GOPideas... ideas done right

The notion of “intellectual honesty” is vital to true political discourse because it allows for citizens to have confidence that the arguments made by policymakers are not a compendium of facts engineered to lead to a conclusion that would not be reached if all the relevant facts were known. Both parties are guilty of intellectual dishonesty, but as Republicans we must hold the party to a higher standard because winning arguments and elections are not the goal. Arguments and elections are prerequisites to the goal: to change the country.

Intuitively, microeconomics dictates that as individuals gain the ability to create wealth, they will do so provided that the wealth gained is greater than the opportunity costs the individuals would need to invest to achieve the gain. If individuals can attain more wealth at an opportunity cost they deem appropriate, they will pursue the growth, if the opportunity costs are greater, the individuals will invest efforts elsewhere. This is the basis for the Laffer Curve --- the economic basis for supply side economics. The theory of economic activity is sound: if people are taxed at lower rates, they will be willing to produce more wealth. Furthermore, Republicans correctly note that tax revenues increased after the major tax cuts of Kennedy and Reagan. This is where conservatives lose their intellectual bearing by categorically stating that if taxes are cut, revenues will rise. As Arthur Laffer himself admits:

“The Laffer Curve itself does not say whether a tax cut will raise or lower revenues. Revenue responses to a tax rate change will depend upon the tax system in place, the time period being considered, the ease of movement into underground activities, the level of tax rates already in place, the prevalence of legal and accounting-driven tax loopholes, and the proclivities of the productive factors.”

Even the famous graph of the Laffer Curve demonstrates that at some points a tax cut will decrease revenues --- conversely, a tax hike will raise revenues. 

For those still not convinced, that raising taxes lowers revenues, note this report that discusses how raising the cigarette tax increased revenues. A better example is a CRS report on federal excise taxes on cigarettes that shows cigarette taxes rising from 24 cents per pack in 1999 to 39 cents per pack in 2002. In sum:

Tax data from IRS here. (full disclosure of intellectual honesty, cigarettes may be considered highly inelastic goods because of their addictive nature, thus consumers are less likely to respond to price signals.)

For a more common sense example, what if we cut tax rates by 99%? If the US has tax revenues of $2 trillion on $14 trillion of GDP and taxes were cut 99%, then revenues would need to increase by over $1,386 trillion for overall revenue to provide the government with more than the $2 trillion it had to start.

The math is not all that difficult --- yet Republicans continue to argue tax cut = revenue increase. Tax cut = increased economic activity does hold, but we cannot pay for education, health care, interest on the debt, Social Security or Medicare with economic activity, only with actual dollars.

Taxes should be cut, but not because of a phony assumption, but rather that individuals, not the government, earned that money and individuals, not the government, have the moral right to decide how best to spend the money they earn.