McPherson, Kan. —
The debate on whether to extend the so-called “Bush-era tax cuts” has very aptly illustrated why the final session of a Congress is sometimes referred to as “Lame Duck.” The debate has really been lame. We've witnessed an endless parade of left-wing politicians expressing their desire to allow some, if not all, of the cuts to expire. Since these tax rates have prevailed for the best part of a decade, though, allowing them to expire is tantamount to an increase. So, we need to ask ourselves why some are so eager to increase taxes.
Pop quiz: let's say you're the CEO of a major airline. Passenger counts and revenues are down. Many routes consistently have empty seats. To increase revenues and fill seats, do you a) increase ticket prices, or b) reduce ticket prices?
Let's say you're the CEO of a major department store chain. You're losing market share to more aggressive competitors, and sales are sluggish. Revenues are adversely affected. To increase customer traffic and revenues, do you a) raise prices on all items in your stores, or b) reduce prices?
Let's say you're the CEO of a major country – much like the USA. The economy is sputtering, with a large number of citizens out of work. Revenues to the treasury are increasingly lower than what is being spent. To put people back to work, promote economic growth, and increase treasury revenues, do you a) raise taxes, or b) keep taxes low?
Of course, the correct answer in each of the three scenarios is “b.” It's the most simple of economic principles. If you want to encourage and foster an activity, then you lower the cost of that activity. If you want to stifle an activity, you raise the cost. I get it. You get it. Most people, with even the slightest measure of common sense, get it.
What I don't get is why some elected officials insist on pretending that they don't get it - when, in fact, it's obvious they do. It's obvious because, time after time, those officials have used the tax code to discourage certain behaviors and encourage others. If you doubt me, here's a verbatim paragraph from the irs.gov website. “Legislators have three needs in mind as they prepare tax laws - the need to raise revenue, the need to be fair to taxpayers and the need to influence taxpayers' behavior.”
For instance, the proposed carbon tax would be designed to discourage greenhouse-emitting activities, plus encourage a switch to alternative energy. Taxes on tobacco products are meant to discourage their use. Import tariffs have been used to encourage sales of domestic goods. Mortgage interest deduction is one way of encouraging home ownership. They really do get it.
Knowing that they get it, and knowing that they understand that a tax increase would discourage economic activity, and stall an already slow recovery, doesn't it make you wonder why so many elected officials are still so determined to raise taxes? I think the answer to that question is painfully simple. Tax collection, to them, is not so much about producing revenues for the treasury, as it is about social engineering and wealth redistribution.
Coupled with a smaller government, low tax rates fuel economic recoveries, and promote economic growth and long-term prosperity. Ronald Reagan got it. John Kennedy got it. Barack Obama gets it, too. His left-wing orthodoxy just won't allow him to admit it.
No comments:
Post a Comment