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Don’t Believe the Hype


Prominent in today’s headlines is Obama’s proposal for tax cuts. Some commenters are optimistic that Barry is not really as much of a Marxist goon as his history and campaign rhetoric suggested. I disagree.

Recall Obama’s campaign promise of tax cuts for 97% of Americans, when only 47% actually pay income tax. Most of the claimed cuts were simply welfare payments with a more acceptable name. There was a lost distinction between Social Security payroll taxes and income taxes. Lower-tier earners pay no income tax, but every worker pays into Social Security. Barry planned to rebate the Social Security payments of low-earners, effectively stealing from the income tax pot to fulfil their retirement obligations.

Today’s plan is the same. I guess folks forgot the campaign’s linguistic sleight-of-hand. Russ Roberts did not:

The payroll tax credit is a rebate of payroll taxes for low-income workers. As faithful readers of this blog surely know, an increase in spending coupled with lower tax collections is an INCREASE in taxes. AN INCREASE in taxes. NOT A TAX CUT. If I spend more money and collect less, the government is promising to collect more taxes in the future. It is not a tax cut. Not a tax cut. Not a tax cut. And when you don't cut rates but rather give people a lump sum of $500, there are no incentive effects other than to increase the probability that the US Treasury will be unable to honor its obligations in the future.

Expanding the annual deficit only shifts taxes to the future. The core principle is every dollar a government spends must be taken from someone as a tax, fee, or penalty. Whether the spending is funded from current revenue or by borrowing, every dollar spent is a dollar taxed. Sooner or later.

More reprehensible is the continued willing disregard for the structural flaws in Social Security. There is no trust fund ensuring retirement payouts. Social Security collections are loaned to the general fund and promptly spent. Barry’s plan is to take money out of the general fund to give to Social Security so Social Security can then lend it back to the general fund to cover demands of current retirees. It’s a shell game, a Ponzi scheme.

And NOT A TAX CUT. The only true, lasting way to cut taxes is to cut government spending.