The Tax Cut is a Trick



By Grant Davies


The tax debate is back. Well, I guess it never left and it never will. But we can't let that stop us from talking it to death. After all, that's what blogs are for.

Meanwhile, let's make a few points about the recent tax legislation, as long as everyone else is talking it to death.

Obviously those who passed it (Republicans) are saying it's the best thing ever, as usual.

Those who oppose it (Democrats) are claiming the end of the world, as usual. 

Democrats say the stuff they always say. Basically they say that because of it we may be looking at starving babies, starving seniors, no health care, school closings, no fire department, no police, faster global warming, increased alien abductions, more Russian meddling, increased free speech, more student debt, more guns, more deportations, more walls, and general chaos. Did I miss anything?

Okay, I made some of that stuff up. They only hinted at those things this time out. But what they are actually saying again is even more inane. Oh, the old canard of "tax cuts for the rich" is still being used but the most preposterous worry of all is that this will "blow a hole in the deficit." (I've never been sure what the hell that meant since I always thought if you didn't like something and you had a bomb, you should blow a hole in it.)

The complaint might have more credibility if it wasn't being complained about by the very party that advocates more spending in perpetuity with no concern whatsoever for the inevitable consequences.

But let's get to my point/opinion about this new tax law. It sucks. Surprised? Only if you don't know me very well.

It sucks because it is merely toying with the code again and adjusting the numbers. What we really need, and what I have repeatedly asked that fictional old fat man for each Christmas, is a new tax system. Getting rid of the entire tax code, all 73,954 pages. (2014, it's more now) Just like the pony I asked him for as a kid, he never brings it. But, I digress. 

Let's contemplate the worst case scenario. What is better, the same old system, or the same old system with lower tax rates? Yep, the old system with rates not being reduced is the worst case. So should we make the perfect the enemy of the not quite as bad? Not in my mind.

And since I'm an old stock trader, I love graphs. Let's look at this simple one and see if we can figure anything out.



Other than making a good point, there is something wrong with this illustration. It's wrong because perfection would be a new system, and that would be more than barely noticeable. But we all get the idea, I think.

To wrap things up, I would like to make a much bigger point. It has to do with the level of taxation. 

When someone is asked what the level of taxation is, they usually go looking for statistics about how many taxpayers there are and dividing it by the total amount paid. I'm sure there are many more calculations that could be done, but it's something like that.

But as any old economist can tell you, (I'm only one of those things) there is a much simpler way to find the level. However, politicians never bring it up because it lays the whole stinking deception bare.

Simply add up all the government spending and the total amount is the level of taxation. Since the government isn't Santa Claus and there is no Easter bunny either, and since government has no funds of its own, every thing they spend money on must be taxed from the citizens.

Wait, you say....what about what they borrow or print? And what about those pesky subsidies and trade barriers and other gifts to favored businesses or unions?  The answer is, some of the people being taxed haven't even been born yet. And when the FED inflates the money supply by printing dollars, the amount of the decline in your purchasing power is tax as well. Also, any law or regulation that cause you to pay more for a good or service than you otherwise would have is also a tax. A tricky one, but a tax none-the-less.

If you guessed that answer correctly, you get to tell it to a liberal or other pinhead in a smug voice or a snarky meme.

So, the tax cut sucks, but not as much as if they didn't do it. The real answer to lowering taxes is to cut spending.  That would be a perfect way to deal with it. And it would be more than barely noticeable.

So screw this tax cut. It sucks because it's a trick. 



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