The Debt Limit debate is in full swing with the President and Congressional Democrats are breaking out their cliché fear mongering rhetoric. With that in mind, I wanted to take time this week to dissect these talking points and explain why they are false. For starters, Republicans are responsibly refusing to allow Democrats to raise taxes in this already strained economy. One talking point that keeps coming from the Left is “We tried tax cuts last year and they haven’t helped the economy.”
Inherent in this statement is a huge lie: In 2010 there were no tax cuts, other than a piddling little 2% cut in social security taxes. Other than that, all that happened was an extension of existing tax rates. Continuing the status quo by its very definition is not a cut. If I decide to maintain my current diet, including my current caloric intake, I cannot say I’ve cut calories. Yet Democrats want us to believe that the President cut income taxes. He didn’t cut income taxes. He simply didn’t raise them.
You see, friends, Liberals seem to believe that the proper income tax rates are always whatever the last Democrat President’s tax increases set the rates. In our modern time, this means they consider any tax rate below Bill Clinton’s 1993 tax increase as a cut. That’s why they keep referring to the Bush tax rates which have been in place since 2003 as “tax cuts.” It’s pure sophistry. The current tax rates have been in place since 2003. Those rates will now continue until 2012. The current tax rates we have now are the tax rates, period. They are not a cut anymore. In 2003 when they were enacted they were cuts, because they reduced tax rates from what the rates were in 2002. The rates this year are precisely the same as they were last year, as they were the year before and since 2003. Simply maintaining them is not a cut.
President Obama didn’t cut taxes. The reason tax cuts are good for the economy is because it means people have more take home pay in their paycheck. Let’s use Bush’s 2001 and 2003 tax cuts. Regardless of what Liberals want to tell you, every tax bracket saw a rate cut. So let’s look at the lowest tax bracket as an example, shall we? Let’s take that person in the bottom tax bracket. Prior to the Bush tax cuts, that bracket was 15%. So a person who is in that bottom bracket who has an annual income of $20,000 per year under the previous brackets would be paying $3000 per year in federal taxes. Under the Bush cuts that individual’s tax rate was cut to 10%. So instead of paying $3000 in federal taxes, now they are paying $2000 in federal taxes.
It may not sound like much, but it’s actually a big difference in that person’s budget. It’s a difference of about $80 per month. To that person who is making only $20,000 per year in salary (that’s a bit over $1600 per month), an extra $80 per month is a big difference.
$80 a month extra is actually a big deal even for someone making more than $20,000 per year. I’ll use some examples in my own personal budget as someone who does make a decent amount over that figure: $80 is roughly the amount I spend every two weeks on groceries for myself. It’s also approximately what I spend for two weeks worth of gas for my car. $80 is about what I pay for car insurance each month. I drive a used car that has close to 100,000 miles on it, so I budget about $80 per month for repairs as needed.
While we’re at it, consider the fact that I’m already paying all those items with the money I’m currently earning. Unlike the Federal government, I’m living within my financial means. Actually, I’m able to fulfill my budget, have a little bit of play money and save about 5% of my income. An extra $80 would make a HUGE difference in my life. With $80 more each month, I could go out to dinner five more times each month than I do now. I could afford to go to the movies more often. In the summer, $80 would give me the ability to play golf two more times each month at a nice golf course. One of my favorite things to do is go see my local minor league baseball team’s games. With $80 per month, I could go to four Rochester Redwings games with a friend each month during the summer.
Perhaps you don’t understand how me having an extra $80 helps the economy. Here’s how: Someone has to take my money at the movie theater. Somebody has to pour my soda and scoop my popcorn. Somebody has to mow the grass at the golf course and maintain the tee boxes and greens. Somebody has to work the box office at the ball game. Somebody has to cook the hot dog and pour the beverage I’ll buy there at the game and take my money when I buy those items.
When lots of people suddenly have more money in their paychecks and their fixed expenses stay the same (for those of you from Palm Beach County, FL, fixed expenses are things like housing, car payments, and utilities that are always part of your budget each month), it gets spent on buying new things that aren’t needed at the moment, like a car or new furniture or a new television. If several people choose to go to the movies more regularly, the theater needs to staff their shifts with more ticket takers, ushers, and concession stand attendants. Another person might choose to buy new clothes, which means the clothing store needs to have someone there to take care of the shoppers. Not to mention the fact that the company that makes the clothes is now selling more items and increasing its production. Even if I put the entirety of that money into savings, that’s an extra $1000 in the bank. (For those of you from Palm Beach County, FL, banks don’t just hang on to your money in a big safe. They use that money to give loans to businesses and individuals. That’s why the pay you interest.)
That’s why tax cuts help the economy. In 2010, there was no cut. My paycheck didn’t see any significant increase in take home pay. Saw that 2% cut in social security taxes…it meant a whopping extra $8 in my paycheck over the course of a month. I can buy one fast food meal with that (hardly world-changing). For all intents and purposes, my take home pay did not change. There was no tax cut. People didn’t have any more money in their pockets, so they didn’t have anything extra to spend. So basically, we did nothing and nothing happened. What a shock.
It is an Obama lie taxes were cut. It’s a further lie to say that Republicans are “fighting to keep the tax cuts of millionaires and billionaires.” The current rates have been in place for eight years to date. They are not a cut. They are the tax rates. Should those rates be increased, it would not be removing a tax cut, it would be raising taxes. Specifically, it would be raising taxes on the very people who own businesses. It would be raising taxes on the people who create jobs. Same goes for raising capital gains taxes. You are taking business capital out of the budgets of business owners. Not a wise decision when what this country needs is more jobs.
This particular talking point is nothing more than class warfare. They are trying to play divide and conquer, to tell people that the benevolent government will get back at those evil people who have more money than you. Let me ask you a question, if you are one such person who believes it would be good to get back at that rich person: If they have less money, does it help you at all? Do you suddenly have more wealth? No. Only the government will be wealthier. You think the government is going to give it to you? Only in the form of government programs that keep you in poverty. The only equality of outcome government can give you is equality of bad results by trickling up poverty.
The economy won’t be improved by taking more from the wealthy. Neither will the deficit be reduced. As Senator Marco Rubio demonstrated last week, it would only pay for about ten days of deficit spending. What’s the plan for dealing with the other 355 days? Here’s the truth that Obama won’t tell you: To achieve the positive results of tax cuts, you have to actually reduce the current rates. The 2010 tax extension did not increase anyone’s take-home pay. It won’t lead to new revenue through new taxpayers via new jobs. Tax cuts work. They’ve worked every time they’ve been tried. Maintaining the status quo and expecting new and better results doesn’t happen.
When the President and other Liberals try to say “we tried tax cuts, they didn’t work,” know that it’s a lie. They didn’t cut taxes. They just didn’t raise them. They didn’t do unnecessary harm to the economy in 2010 by raising taxes, that much is true. They also didn’t do anything to help it. They just let it sit still in its ill state.