Here is the truth about tax cuts and revenue:
When taxes are low, the economy is strong. More people move money from one person to another, from one business to another. Moving money is the driver of profits, and profits are the source of tax revenue. When taxes are low, tax revenue is high.
When taxes are high, the economy is weak. People hang on to their money. Businesses hang on to their money. Worse, some businesses go out of business, and some people lose their jobs. That means fewer people and businesses have any income at all. When taxes are high, tax revenue is low.
Free market capitalists believe in economic freedom. Leftists, progressives, socialists, communists – in other words, most democrat politicians – believe in government control of the economy.
So then, why do democrat politicians appear – at least on the surface – to support tax cuts in the form of tax rebates and tax credits? Aren’t these “lower taxes” and shouldn’t that mean “more revenue” and “economic freedom”?
First, go back to the big picture. In order to enact tax rebates and tax credits, you must begin from a baseline of high taxes. After all, if taxes are already low, what is left to lower further from rebates and credits? Therefore, democrats want the baseline to be higher taxes across the board.
Now, when taxes are high, the economy is bad. This creates an economic crisis. What does a crisis do? It gives the government an excuse to act – for your own good, of course. So the democrats propose targeted rebates and credits, as relief for the poor, to help the economy – never mind that the economy is bad because of democrat supported high taxes overall.
So, why give targeted cuts instead of just lowering taxes? The answer has two components:
First, targeted tax cuts allow politicians – and this applies equally to republicans and democrats – to buy votes. Need votes in the heartland? Give subsidies to farmers. Need votes in the rust belt? Give bailouts to automakers. Losing support among the poor? Give them rebate checks. This then allows you to create class warfare for political gain. Soak the rich; help the poor. Or the other way around. All political groups do this.
Second, targeted tax cuts allow the government to control what segments of the economy prosper, and which die out. They are not simply an economic tool, but a policy tool. Want to promote an environmental policy platform? Raise everyone’s taxes; then give tax credits to “green” industries. Want to support the LBGT alliance? Offer tax credits for health care for same-sex domestic partners, while opposing them for non-married heterosexual couples. By the way, that last one is current law. I am not making this up to bash gays. I don’t give a darn about sexual preference. But my wife and I did pay more in taxes before we got married because she put me on her employer’s insurance plan, while same-sex couples doing the same thing did not. But I digress.
And now, you can see just what it is that the left wants to do with tax policy: use higher taxes to cripple the economy, creating an economic crisis that requires government action, and allowing government to rescue only those segments of the economy that meet the political agenda of the left.
Wouldn’t it make more sense to just, you know, lower taxes for everyone, let the economy recover on its own, and then allow the people to choose politicians who advocate for policy choices independent of the economy? If you want environmental or civil rights or agricultural policies, then win elections based on the merits of your positions. Don’t use an artificial economic crisis that you yourself created to advance an agenda behind the scenes.