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December 2 2010

Whoa There, Tax Cuts Don't Have to Be "Deficit-Financed"

Hadley Heath

In a discussion about budgetary policy, it's important to remember that government spending is not "government-financed."  It is either "taxpayer-financed" or "deficit-financed."

It is not tax cuts that are "crazy" or "deficit-financed;" it is the spending.  Income taxes are government revenues.  They come from us, people who have incomes.  The money that the government collects from taxes is money that we have earned.  But the government does not have to "borrow money" from China or other lenders to allow Americans to keep more of what they rightfully own and what they have earned.

Granted, it would be hard for the government to spend money on anything (including good things like our court system or national defense) without any revenues.  Americans have been paying some form of taxes since (and before, as colonists, to King George) the founding of our country.  In general, we support the collection of some taxes to fund the safety and stability of our country and states.   And as far as income taxes go, we've learned that the rate of taxation doesn't always predict receipts because of the Laffer Curve effect and other forces in our economy.  We've lowered the tax rate on our highest earners several times since 1960 and received relatively constant revenues from individual incomes taxes as a percentage of GDP.

But the reason we are now talking about tax cuts "adding to the deficit" is because our government is spending money faster than it can come in.  We've got national debt up to our eyeballs, and too many of our leaders are committed to spending the money from tax receipts on programs and entitlements we can't afford.  So they believe that raising tax rates will 1) raise tax receipts, which is questionable and 2) fix our budget woes, which is impossible without a discussion about spending.

So, let's please stop using this rhetoric about "deficit-financed" tax cuts.  The only thing the deficit is financing is out-of-control spending.  It is not going to finance more of my paycheck moving from the "withdrawals" column to the "going-to-the-bank" column.  That's my money, not China's!  And I'm willing to give up a reasonable amount of my money in taxes, but only to a government responsible enough to limit spending within reason.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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