| Tax cuts pay for themselves. The concept is simple - if you cut taxes by 5% and get a resulting 10% growth in the overall economy, then you will collect more taxes after the tax cut than you were before it. There are a number of problems with this idea.
Firstly, it is taken from the economic model called the Laffer Curve. Simply put, the Laffer concept is that the incentive to work is reduced as tax rates increase. At some point, a person is paying so much in taxes that they simply give up trying to earn more money.
The problem with this idea is that no one - no one - has ever raised taxes to the point where people actually stop trying to earn more money. Not America, whose tax rates now top out at thirty-five percent. Not Denmark, where income tax rates start at thirty-eight percent and go as high as fifty-nine percent. It seems that people inherently understand that even if the government takes ninety-four percent of your next dollar (as the US government did in 1944); then you are still slightly richer for having made that dollar - and therefore better off for having made it - than you were before you made it.
Secondly, even if the Laffer Curve were correct, tax cuts would only pay for themselves if we were already on the back-side of the curve - where taxes were so high that people were already limiting their earnings so as not to pay more taxes. Given that the United States has seen a rapid growth in the ranks of the super-rich, we simply haven't been anywhere close to that point in my lifetime.
Simply put - people don't stop trying to make more money because they are taxed. And if they did, we are still a very long way from taxing them that much.
Tax cuts create jobs. Right now the United States is staggering along at the bottom of the worst economic rut since the Depression. Significantly, taxes are at their lowest since the Depression. Marginal tax rates were increased in 1932 from twenty-five percent to sixty-three percent - but they have been lower than that level continuously since 1982.
If tax cuts created jobs, no one in the country would be without a job.
Wealthy people just move away from higher tax rates. Some do, some don't. But, if you have enough money to pay taxes, then it really drops as a consideration. Good schools, safe communities, thriving business communities...those are things that draw people with enough money to move around. Plus - again - there is absolutely no evidence to support the contention that people are leaving New Jersey to escape taxes.
Now, to the matter at hand...
First of all, taxation is a cooperative exercise. In a representative government, we elect people to determine how much we are taxed. So taxation is not coercive - no more than the speed limit or drinking age or any other law we have to protect society. Taxation is cooperative.
Secondly, for any given level of spending, the taxation required to support it is constant. If we are going to spend $30 billion; then we have to tax $30 billion. If we cut spending to $27 billion; then we can cut taxes to $27 billion. How much we tax is dependent on how much we spend - and not the other way around.
Thirdly, "the power to tax is the power to destroy." Anytime the government takes money away from a person, they have less left in their pocket to take care of their self. So it is only common sense that we should not take people who are on the brink of destitution and tax them until they are well over that same brink. Instead, we should exercise the wisdom to spare that destructive hand of taxation from those who are at the greatest risk of economic destruction.
Conservatives like to look at our tax structure and say that our base tax rate is 1.4%, and then we raise taxes on those who make more (which is "penalizing people for doing better). The reality is that we have a base tax rate of 8.97%, and give progressive breaks to those who cannot afford to pay. What this means is that each of us selects how much of our income we pay in taxes because it is always possible to limit our income and work for less money.
Fourthly, everyone should be able to take care of their family before they take care of the government. This is the justification for a household exemption rather than a personal exemption. The first several thousands of dollars a household makes are entirely eaten up with simple existence - and that should be free of tax.
In a nutshell, the progressive argument for taxation runs like this:
1) Taxation is a cooperative exercise in providing public goods;
2) Taxation is constant for any level of spending (or - identify spending cuts before you identify tax cuts);
3) We, as a society, choose to shield those most vulnerable to economic destruction from the heavy hand of taxation; and
4) We, as a society, insist that people should be able to pay for their own way before they pay for the government's way.
The fact is that this is an inherently fair way of apportioning taxes. It is not, however, inherently equal because our capitalist system is not an inherently equal distributor of economic resources. In fact, with this framing, progressive taxation becomes a necessary part of ensuring that capitalism remains successful because it makes sure that those at the lower end of the income scale retain enough of their income to participate in the economy. |
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