Unemployment And The Economy: What Will The Tax Cuts Cost The Deficit
By Janet Peterson on September 3, 2010, 5:15 pm Posted in Finance NewsThe tax cuts will not cost the deficit anything provided they are done correctly. Historical examples, particularly those provided by the Reagan tax-cuts show that deficits go down when Congress makes moves to let people keep more of their own money. The reasons for this are found in human psychology rather than the pages of a math book. The current tax rates are confiscatory and discourage achievement.
Why Tax Cuts Reduced the Deficit
Even the person who knows virtually nothing about the tax laws knows that they are complicated mess that provides too many loopholes. The simplest answer would be a reasonable flat tax with rates much lower than have been proposed in the past. The reason lowering the taxes increases revenues is simple. No one views that taxes they pay as the government’s money. It’s viewed as a legal and necessary form of theft. People go out of their way to keep as much of their money as possible, particularly if the government demands a large percentage of income. If the rates get reduced, people do not go out of their way to manipulate as many parts of the tax code.
Better Solutions To The Deficit
The best bets to reduce the deficit is to get the government to reduce spending. Even though the Tea Party candidates are gaining ground, they may not be able to get enough votes to push their agenda through Congress. Tax increases will only increase the problem and taxing the rich specifically may cause them to seek other areas to live. Punishing the rich for being rich does not always work the way people think it does. People with the most money also have the means to move where there are lower taxes. They will make the move to save money, too.