Wednesday, January 28, 2009

Obama's "Tax Cuts"

Public opinion is behind tax cuts. In a recent poll, 58% of Americans said they would oppose a new fiscal stimulus program if it did not include tax cuts. While it is natural that Americans should want tax cuts, we should be careful about the methods we choose to achieve that goal...

Perhaps the most disturbing part of this discussion is the failure of so many people to recognize the illusory nature of the Obama tax cuts, which would reduce the immediate tax burden for some Americans by increasing the federal deficit. A switch from tax-financed spending to deficit-financed spending does little to change the existing division of resources between the private and public sector.

Obama's tax cut does not shift resources into the private sector, as a true tax cut would. What Obama is proposing is deferred taxation. He wants to spend now and tax later. The Obama deficits will increase the interest payments by the federal government, draw money in capital markets away from private investment, and ultimately result in higher future tax rates...

Overall, the Obama plan to borrow now and tax later does not stimulate the economy; it just keeps a large part of the economy in the public sector. There is no real tax cut in his proposal. In real economic terms, the alleged tax cuts in Obama's plan keep tax rates the same.

The real cost here stems from government waste...

Government waste is a drain on future economic growth. Lower economic growth is a hidden tax that we all pay. That is, it is a tax that is completely unseen by people who accept the rhetoric of economically illiterate politicians like Barack Obama. Unfortunately, many Americans are ready to be fooled by Obama's mythical tax cuts and fiscal stimulus. While Obama promised change, he is changing nothing with his tax policy.

read the entire essay

My thoughts: Smoke and mirrors. Cut tax rates. Or better yet eliminate the income tax and cut spending to match.

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