published Monday, February 6th, 2012

'Debt reduction,' 'stimulus' poor excuses for tax hikes

A number of reasons -- or excuses -- are put forth to justify tax increases on "the rich."

At present in Washington, there is a debate on an extension of payroll tax relief, and on whether to make up the temporarily reduced revenue with spending cuts or with tax increases on wealthier Americans.

Republicans generally have favored spending cuts and a federal pay freeze, while Democrats usually favor higher taxes on a small group of Americans to pay for payroll tax relief for a larger group.

But a quick look at the supposed justifications for tax increases -- whether to pay for payroll tax relief or to fund more government spending -- shows that tax hikes would be counterproductive.

n One reason offered for increasing taxes is that the revenue raised could be used to reduce our catastrophic $15.2 trillion debt.

But history shows something else. In the early 1980s, President Ronald Reagan went along with a plan to cut spending by $3 for every $1 that was raised in new taxes. That seemed like a good deal on balance, but it didn't pan out. The taxes went up, but the promised spending cuts didn't materialize.

It happened again in 1990, when President George H.W. Bush agreed to tax increases that were supposed to be coupled with even larger spending cuts. As expected, taxes went up, but not only was spending not cut, it actually rose.

There is, in short, no guarantee that revenue from higher taxes will actually be used to reduce the debt. Congress has far too strong a tendency to spend every new dollar it gets its hands on.

n Another excuse given for raising taxes is that in this weak economy, businesses are sitting on large amounts of money rather than investing it in job creation. Washington should tax them more -- the argument goes -- and raise money for more government "stimulus" spending to boost the economy.

That is a bad idea on many levels.

In some cases, it is true that companies are holding back on investing. But there are reasons for their reluctance: Consumer demand is low, and they are concerned about the twin threats of higher taxes and heavier regulations from laws such as ObamaCare. More taxes and regulations could destroy much of the return they might otherwise get on their investments in job creation. Many small businesses know, for example, that under ObamaCare they soon will have to provide government-approved medical insurance to employees or else pay large fines for many of their workers.

Businesses obviously would invest if they felt it would be profitable. But in the stifling business climate created by Congress and the Obama administration, it is not practical or even rational for some companies to expand. And it is ludicrous to think they will somehow become more likely to invest if Washington begins confiscating more of their income.

As for increasing taxes to fund more stimulus spending, the failure of the first $862 billion stimulus to produce the jobs it was supposed to create and to hold down unemployment is surely no reason to throw good money after bad. In fact, one federal "investment" after another has proved disastrous.

A recent example is the half-billion dollars that the solar company Solyndra got from Washington -- before it went bankrupt and taxpayers got the bill. "Green energy" subsidies for electric cars have been equally unsuccessful. Indeed, Congress and the Obama administration have a poor record of "investing" taxpayer dollars, and they certainly have no greater aptitude for doing so than private companies have.

As lawmakers and the president debate everything from payroll tax relief to the federal budget as a whole, it would be encouraging if they dropped the talk of ruinous tax increases.

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conservative said...

It is a fact that Congress spends about $1.40 for every dollar it collects in taxes. So raising taxes will only INCREASE our debt. Obamination and the Demoncrats could care less about our debt for they are Socialists. They only want to tax and spend and then do it again.

Here is a Demoncrat citing the $1.40 spending: "We're borrowing 40 cents of every dollar we spend." Kent Conrad on Sunday, January 23rd, 2011 in an interview on "This Week with Christiane Amanpour." http://www.politifact.com/truth-o-meter/statements/2011/jan/27/kent-conrad/kent-conrad-said-were-borrowing-40-cents-every-dol/

February 6, 2012 at 11:56 a.m.

And yet raising taxes to cover the Spending never occurred to Reagan or either Bush.

Do you think none of those Republican presidents engaged in wasteful spending? That six hundred ship navy cost plenty. So did fighting a war in Iraq...twice, and one in Afghanistan. The sad thing is that the first war in Iraq justified billions more in spending, none of which apparently merits mention, no matter how much waste occurred.

The rich aren't suffering, they had a manner year. Corporations are flush with cash. What are they doing with it? Seems like they're trying to buy some elections with it. Yay?

Or worse, they're investing in China and India, where they have even less to worry about. Especially not the workers.

By the way, the effective tax rate is the lowest ever for corporations. How much more accommodations do they need? Should they all have government bailouts, without even the pretense of public investment?

February 6, 2012 at 12:17 p.m.
conservative said...

The country is just not in the mood for tax hikes. Obamination is just trying to rally his sheep ( sheep are dumb ) for they are largely the welfare crowd who live off the backs of taxpayers. Congress is not going to raise taxes in an election year, it's just talk.

The Demoncrats in the Senate will not put forth a budget because they don't want to show the voting public their plan to drastically raise taxes. In the mid-term election the Demoncrats lost 6 Senate seats, over 60 Congressional seats, 6 governerships and over 680 seats in state legislatures and that was without them revealing their tax intentions. Think how bad it would have been had the public seen their tax hikes.

February 6, 2012 at 1:39 p.m.

I've rarely seen any country that is ever in the mood for tax hikes.

Heck, it's impossible to convince some people that they need to spend money on a new roof before their old one blows off in the rain and ruins what they had in the house, forcing them to spend even more money!

But hey, you could go with the Ryan Budget Plan, it only kills Medicare, raises the debt, and doesn't balance the budget, just cuts spending on essential infrastructure. All to save a little on taxes.

February 6, 2012 at 2:14 p.m.
rolando said...

Anyone notice -- or care -- that many of the 1%-ers are leaving the US...and taking their money with them. The office responsible for processing the [formerly free] citizenship renunciation forms are seeing a golden goose so the cost has now gone up to $450 per renunciation. One guy claims to now own 180 miles of the Canadian border and can walk across anytime.

Soon, expect to see those with any kind of earned income will see their taxes skyrocket to replace the lost revenue...the 1%ers paid something like 40% of the revenue collected...

February 6, 2012 at 5:06 p.m.

Which just goes to show you, they're not concerned about the country, they just believe in their own wealth. After they've made theirs off our resources and labor, they'll move on to somebody willing to pander to them.

I'd recommend not letting that kind of thing happen.

February 6, 2012 at 5:31 p.m.
Plato said...

There is so much misinformation in this piece it's hard to know where to begin. Let's start here:

"Another excuse given for raising taxes is that in this weak economy, businesses are sitting on large amounts of money "

Large corporations as a group, are sitting on a large pile of cash, not small and medium sized businesses. No one is suggesting that corporate taxes which are at historical lows, be raised.

"In some cases, it is true that companies are holding back on investing. . . . . .they are concerned about the twin threats of higher taxes and heavier regulations from laws such as ObamaCare."

There is no threat of higher taxes - that's bogus. Large corporations and most mid sized and small corporations are by and large not effected by Obamacare as they are already offering health care plans to employees. Those with less then 50 employees are exempt. Many small business that have never been able to offer health care, will be able to do so because of Obamacare. As a small business owner I can tell you that trying to hire quality people now a days without a health care plan is next to impossible.

"As for increasing taxes to fund more stimulus spending, the failure of the first $862 billion stimulus to produce the jobs it was supposed to create and to hold down unemployment is surely no reason to throw good money after bad. "

Totally false. According to the Congressional Budget Office (CBO) the stimulus, $350 Billion of which was tax cuts, produced over 2 million jobs and kept us from falling into a depression.

"A recent example is the half-billion dollars that the solar company Solyndra got from Washington -- before it went bankrupt and taxpayers got the bill. "Green energy" subsidies for electric cars have been equally unsuccessful. Indeed, Congress and the Obama administration have a poor record of "investing" taxpayer dollars, and they certainly have no greater aptitude for doing so than private companies have."

To call this a distortion of facts would probably be kind. The fact is Solyndra was only one of about 40 companies that got government backed loans under the presidents green energy loan program and only one other much smaller firm looks to be failing. The others are on the road to success and have produced tens if not hundreds of thousands of jobs - many more than the Keystone Pipeline that the Republicans harp about. As an investor if I come out winning on two stock and take a bath on the third I have done pretty good. 38 winners out of 40 is off the charts IMO.

Constantly repackaging the repeating the same nonfactual drivel really gets old.

February 6, 2012 at 6:34 p.m.
acerigger said...

Plato said..."Constantly repackaging the repeating the same nonfactual drivel really gets old."

So true Plato.Thanks for debunking some of purely partisan Republican talking points in this "editorial". I strongly suspect that most,if not all the "right-side"Freepress editorials are written by the RNC,then simply copied and pasted into the Chattanooga paper.

February 6, 2012 at 7:43 p.m.
rolando said...

Like Wash, DC, newbulbs. Only difference is, the one-percenters are joining the money they have stashed overseas.

In any case, you missed my point...that lost 40% of total tax revenue must come from someplace...can't get it from those who pay no taxes anyway [the 47% who ride free, including the 10% who are given "refunds"]...so that narrows it down to the rest of us.

February 6, 2012 at 7:44 p.m.
rolando said...

Consider these Free Press articles/editorials the written version of Clay Bennett's scribblings. Each has its own adherents. Each has what some consider "misinformation" while delivering their own version of distorted "truth". Each has what the "other side" considers tiring old "non-factual drivel".

Consider today's offering by Bennett.....how old and tiring is that one-trick-pony "drivel"?

February 6, 2012 at 7:52 p.m.

Well you could take from that forty-seven percent, but wait, 100 percent of everything they have would total how much? And have you ever bothered to look at the actual make-up of that group? There's more senior citizens and disabled in there than you probably consider.

But here's the good news, if we're no longer taxing that one percent, we don't have to spend several trillion on them. Let them pay for multiple aircraft carriers on their free market.

Or you know, we could point out to them that they are not more citizens than the rest of us, and that much of their wealth comes from who? Oh yeah, us!

February 6, 2012 at 9:19 p.m.
acerigger said...

Please point out the "non-factual drivel" in Bennetts Romney 'toon.

The "non-factual drivel" of the Freepress editorial(s) has already been pointed out. Your turn.

February 6, 2012 at 11:05 p.m.
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