Paying for Tax Cuts? Whose Money is it?

Posted: Monday, September 13th, 2010

"How will we pay for the tax cut?"
I laugh when I hear that question because it's so obviously illogical. If the government were to cut taxes, say, by lowering rates or outright repeal, people would simply be free to hold on to money they otherwise would have sent to the IRS under threat of punishment. Allowing them to keep that money requires no expenditure. If the tax cut is dramatic enough, it might save money by permitting a shrinking of the government's tax-collection machine. In the most basic sense, a tax cut costs nothing. What people who ask that question really mean is: How will the revenue forgone be made up? Why do they care? Because they don't want the government to have to cut spending.

Tax cuts don't cost money; government programs do.
The demand that tax cuts be paid for rests on the claim that government distribution of other people's resources - euphemistically called "spending" - is sacrosanct. If you dare to propose that less money be sucked into the government's coffers through one form of taxation, you'd darn well have a plan to make up that lost money because cutting spending is out of the question. That means raising other taxes to offset the cuts.

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