Last night, in the wee hours, the Senate finally passed its version of the tax reform bill. While the final version will depend on the conference between the House and the Senate, it’s safe to say that the bill is a mixed bag. Some will get what they want, some won’t, and some people will see bigger tax bills. Given the massive complexity of our tax code, and given the sausage-making reality of legislation, this was inevitable. It also offered up an opportunity for some political preening and fair-weather principle-staking.
The bill has been scored as having a $1.2T “cost.” I put “cost” in scare quotes, because I consider it an affront to claim that letting people keep more of their money is a “cost” to the government. Tax dollars do not originate with or belong to the government, and saying that reducing the amount of money taken from taxpayers “costs” the government stands the fundamental tenets of liberty, capitalism, and self-ownership on their heads.
I also take issue with that figure, both in accuracy and in presentation. Historically, tax cuts typically don’t end up “costing” as much as originally claimed, nor do they typically raise revenue as much as originally claimed, simply because the predictors don’t fully factor in behavioral changes induced by the code changes (sometimes, this is due to legislative restrictions on predictive methodologies). There’s also the great big gag of reporting the “cost” over a 10 year span (again, a legislative mandate/restriction that caps forward looks at 10 years), when it’s typical to report spending and budget deficits in annual terms. For example, when a report comes out about Pentagon or Medicare/Medicaid waste/fraud/duplication comes out, the numbers are reported as $125B and $100B per year, respectively, not as $1.25T and $1T over a decade.
Add in a time-value-of-money consideration (a $120B “cost” in Year 10 is less impactful than it is in Year 1), and the tendentiousness of the 10 year presentation is exacerbated.
Still, the notion that this tax bill will add to the deficit, whether it be correct, incorrect, or exaggerated, gives a few money hawks something to screech about. Notably, Senator Bob Corker declared that he’d oppose the bill if it added to the deficit, then was amenable to voting for it if they added some trigger provisions to raise taxes should the predictions come true. Apparently, those trigger provisions were deemed a no-no by the Senate parliamentarian, and so Corker ended up being the lone GOP “no” vote.
There has been hand-wringing over the “cost” of this tax cut package from some other money hawks, but, frankly, I think they should do all their screaming and squawking over spending (including the aforementioned waste, fraud, and inefficiency). After all, one does not end up in the poor house simply by making a little less money, one ends up in the poor house by living beyond one’s means.
Yes, a big chunk of the Federal budget is “non-discretionary,” i.e. it’s Social Security and Medicare spending, which can’t be simply cut in normal budgetary work. But, there’s a whole lot of budget that is discretionary, and there’s a whole lot of money to be recovered simply by spending better, so screaming about tax cut “costs” when nothing is being done about cutting discretionary spending, reducing waste, fraud, and duplication, and reforming the entitlement programs that will blow up the nation’s finances, with or without this tax cut, is squawking about nickels and dimes while tens and twenties are blowing out the window.
And, yes, there are spending hawks, who make their displeasure known in similar fashion.
But, accepting continued deficit spending and spiraling debts is a far cry from accepting tax cuts that aren’t immediately tied to spending cuts. Nothing is stopping Congress from cutting spending after cutting taxes. Nothing, that is, other than their disinterest in doing so. Fact is, there’s far too little interest in cutting spending in those hallowed chambers. Spending other people’s money is how many politicians buy their way to re-election, and many others think that spending is a Good Thing.
It’s an unfortunate conclusion that the only way out of our deficit/debt hole is via growth. Historically, no matter the provisions of the tax code, federal revenue has oscillated around a flat long-term average of 18.5% of GDP. If they can’t manage to cut spending, they’re left with trying to keep spending growth lower than GDP growth, and doing what they can to spur GDP growth. 18.5% of a faster-growing pie (tax cuts will make the pie grow faster) will put more dollars into the federal coffers, and if they manage to slow spending growth, eventually things will start to get better (provided they also fix entitlements – something that must happen at some point). This, by the way, is how Canada fixed her finances – capping spending so that revenues could catch up.
As I just recently noted, I’m from the Milton Friedman school of tax cuts:
I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.
So, despite flaws and inadequacies, and pending the final form that comes out of committee, I’m glad the Senate passed its bill. Tax cuts are stimulative, and maybe, just maybe, it prompts enough GOP senators (I’ve completely written off the Dems at this point – they’re kneeling at the murderous altar of socialism) to decide they need to work on spending next year to make a difference. Because, if they don’t, it won’t matter whether a tax cut happened. Over-spending is what will do us in, not under-taxation.
The half-assed squawking of the deficit hawks doesn’t sway me on tax cuts. After all, it’s not wrong to let us keep more of our money.
Loading ...
Active Comment Threads
Most Commented Posts
Universal Background Checks – A Back Door to Universal Registration
COVID Mask Follies
When Everything Is Illegal…
An Anti-Vax Inflection Point?
“Not In My Name”
The Great Social Media Crackup
War Comes Through The Overton Window
The First Rule of Italian Driving
Most Active Commenters