Does anyone out there know the difference between a tax increase and a tax-revenue increase?

Here is a message is sent on April 19, 2009, to Neil Cavuto, who, despite conservative pretensions and labeling, does not seem to grasp the fundamental difference between a tax increase and a tax-revenue increase.

Dear Mr. Cavuto,

Tax-rate increases do not lead to tax-revenue increases.  Never did, never will.  If you want the proof from an academic standpoint, check out the 2 links below, and if you are still unconvinced, contact Glenn Hubbard, dean of the Columbia U. economics dept.

It is disheartening to watch you continually beaten down by Liberal guests who persist in the fantasy that raising tax rates for upper-income taxpayers will somehow raise revenues and thereby help to pay down the trillions of dollars of debt that they have planned for us.  They almost invariably con you into a discussion of whether higher rates are “fair,” which is not only a dead-end fantasy but a red herring.  The primary goal of fiscal policy is not fairness, it is the raising of the maximum amount of revenue through taxation.  So, the proper question is, do we raise more money by raising rates or lowering rates?

As Alan Reynolds, David Ranson, and Dean Hubbard all agree, the raising of rates causes the intended victims to change their behavior, in ways that save them taxes but cost the economy money.  In fact, if you want to raise tax revenues, the smartest thing to do is to significantly and permanently lower the rates of taxation on upper-income individuals, corporations, and the recipients of capital gains, dividends, and decedents’ estates; by doing so, you would instantly put the kind of optimism into the markets and the economy that all of these “stimulus” plans are supposedly intended to generate.

Indeed, if the Liberals wanted to insist upon their obsolete “pay-go” theory, we could simply establish a set of rate-cuts that  the Liberals would expect to cost us a couple trillion or so, and use that as our “stimulus” expenditure instead of spending that much money to bail out the financial industry, the auto industry, the insurance industry,, the healthcare industry, etc – it is a near-certainty that the ultimate effect of the cuts would be that the net cost to the Treasury would be little or nothing.    But I guess that suggestion will never see the light of day, because it would deny the Administration its excuse for nationalizing the whole private sector.

[Posted on 10 Feb 2012]

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