12/07/2017

Fiscal Responsibility Or Lower Taxes?

Ben Shapiro, Townhall

This week, Republicans in the Senate finally passed their long-awaited tax reform plan. It lowers individual income tax rates across the board, although it does claw back some government revenue in the form of elimination of state and local tax deductions. It drops corporate tax rates as well. It is, in other words, a significant but not atypical Republican tax cut designed to boost economic growth by allowing Americans to keep more of their own money.

The tax cut will almost certainly increase the deficit, however. Even with dynamic scoring -- the assumption that the economy will grow at a faster clip thanks to tax cuts -- the tax cuts could lead to $1 trillion in lower revenue through 2027. This has led some conservatives to sour on tax reform altogether, rightly saying that Republicans were, until a few months ago, complaining incessantly about former President Obama's blowout deficits and the burgeoning national debt, which now stands at a cool $20.5 trillion. That doesn't include long-term unfunded liabilities, which are slated to bring the debt to some $70 to 75 trillion in coming decades.

So, which is more important: cutting deficits or cutting taxes?

The answer, in the long run, is obvious: cutting deficits. Deficits impoverish future generations; they undermine the credibility of our financial commitments; they prevent us from fulfilling promises we have already made to our own citizens. There are already millions of Americans who will never receive Social Security in the amount they have been promised; there are already millions of Americans unborn who will spend their lives paying off the commitments made by others for political gain.

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The Reagan Tax Cuts Worked

Thanks to "bracket creep," the inflation of the 1970s pushed millions of taxpayers into higher tax brackets even though their inflation-adjusted incomes were not rising. To help offset this tax increase and also to improve incentives to work, save, and invest, President Reagan proposed sweeping tax rate reductions during the 1980s. What happened? Total tax revenues climbed by 99.4 percent during the 1980s, and the results are even more impressive when looking at what happened to personal income tax revenues. Once the economy received an unambiguous tax cut in January 1983, income tax revenues climbed dramatically, increasing by more than 54 percent by 1989 (28 percent after adjusting for inflation).

 

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