Tuesday, February 1, 2011

2. What’s wrong with being an ideologue on taxes?

The main point here is that when you are an ideologue, you do not consider circumstances and context. Many people, particularly on the right, proudly proclaim their ideological purity. “I am a conservative and I am for the conservative principle of tax cuts.” We know that an ideological stance for tax cuts in all circumstances is not valid in commonly occurring conditions (context). So doesn’t this make ideological approaches invalid?

A splendid reference point is the Reagan tax cuts (1981-83), which, for many conservatives, provide a permanent justification for all future tax cuts. In 1980, the top tax rate was 70 percent (today it is 35 percent). There had also been nearly a decade of significant inflation, without any adjustment for tax brackets—“bracket creep” (tax brackets are now indexed for inflation). In addition, the national debt stood at a mere 33 percent of GDP in 1980 (compared to nearly 100 percent today). A sound argument could be made that tax cuts were the right thing to do then (although the tax cuts may have proved to be too large), particularly given the recession at the time. And so, the Reagan tax cuts of 1981 were passed lowering tax rates about 23 percent across the board over three years.

For the past 30 years, devotees of Ronald Reagan have sounded the refrain of tax cuts. Why? Because economic theory maintains that they would work in the radically different circumstances of today? For an ideologue, circumstances (context) don’t matter; all that matters to a tax ideologue is that taxes go down. But shouldn’t circumstances matter to a good, risk-managing conservative. Shouldn’t a genuine conservative weigh the impact on the debt versus the economic stimulus from tax cuts?

For more on the tax issue, see Chapter 7 on Poverty Income and Wealth in NewsGuides™ Top 10 Issues 2011 (available at www.USPolicy.com).

Next Post—Why do today’s conservatives mistrust big government, but not big corporations?

No comments: