT is protectionism - Lets target it for cuts

3:01 pm  
Anonymous TJN said...

We tend to think, too, that there is too much VAT around and not enough progressive taxation - though each country is different, and it's hard to pull out hard and fast numbers. but yes, VAT is regressive. Our recent blog looking at VAT abuse is another essential point worth considering.

1:37 am  

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