How can a tax cut ADD to the deficit?

[theinlawjosie]

Don't get me wrong, I understand that a tax cut takes money from the government which then, in theory, adds to the deficit. Or at least takes money from the government that could be used to pay back the deficit, but the tax cuts are already in place and letting them expire would not relieve the deficit as much as it would steal from the private sector.
I am constantly seeing opponents of the tax cuts making claims that these cuts would add to the deficit and it drives me CRAZY!
Anybody have any thoughts on this? Am I wrong in believing this way? I mean up until the turn of the 19th century not only did we not have an income tax, it was ruled unconstitutional by SCOTUS.

 

[Fox McCloud]

a more accurate soundbyte would be "refusing to cut spending adds to the deficit", but that's precisely why a lot rail against taxes; they don't want to cut spending.

 

[heavenlyboy34]

Even if the tax were 100%, it wouldn't cover the debt. Tax cuts work because they keep capital in the system(that is, in the private sector), where it is many times more productive. (Ideally, as RP would say, the income tax rate would be 0%)

 

[theinlawjosie]

Even if the tax were 100%, it wouldn't cover the debt. Tax cuts work because they keep capital in the system(that is, in the private sector), where it is many times more productive. (Ideally, as RP would say, the income tax rate would be 0%)

Exactly, it just kills me that these people are using the tax cuts as an excuse for an outrageous deficit...or at least a portion of it. Nobody seems to be challenging them on these claims either. It just really bothers me.

Thanks for your responses.

 

[Zippyjuan]

A deficit occurs when you are taking in less money than you spend. If the government reduces taxes, it will collect less money so even if they spend the exact same amount, a tax cut will increase the deficit. The only way a tax cut will not increase the deficit is if you have a coresponding decrease in spending of at least the same size as the tax cut. If the tax cuts are not allowed to expire, then the deficit in the future will be larger than it would be if the tax cuts get extended- I have seen estimates of $700 billion more in debt over a ten year period. The Bush tax cuts were originally supposed to be just temporary to help boost things in the last recession but they keep getting extended- a couple years at a time.


While Ron Paul would like to have taxes be very low or even zero, he agrees that you have to deal with the spending before you reduce taxes otherwise you make deficits worse and that creates other economic problems- just paying the interest on the debt costs more and more money and the more money the government borrows to pay their bills, the less money available for businesses and individuals to borrow.


From his own mouth in 2005:

We will never have a balanced budget until Congress either raises taxes or cuts spending. It's really that simple. I support balancing the budget by cutting the budget, but most people in Washington abhor that option. They abhor making real cuts to the budget because it means cutting the sacred cows of modern American politics. If we cut spending, we cut the power of Congress. Most people do not realize it, but absolutely no major program has been cut one cent in many, many years.

http://www.lewrockwell.com/paul/paul272.html

It is popular with voters to cut their taxes but tax cuts not accompanied by budget cuts only serve to buy votes and they don't help with the budget shortfalls- in fact, they make them worse. Cutting spending is hard and Congressmen and women do not like to make difficult or potentially unpopular decisions.

If you really want to balance the budget you have to RAISE taxes AND cut spending. It is impossible to do with just one or the other. And you have to include everything- Social Security, Medicare, and the Department of Defense along with all the other departments. Based on numbers at Wiki for the 2010 budget, if you cut every penny for every department you would come close to balancing this year's shortfall. (That is figuring no cuts to Social Security or Medicare and no new taxes -either raised or cut).

 

[MichelleHeart]

YouTube - It's Simple to Balance The Budget Without Higher Taxes

 

[Jeez]

Funny thing about cutting the budget is that everyone supports it as long as it doesn't affect them. There was discussion on it in Stossel yesterday and even 65% of tea party supporters were against cuts to medicare or social security etc. It is pretty much political suicide when to comes to cutting defense/home land defense, education spending etc

So i do not think political shift is going to get congress to some how stop spending. Since politicians get elected for promising entitlements not for cutting them back.

 

[pmbug]

It's a game of words and semantics - half formed thoughts where the informed reader is expected to understand the context and the uninformed to be swayed.

A tax cut will add to a projected deficit that didn't include it.

 

[psi2941]

Funny thing about cutting the budget is that everyone supports it as long as it doesn't affect them. There was discussion on it in Stossel yesterday and even 65% of tea party supporters were against cuts to medicare or social security etc. It is pretty much political suicide when to comes to cutting defense/home land defense, education spending etc

So i do not think political shift is going to get congress to some how stop spending. Since politicians get elected for promising entitlements not for cutting them back.

thats why the best way to really cut spending is to collapse the dollar. so we need more spending!

 

[AlexMerced]

YouTube - The 2010 Tax Bill: Does it Increase our Deficit?