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Lying about Tax Cuts

originally posted: November  4, 2004
last updated: October 28, 2005

If you've heard it once, you've heard it a million times. It's one of the big lies of modern American politics. It goes like this:

Cutting taxes reduces the burden of government on the American people.

This idea has gotten so popular that even people who want to increase taxes find themselves constantly refering to the "tax burden." It certainly feels true, especially when April 15th comes around each year, but it's not. It's a lie.

The Granny Burden

Imagine your poor grandmother's retirement money runs out. She has no money left, so she moves in with you. Every week Granny puts on her tax collector hat, and asks you for $100. You give it to her and she spends it on this and that.

After a while, you start feeling like that $100 a week is too much of a burden. You just can't afford it. So Granny agrees to give you a tax cut. She'll only ask for $50 a week now.

For a while you feel happier. But then you notice, that Granny still seems to be spending as much as ever. In fact, she seems to be spending more than ever. You ask her what's up, and she says, "Oh! It's no problem! I just took a loan out in your name, so now you only have to give me $50 a week, and I can spend $150 a week! Wasn't that clever of me? I'm so happy not to be so much of a burden on you any more!"

Maybe you are not too thrilled with Granny just now. As long as Granny's spending is increasing, the financial burden on you is increasing. The fact that she is taking less in cash from you every week is no help at all. If she has no money of her own, everything she spends ultimately comes out your pocket, one way or the other.

Here's the truth:

The burden of the government on the American people cannot be reduced by only cutting taxes. To reduce the burden, you must cut spending.

When politicians "cut taxes" while increasing spending, as President Bush does, they are not reducing the burden of government on the American people. They are just rearranging which American people the burden falls on. Bush increased spending more than twice as fast as Clinton did. He didn't reduce the burden of government, he increased it. His tax cuts did not magically make the cost of that increased spending disappear. Instead, the cuts shifted that increased burden off our shoulders (or at least off the shoulders of the richest among us) and onto all our children's shoulders. Redistributing the burden is not the same as reducing it.

The Granny Benefit

But there is a deeper lie hidden in the very idea of "tax burdens." To discover it, we need to pay some attention to what Granny is spending all that money on.

Let's suppose that Granny is not just spending all that money on wild drunken bingo parties. Let's suppose she is spending much of her money on buying lunchs and school books for your kids, and household supplies for your family. She does spend some money on food and clothing for herself, but she spends most of her time helping with housework, watching the kids to help keep them safe, and helping them with their homework. She spends some time chatting with the neighbors, and gives them some small gifts, but this improvement in your family's relationship with your neighbors benefits your family too.

If this is the case, people are going to think you quite the grinch if you go around calling Granny's spending a "burden."

Ideally, government spending would work the same way. It would be a burden, because we have pay for it, but every bit of spending should also be a benefit that is worth what we are paying for it.

Here's the truth:

It is senseless to speak of the burden of taxes without considering the benefits that those taxes make possible.

Now different people may feel differently about how much use they want to make of Granny Government. If you give her more money, she can probably do more for you. You may like that, or you may prefer to give her less money, and do more for yourself. That's a partly a question of your values, and partly a question of how well you feel Granny Government does her tasks.

It's certainly legitimate to evaluate each government program and determine whether the benefits of the program balance the burden of the spending it requires. We certainly have many government programs that are not by any sane standard a net benefit to America, and they should certainly be cut. If you do that, government will be less of a burden on the nation, and more of a benefit to the nation. But focusing entirely on the "burden" of government, and cutting spending without thinking about the value of what is being bought would be just plain stupid.

President Bush treats cutting taxes as a pure virtue and an unquestioned good. But he doesn't seem to want to cut any spending. He wants the benefits of all those government programs. In fact, he wants the government to do more for us, like paying for prescription drugs, funding private retirement accounts, and rebuilding middle-eastern nations. He wants all that stuff, but he doesn't want to pay for it. So he's taken Granny's dodge - taxing us through the back door by borrowing money in our name.

Cutting taxes without cutting spending is just a way to make your kids pay for the benefits you are receiving. That is not a pure virtue. That is nothing but greed and shortsightedness.

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