[POLITICS] When a "Tax Cut" Isn't One

From: Technotranscendence (neptune@mars.superlink.net)
Date: Wed May 28 2003 - 06:06:00 MDT

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    THE LIGHTHOUSE
    WHEN A "TAX CUT" ISN'T ONE
    from "Enlightening Ideas for Public Policy..." Vol. 5, Issue 21 May 27,
    2003
    -------------------------------------------------------------
    It sounds like a bad joke told by an economically literate stand-up
    comic: When is a "tax cut" not really a tax cut? When it isn't offset by
    a reduction in government spending. In that case, it is more accurate to
    call the "tax cut" a deferred tax increase. (That's why the joke's not
    funny!)

    According to Alexander Tabarrok, research director of the Independent
    Institute, this is precisely the case with President Bush's proposed
    "tax cut"; it's really a tax shift, Tabarrok argues, to a future where
    taxes already were expected to increase significantly to pay for growing
    Social Security and Medicare liabilities.

    "To grasp the difference between a tax cut and a tax shift, we must
    first understand that what ultimately drives taxes is spending," writes
    Tabarrok in an op-ed carried last week by United Press International.

    "If spending increases, as it has under the current administration, then
    sooner or later taxes must increase (or inflation, a type of tax, will
    go up).... If spending isn't cut, then less taxes today means more taxes
    tomorrow. Thus, the Bush tax cut plan is really a plan for future tax
    increases....

    "Conservatives used to argue that the public didn't want big government
    but was fooled by deficit financing and other hidden taxes into thinking
    that it costs less than it actually does. Today, conservatives seem to
    believe that the public does want big government and that the only way
    to curb government growth it is to fool the public with lower taxes
    today so that the costs of government will be so high tomorrow that no
    one will accept the offer. How cynical.

    "Will deficits in fact force future administrations to cut spending?
    It's possible but I am fearful. The combination of changing demographics
    and current tax cuts is seeding out economy for a fiscal 'perfect
    storm.' When the storm hits there will be a crisis, and as economist and
    historian Robert Higgs has ably demonstrated in CRISIS AND LEVITHAN,
    small government rarely does well in a crisis."

    See "What Tax Cut?" by Alexander Tabarrok (5/22/03)
    http://www.independent.org/tii/news/030521Tabarrok.html

    Also see:

    "Taxation, Forced Labor, and Theft," by Edward Feser (THE INDEPENDENT
    REVIEW, Fall 200)
    http://www.independent.org/tii/content/pubs/review/tir52_feser.html

    Independent Institute archives on taxation, see
    http://www.independent.org/archive/taxation.html



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