Tuesday, May 2, 2017

Thomas Sowell fillets tax rhetoric

Economist Thomas Sowell officially retired from column writing earlier this year, but he's still the no-nonsense sage that he's been for decades:

"How is the claim of "tax cuts for the rich" false? Let me count the ways. More important, you can easily check out the facts for yourself with a simple visit to your local public library or, for those more computer-minded, on the internet.

One of the key arguments of those who oppose what they call "tax cuts for the rich" is that the Reagan administration tax cuts led to huge federal government deficits, contrary to "supply side economics" which said that lower tax rates would lead to higher tax revenues.

This reduces the whole issue to a question about facts — and the hard facts are available in many places, including a local public library or on the internet.

The hardest of these hard facts is that the revenues collected from federal income taxes during every year of the Reagan administration were higher than the revenues collected from federal income taxes during any year of any previous administration.

How can that be? Because tax rates and tax revenues are two different things. Tax rates and tax revenues can move in either the same direction or in opposite directions, depending on how the economy responds.

...Before we turn to the question of "the rich," let's first understand the implications of higher income tax revenues after income tax rates were cut during the Reagan administration.

That should have put an end to the talk about how lower tax rates reduce government revenues and therefore tax cuts need to be "paid for" or else there will be rising deficits. There were in fact rising deficits in the 1980s, but that was due to spending that outran even the rising tax revenues.

Congress does the spending, and there is no amount of money that Congress cannot outspend.

As for "the rich," higher-income taxpayers paid more — repeat, more tax revenues into the federal treasury under the lower tax rates than they had under the previous higher tax rates.

That happened not only during the Reagan administration, but also during the Coolidge administration and the Kennedy administration before Reagan, and under the G.W. Bush administration after Reagan. All these administrations cut tax rates and received higher tax revenues than before."

1 comment:

  1. Glad to see you so active in the blogosphere again, Patrick! I will now visit far more often.

    Zane (aka Mark Humphreys)