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Archive for June 29th, 2011

Those who had the misfortune of seeing President Obama go after “tax breaks for corporate jets” as part of his press conference may be wondering why he was attacking a provision that was in his so-called stimulus and enacted by a Democratic-controlled Congress in 2009.

But that’s just routine politics. The folks in the White House are probably laughing about screwing jet builders after collecting campaign money from them in exchange for that provision two years ago.

The more important thing to focus on is the way that the big spenders in the White House and elsewhere are trying to build support for a big tax increase by characterizing tax breaks as “spending in the tax code.” The left obviously hopes Republicans are so stupid that Orwellian word games are all that is needed to get them to acquiesce to legislation that would increase the amount of revenue going to Washington.

To be sure, Republicans are known as the “Stupid Party,” so anything is possible. But if GOPers can simply remember these three simple concepts, they will be in good shape.

    1. Tax reform is when you get rid of special tax breaks and use the revenue to finance lower tax rates.

      Under a flat tax, for instance, all the loopholes and distortions in the tax system are eliminated, and every single penny is used to finance lower tax rates. The politicians don’t get any additional revenue to waste.

      But if the crowd in Washington gets rid of the tax preferences without lowering tax rates, that’s just a tax increase. It’s a less-destructive way of raising revenue, at least compared to higher tax rates, but it’s still a tax increase.

    2. A tax increase is when politicians impose legislation that increases the overall burden on taxpayers and results in more revenue in Washington.

      If legislation is enacted that results in more money coming into Washington, that is a tax increase. It doesn’t matter if the additional revenue is generated by eliminating a special tax break (such as for ethanol). If politicians wind up having more money to waste, that is a tax increase.

      The only exception is if the additional revenue is from some sort of Laffer Curve effect – i.e., a lower tax rate that generates higher tax receipts.

    3. Government spending is when politicians give you other people’s money, not when you’re allowed to keep your own money.

      When politicians tax (or borrow) money from one person and give it to another, that’s government spending. But if politicians allow a person keep more of their own money, that’s a tax cut. The tax cut may be pro-growth, such as a lower tax rate. Or the tax cut may be inefficient and distorting, such as an expanded tax loophole for healthcare.

      From a moral perspective (at least if one believes in the right of self-ownership), there’s a big difference between taking what someone else has produced or keeping what you have produced. Politicians want to blur that difference, but that doesn’t change reality.

I’ve already explained that left has one fiscal policy goal. They want to seduce Republicans into a tax hike. Orwellian dishonesty about tax reform is just another scheme to accomplish that goal.

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Here’s a new video, less than 2-1/2 minutes, pointing out some of the key differences between rich nations and poor nations. Not surprisingly, small government, free markets, and sound institutions are critical.

I narrated a similar video, released more than two years ago, that makes similar points. The production values are not as high, but I had six minutes to play with, so it gave me an opportunity to elaborate on the various factors that contribute to growth. I think the videos are good complements.

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