Why Tax Cuts Won’t Work

Hear me out before you jump to a hasty conclusion. In a recent interview at Yahoo! News, Amity Shlaes discussed her new book entitled Coolidge. The interview began with Yahoo News announcer Lauren Lyster explaining that one of the big issues of Obama’s second term was tax reform and what could be learned from Calvin Coolidge.

Shlaes explained that, “The cutters — Reagan, Kennedy, and going back to Coolidge — all ended up with more money on the books due to extra business activity.” Tax cuts led to more tax revenue, but there was a problem. Shlaes writes:

“Conservatives long for another Ronald Reagan. But is Reagan the right model? He was of course a tax cutter, reducing the top marginal rate from 70 to 28 percent. But his tax cuts—which vindicated supply-side economics by vastly increasing federal revenue—were bought partly through a bargain with Democrats who were eager to spend that revenue. Reagan was no budget cutter—indeed, the federal budget rose by over a third during his administration.”

These are irrefutable facts. Most every conservative and I have used the same argument tax-cutting argument for years. Cutting tax rates spurs economic activity and growth, which leads to more jobs, more taxpayers, and more revenue for the government.

So let’s cut tax rates. It’s a proven winner. If you are a conservative, you know you’ve also used this argument.

Even Lindsey Graham, hardly a conservative, stated recently that flattening the tax code amongst other things could generate an additional $600 billion for the government coffers.

And there you have it. Graham has properly summed up the whole flawed tax cut argument in one sentence.

Well, I’m here to confess that I’ve also been wrong. In all the years I hammered tax rate reductions, I missed one crucial point. I am man enough to admit it.

Common Constitutionalist

Now all you liberals reading this (there probably aren’t that many), don’t get too excited. To my conservative friends, buck up. I have not gone over to the dark side.

What I have had is an epiphany of sorts. It dawned on me that we freedom lovers have actually been arguing all these years for bigger government.

We’ve been advocating for lower taxes to get more tax revenue. Well, what will that additional revenue be used for? To grow government, of course. So we are at least partially to blame for the growth of government.

In fact, we may be more to blame. Liberals and progressives are voted into office, raise taxes, and ruin the economy. Then, what happens? They are thrown out of office, conservatives are voted in and push for tax cuts, decrease regulations and voilà, increased revenue to the government. It doesn’t seem right, does it?

In my humble opinion, the only way to save this country is not only through tax-rate reductions; capital gains rate cuts and the like. We know what will occur with their proper implementation if government spending isn’t also cut — additional food for the beast to devour.

We need to begin to advocate for smaller government at every level. Decreasing the size of government is the only way to rein in spending.

Now don’t get me wrong. I’m all for keeping as much money as I can, but I think we are beyond that point.

By shrinking government’s size, the rest may take care of itself. It’s been too often proven that we can’t starve it. Government will always find more money somewhere and more programs to spend it on. We’ve seen the truth in this from both parties.