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Higher Taxes, Whiskey and Car Keys

Today’s Wall Street Journal has a great essay by Stephen Moore and Richard Vedder in which they argue that "higher taxes won’t reduce the deficit," specifically saying, “History shows that when Congress gets more revenue, the (politicians) spend it.” This essay arrives as several plans have been released setting out how to eliminate the federal deficit.

The question remains, however, is do you reduce the deficit by raising taxes or cutting spending. Moore and Vedder note that Erskine Bowles, one of the co-chairs of the president’s deficit reduction commission “suggested at a briefing several months ago that there will be $3 of spending cuts for every $1 of tax increases.” The authors write that if that sounds familiar, it is since President “Reagan used to complain that he waited his entire presidency for the $3 of spending cuts that Congress promised for every dollar of new taxes he agreed to in 1982.”

Now P.J. O’Rourke made much the same argument opposing higher taxes when he said:

“Giving money and power to government is like giving whiskey and car keys to teenage boys.”

We also growled on November 10 when news broke that the commission’s co-chairs released their proposal.

Moore and Vedder point out that recommendations in the proposal, e.g., closing popular tax deductions and raising tax gas taxes, among others, would “drive tax collections up to 21% of GDP from the historical norm of about 18,5%. Spending would also increase so how would the deficit be reduced? The authors also produce research papers supporting their contention that higher taxes would not reduce the deficit. Moore and Vedder conclude their essay saying:

“We suspect that voters intuitively understand this tax and spend connection, which is why there is such hostility to broad-based tax increases. "Polls consistently find that a majority of Americans believe any new taxes will be spent by the politicians," pollster Scott Rasmussen told us recently in an interview.

“The grand bargain so many in Washington yearn for—tax increases coupled with spending cuts—is a fool's errand. Our research confirms what the late economist Milton Friedman said of Congress many years ago: "Politicians will always spend every penny of tax raised and whatever else they can get away with."

So well said!

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