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“Republicans Return To Tax Cut Fantasyland”: Every Argument Republicans Have Made In Last 20 Yrs About Taxes Have Been Wrong

One surprising thing about the campaign Mitt Romney ran in 2012 was that cutting taxes, a theme you might have expected from someone of his profile, wasn’t at the center of it. Perhaps wary of getting painted, even more than he already was, as the representative of the rich, Romney proposed a tax cut plan that was, by Republican standards anyway, rather modest. But those were the bad old days—tax-cut fever is back in the GOP, with a vengeance. From Bloomberg’s Richard Rubin:

The campaign for the Republican nomination for president is poised to become a race to the biggest tax cut.

More than a dozen candidates are vying for attention from donors and the party’s base voters, and they aren’t letting the U.S. budget deficit get in their way.

Senator Marco Rubio of Florida kicked off the competition with his plan to boost economic growth by slashing taxes on investments, wages and business income. Even the plan’s proponents concede it would reduce tax collections by at least $1.7 trillion in the first decade, largely favoring the top 1 percent of Americans over the middle class.

Senator Rand Paul of Kentucky says he will propose the biggest tax cut in U.S. history. Rick Perry and Rick Santorum, both considering repeat presidential campaigns, ran on reducing taxes four years ago and would be expected to do so again.

The shrinking deficit—it’s less than half of what it was four years ago—creates an opening for Republicans to return to the tax-cut politics that propelled Ronald Reagan and George W. Bush into the White House.

“It focuses on the right question at the right time, which is: How will we grow more rapidly?” Douglas Holtz-Eakin, a Republican and former director of the Congressional Budget Office, said of the proposal Rubio released last week with Senator Mike Lee of Utah. Holtz-Eakin acknowledged that the tax cuts require spending reductions to keep the deficit in check.

Holtz-Eakin is not just wrong about that, but wrong in two separate ways. First, how we grow more rapidly is not at all the right question. The question everyone is asking now is how we spread the gains of a growing economy more widely. And second, even if the question were how to grow more, tax cuts would not be the answer.

You have to admire one thing about the Republican perspective on this issue: their unflagging insistence, despite a mountain of evidence to the contrary, that the best and perhaps only way to affect the economy is by adjusting the tax rate paid by wealthy people. Here’s a quick history review of the last two decades: In 1993, Bill Clinton signed a budget that included tax increases. Republicans unanimously said it would bring a “job-killing recession.” It didn’t; in fact, almost 23 million jobs were created during Clinton’s two terms. Then George W. Bush got elected and signed two rounds of enormous tax cuts. Republicans promised these cuts would super-charge the economy. They didn’t; job growth was weak throughout Bush’s term. Then at the end of 2012, the deal ending the “fiscal cliff” allowed the top income tax rate to revert back to what it had been during the Clinton years. Republicans grumbled that this increase would hamper job growth. That didn’t happen either; in the two years since, the economy has created 5 million jobs.

In other words, the Republicans’ essential theory about upper income taxes—increasing them destroys jobs and smothers growth, while cutting them explodes growth and creates huge numbers of jobs—is not just wrong, but demonstrably, obviously, spectacularly wrong. Yet they keep saying it.

The reason isn’t all that difficult to concern. For conservatives, cutting upper-income taxes isn’t a practical imperative, it’s a moral imperative. It’s just the right thing to do. Taxes are an inherent moral evil, and taxes on those who have proved their industriousness and virtue by being rich are the most profound moral evil of all. This is a very different argument from the practical one, which says that if we cut taxes for the wealthy then good things will happen to everyone as a consequence.

Republicans know that the moral argument has appeal to only a very small number of Americans, mainly those would benefit directly from upper-income tax cuts. So the practical argument is the one they must offer, even if it happens to be utterly false.

So here’s the question they ought to be asked: “Every argument Republicans have made in the last 20 years about taxes has turned out to be wrong. Now you’re saying if we cut upper-income taxes, it will produce terrific growth. Why would that be true now when it hasn’t been true before?”

 

By: Paul Waldman, Senior Writer, The American Prospect, March 13, 2015

March 15, 2015 - Posted by | Deficits, Republicans, Tax Cuts | , , , , , , ,

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