Does Goosing the Tax Payer Lay More Golden Eggs?

In his article entitled, “It’s the spending, stupid,” Wesley Messamore (The Daily Caller, December 6, 2010) states, “ … annoyingly, tax cuts still seem to pervade our discussion of fiscal policy.” He argues “The real fiscal issue of our era is Washington’s spending, and whether or not Bush’s tax cuts expire is simply a negligible issue in the face of deficits that have now started to measure in the trillions of dollars for the first time in our nation’s history. It’s time to get serious about cutting spending, not taxes. Republicans should offer the Democrats this compromise: that they’ll let the tax cuts for the wealthy expire if the Democrats will help them to substantially reduce federal spending across the board.”

Interesting argument, but it misses the larger point: the average tax payer has no more money to spend on anything, especially taxes.

• Over the past two years, the average family-of-four’s disposable income in Virginia Beach has dropped 14%, house values have dropped 17%, and the city government wants to raise taxes 2%.

• 47% of all wage earners pay NO federal income tax.

• As the recent spending reduction battle in Washington shows, when all is said and done, more is said than done: of what was thought to be a $68B reduction, approximately $350M will be realized according to the CBO.

Four times in history, the US government has lowered federal tax rates and in each case actual tax revenues to the Treasury increased (in dollars, not percentage of GDP). Unfortunately, progressive government continues to spend more money than it raises in revenue. In other words, the goose can no longer lay its golden eggs fast enough, so the government wants to kill it.

The best path forward is to curb our appetite for the things the goose’s gold buys, feed the goose, and encourage it to breed. This is best done by setting annual spending caps, with automatic triggers; lowering tax rates, especially corporate tax rates; and increasing the tax base to include more of those individuals who enjoy America’s freedoms and fleeting prosperity but pay nothing to the Treasury.