This would be a no-brainer to most people, but for David Leonhardt, business columnist for The New York Times, it’s a question that deserves deep thoughtful deliberation.
“There are big philosophical questions about taxes that facts alone can’t answer. How important is it to let people keep the money that they earn?” Leonhardt asked in the October 31 Times.
The answer seems fairly cut and dried, at least to someone who wouldn’t mind having the extra money in their wallet, but Leonhardt actually says having a lower tax burden is of no consequence.
“The obvious conclusion is that moderate shifts in taxes don’t dictate economic growth,” Leonhardt wrote. “Mr. Bush’s father and Bill Clinton raised taxes — and the economy grew for almost the entire decade of the 1990s. The current administration has cut taxes — and the economy has grown for almost all of this decade. So if short-term economic growth were the only thing to worry about, you could make a good argument either for cutting taxes or for raising them.”
Leonhardt makes the same mistake the media make over and over again. Referring to tax cuts as a “cost” to the government, which the media often do, assumes that all money is the government’s to begin with, which it’s not. Such an implication suggests the government generated the tax money, which it didn’t. (See more in the Business & Media Insitiute’s special report – Tax & Spin.)
Leonhardt used what happened during the prior Bush and Clinton administrations as reasoning to suggest higher taxes are important to reduce the budget deficit. But as Pete Du Pont wrote in the October 29 Wall Street Journal you can have lower taxes and reduce the budget deficit by increasing tax revenues.
“Tax rate reductions increase tax revenues,” Du Pont wrote. “This truth has been proved at both state and federal levels, including by President Bush's 2003 tax cuts on income, capital gains and dividends. Those reductions have raised federal tax receipts by $785 billion, the largest four-year revenue increase in U.S. history. In fiscal 2007, which ended last month, the government took in 6.7% more tax revenues than in 2006.”