When the local store managers sit down and plan for the next big sale, do you think anyone asks, “So how are we going to pay for this sale?” Of course, no one in his right mind would ever say that about a store sale. Why? Because the increased volume of customers will lead to an increase in overall revenue, not a decrease. Anyone who has ever run a store understands this principle completely. But do you think the liberal left understands this in government? Well, if they do, they certainly don’t act as if they understood it.
Why am I being so harsh on the leftist liberals sitting in the seats of power in Washington D.C.? Because they have yet to learn from the lessons history teaches. This can be seen time and time again, but for the nonce, let’s focus on taxes. The liberals who stalk the halls of power in Washington crave and covet every dime of taxpayer money. No amount of social spending is too much for a liberal, but propose spending tax revenues on something which is actually a Congressional responsibility, such as defense, and they will begin to defend the glorious virtue of fiscal responsibility. Currently the Democrats are blanching at President Bush’s proposal of $87 billion to help fight terror and rebuild Iraq and Afghanistan. Democratic Senator Joseph Biden of Delaware is demanding that the tax cuts for the wealthiest Americans be postponed to pay for this proposed funding. Is he asking for this because he’s truly concerned about the government’s bottom line? Of course not! He is a Democrat, after all, and he is firmly in favor of spending over $400 billion on projects like prescription drugs for seniors. So why is he asking to strip the proposed tax cut from the wealthy? It is quite simple–he hates tax cuts.
So why do today’s Democrats hate tax cuts so much? It is a matter of philosophy. They believe that every dime you own is a dime they could spend better and more wisely. If they had their way, they would take all your money since they are so much smarter than you in knowing just how it should be spent. After all, they are the intellectual elite and you are just some brainless hick who should bow to their enlightened whims. If they truly wanted the government to be awash in tax revenue, they would drop the tax rates on Americans.
I can see some people reading this and wondering if I got that right. After all, they think, how can the government get more if it taxes less? It will make more sense if you realize just what the government is. Does the government produce anything? No. It gets all its money from taxation and fees, much like a blood-sucking mosquito or tick, rather than producing any tangible good of its own. But while government does not produce anything, it certainly has a big effect on the American economy. Imagine the economy as a vast flow of water going from place to place, and the government as the pipe through which it flows. The pipe itself does not produce water; it is just moving it around. But it is very easy to see how the pipe can reduce the free flow of water if it becomes plugged or if someone starts cranking down a valve to close it. Government, by its very existence, impedes the free flow of money in the economy with every dollar it takes to fund itself and/or regulate others. As it increases the tax burden on the people, it is cranking down on the free flow of money through the economic pipe. If the government regulated less and taxed at a lower rate, the net result would be a freer and more lively economy, just as a clean, unobstructed pipe allows more water to pass through. Don’t believe me? Then let me give you a concrete example–only about 25 cents of every dollar appropriated for welfare actually makes it to a welfare recipient. Talk about some clogged pipes!
As government steps in to regulate and tax, the economy runs slower and slower. Likewise, the less the government regulates and taxes, the better the economy will be. And as the economy runs well, the government receives more tax revenues. Since Democrats do not understand this, I will point to three examples of how lowering tax rates improved overall tax receipts.
* In the 1920s, the tax rates were reduced, and tax revenues increased by 61%.
* In the 1960s, the tax rates were reduced, and revenues increased by 62%.
* In the 1980s, the tax rates were reduced, and revenues increased by 54%.
Each time the tax burden was reduced on the American people, the economy took off and tax revenues went up. True, the government was getting a smaller slice of the economic pie, but since the overall pie grew, that slice was bigger than before. However, it is possible to drop the tax rates so low that the government will bring in less money. This is predicted in the Laffer Curve. In a nutshell, the Laffer Curve says that between 0% and 100% taxes, there is an optimum tax rate that will bring in the most possible revenue for government. Democrats often discredit the Laffer Curve by pointing to the huge deficits rung up during the Reagan years. However, these deficits were caused not by a lack of revenue, but by a related Congressional increase in spending. Regardless of how much money you earn, if you spend more than your pay raises bring in, you will find yourself in debt; that is precisely what happened during the Reagan years.
If Democrats truly wanted to fund every social program under the sun, they would be champions of reducing tax rates and heating up the American economy. After all, each time this has been tried, the end results have been increased wealth and prosperity for both the people and government. But you will not hear that from the Democrats in D.C. Why is that? I have to believe that they view your money as really belonging to them, and the very idea of you keeping more of your money grates on their nerves.
That, or they have never learned anything from history.