Democrats are skewing facts on tax cuts 

It is difficult to conceive of a liberal myth more out of touch with economic reality than House Speaker Nancy Pelosi’s oft-repeated claim that tax cuts must be “paid for.”
Again and again this week, Pelosi has insisted that any extension of President George W. Bush’s 2001 and ’03 tax cuts should be restricted to the “middle class.” If the cuts are extended to couples making more than $250,000 — the rich, in Pelosi’s view — then, she claimed, Republicans are saying, “We should not pay for it, we should add that $700 billion to the deficit.”

Variations of Pelosi’s claim — such as the assertion that tax cuts “cost” the government — are the conventional wisdom among congressional Democrats and their allies in the liberal media and nonprofit activist communities. The stakes in this debate are immense. If all of the tax cuts expire as scheduled at midnight Dec. 31, it will result in the largest tax hike in American history.

But think about these liberal assertions for a millisecond and their speciousness becomes clear. For one thing, they assume that a tax cut is a gift from the government to the taxpayer rather than government choosing not to take something away that the taxpayer already possesses. Otherwise, to be logically consistent, the assumption must be that the money in taxpayers’ hands is actually government property, which we are allowed to keep until the tax collector demands that we return it in the form of taxes.

Another way of understanding the fallacious nature of the Pelosi argument that tax cuts must be “paid for” by government is to focus on the $700 billion she said will be added to the deficit if all of the Bush measures are extended. Where does Pelosi think that $700 billion presently resides if not in the hands of those who will have to pay higher levies if her position is accepted? Does the lame-duck House speaker really think the Warren Buffetts, Bill Gateses and Donald Trumps of the world will somehow break into the U.S. Treasury in the dead of night and steal the $700 billion if her view is rejected?

The practical reality is that the best way to acquire more from “the rich” is to reduce marginal tax rates. The total of tax payments by top-bracket households nearly doubled after the 2003 reductions, according to the most recent IRS data. The figures show the same pattern of the rich paying larger portions of growing government revenue from individual taxes following the tax cuts of Presidents Ronald Reagan, John Kennedy and Calvin Coolidge.

T.S. Elliot once argued that great poetry requires a “willing suspension of disbelief.” Believing liberal nostrums about tax cuts requires a willing suspension of reason.

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