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Opinion

Explaining Why Tax Cuts Work To The Uninformed

Explaining Why Tax Cuts Work To The Uninformed
N&V Staff
August 22, 2011

(Jim Clark) – Senator Dean Heller was in Incline/Crystal Bay earlier this month at a fundraiser held at the beautiful home of Bruce and Nora James.  The affair was bifurcated into a cocktail and appetizer hour for a larger group followed by a catered dinner on Bruce and Nora’s deck overlooking the lake, reserved exclusively for those who could write checks that might make a difference in a senatorial campaign.  With this smaller group, it was possible to engage in some give-and-take with the senator between courses.

I was a little surprised to hear some of Incline/Crystal Bay’s brightest and most affluent folks take issue with Sen. Heller over his decision to vote against the U.S. debt limit compromise worked out between Speaker Boehner, Senate Leader Reid and President Obama.  The questions revealed some concern about House Republicans appearing petulant about their insistence that no compromise involving a tax increase would be approved.  Eventually the GOP won on this point, although spending cuts were largely eviscerated in the ultimate compromise. 

With respect to Republicans’ killing even modest “revenue enhancement” provisions, the senator said that raising tax rates would not affect total revenues.  He said that since World War II, the maximum individual tax rate has been as high as 91% (1960) and as low as 28% (1986), yet throughout this entire period annual federal tax revenues have averaged 18% of gross domestic product.  In short, U.S. Government tax revenues, like Nevada’s, are totally dependent on the health of the economy.

“Right on!” I thought to myself, having authored a Bonanza column on this subject about 3 years ago. And Democrats know this, too.  In December 1962, President John F. Kennedy said: “It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise revenues in the long run is to cut rates now.  The experience of a number of European countries has borne this out.  This country’s own experience has borne this out.  The reason is that only full employment can balance the budget, and tax reduction can pave the way to full employment.  The purpose of cutting taxes is not to incur budget deficits, but to achieve the more prosperous, expanding economy which will bring a budget surplus.”

The current crop of Democrats is not stupid, just misguided. All this Obama stuff about tax increases for the “wealthy” is just demagoguery, attempting to show his left-wing base that he stands for state-enforced redistribution of wealth to the “needy,” even though he knows this would further cripple the economy.

As for Obama’s penchant to blame corporations for everything, he should have watched CBS’ 60 Minutes earlier this month.  It showed Leslie Stahl wandering around Zug, Switzerland, finding multinational corporations’ head offices run by a secretary and a janitor.  Why?  Because the U.S.’s 35% corporate tax rate is the second highest in the world (Japan’s is 36% and their economy has been stalled for decades). 

Result?  Intelligent CEO’s move their nominal headquarters to countries where they pay less than 20%.  They cannot repatriate foreign earnings without paying U.S. corporate income taxes, so they leave them in foreign banks.  Currently, $1.4 trillion dollars in accumulated corporate earnings are being reinvested in foreign countries, while the U.S. suffers job losses. 

The Bush Administration proposed a reduction in corporate tax rates to a world average and forgiving taxes on the trillions now parked overseas, but Democrats found this politically unpalatable.  As long as Obama and the Democrats remain wedded to failed collectivist principles, the US economy will never recover.

It’s time for a change we really can believe in.

 

(Jim Clark is President of Republican Advocates and a member of the Washoe County and Nevada GOP Central Committees; he can be reached at tahoesbjc@aol.com.)

 

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Related ItemsDean Hellerdebt ceilingObama's economic policiestax cutstax rates
Opinion
August 22, 2011
N&V Staff

Related ItemsDean Hellerdebt ceilingObama's economic policiestax cutstax rates

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