The other guys are lost.
About a week ago the Wall Street Journal documented the growth of federal revenues since the Bush tax cuts were enacted in 2003. The numbers and the implications are substantial. Total revenues in this period are $785 billion, a huge amount; the federal deficit has fallen to about half the average of the last fifty years; and overall revenue is now 18.8 percent of GDP, which compares favorably with the 18.2 percent average of the past forty years.
Now, I’m sure that Tom Friedman of the New York Times is aware of these numbers, but perhaps they just don’t register. Since the 2003 tax cuts, tax revenues have increased $785 billion. With this plain fact out there, one wonders how a smart guy like Friedman could have written his column of October 7, “Charge It to My Kids.”
The thrust of Friedman’s article is that we should raise taxes to pay for the war, among other things. He writes, “The struggle against radical Islam is the fight of our generation. We all need to pitch in — not charge it on our children’s Visa cards.” And by “pitch in” he of course means raise taxes, which presumably will deliver the needed war revenues.
Is Freidman not watching?
Apparently he misses the point that the Bush tax-rate cuts didn’t cut tax collections. Rather, they triggered an explosion in tax revenues — $785 billion, a lofty amount historically speaking.
To help make his case, Friedman quotes another apparently lost fellow, Robert Hormats, vice chairman of Goldman Sachs International. Hormats notes that “during this Iraq war taxes have been lowered and domestic spending has climbed,” as if the war is actually draining our coffers.
But Hormats must have missed that $785 billion, too. Note also that the cost of the Iraq War to date is about $460 billion. So it turns out that we’ve actually paid for the war so far with $325 billion left over.
Friedman and the other lost souls still think that by raising taxes — on who else but the rich — this country can achieve wonderful goals (as if we don’t already lead the world in such achievements), while building a budget surplus so that we are always prepared for that inevitable “rainy day.” But in making their case they seem not to grasp the difference between taxes and tax revenues.
Take the capital-gains tax, for example. The editors of the Wall Street Journal, in an October 15 editorial entitled “A Capital Gains Primer,” do an excellent job of documenting the fact that when capital-gains tax rates are reduced, tax revenues from that activity rise. Conversely, when the government raises capital-gains tax rates, tax revenues fall.
But the facts never seem to deter the lost souls who are hell bent on raising taxes on the rich. And while they constantly talk about taxing the rich, they never suggest taxing Richie Rich, say with a wealth tax. Rather, they want to tax income — the point at which hard-working people get an opportunity to move up the standard-of-living ladder.
If Tom Friedman really wants Uncle Sam to reap more tax revenues, here’s how he can help the cause: Write a column that calls for a reduction in maximum tax rates on personal income to 25 percent, and a cut in the capital-gains tax rate — for any time period — to 10 percent.
If those tax rates gets enacted, federal revenues will explode yet again.