Tax Breaks

In this morning's Dallas Morning News was an article concerning tax breaks. In the article, it was mentioned how the earned income tax credit alone will cost the federal government roughly $49 billion in 2008. Tax beaks will "cost" the federal government billions of dollars this year. As is common, the topic of tax breaks was discussed as if the government was paying out money. It is not. Lowering taxes is simply the government taking less of what does not really belong to it in the first place.

When the government lowers taxes or grants tax breaks, the money is not lost. It certainly is not wasted. It stays with those who earned it. The money retained is either saved or spent. In either case, the economy benefits. The only thing that is lost is the government's ability to spend that money.

Many are critical of the idea of tax cuts. They argue that reducing taxes will only make the debt problem worse. They are right. But the massive federal debt is not due to deficient tax collection: tax revenue has been going up for years. It is due to reckless overspending by the government. The government has taken a spend first, collect later approach to managing the nation's affairs. The government determines how much it wants to spend before it determines how it will pay for it. Whatever it decides it wants to spend is spent. The difference between income and expenditures is worked out afterward through raising taxes and borrowing money.

Tax cuts cost the government nothing. Spending money costs the government everything. The government is not in debt because it is not collecting enough in taxes. It is in debt because it has been spending more than it has been collecting. To cite the national debt as a reason to resist tax cuts or to raise taxes is to punish tax payers for the government's fiscal recklessness.

If people are serious about demanding tax cuts, they will have to wean themselves off government and demand less from it. There is little indication that is likely to happen. Each year, people become more dependent on government and expect more from it: and that costs money. That is just fine with Washington. For many politicians in Washington, a nation dependent on government is priceless.