Taxes: Proper posture
April 24, 2012
Good posture is important, especially in Washington. And Rep. Eric Cantor's small-business tax cut, which the House passed last week, demonstrates it.
In offering an alternative to Democrats' demand for a tax hike on rich folks, the measure strikes a pro-growth pose. It would last for only a year — and even then has no chance of becoming law, thanks to opposition from Senate Democrats and President Obama. Nevertheless, it sends the right message. In his weekly address this past weekend, Obama said the U.S. "cannot just cut our way to prosperity." Maybe not — but we definitely can't tax our way to prosperity, as he and his party seem to think.
The bill would let small businesses deduct 20 percent of their income — but only if they pay wages to workers, a stipulation meant to ensure the money goes to job creators rather than celebrities or lucrative business partnerships.
Liberals object that the measure would raise the deficit — a complaint they haven't made about skyrocketing federal spending, which has risen by more than a third since President Obama took office.
Still, "the benefits of 'targeted' tax breaks generally don't exceed their costs," contends The Washington Post. Costs? To whom? The argument takes the side of big government, which loses revenue from tax cuts, rather than taxpayers, who gain from them.
In any event, the arguable assertion is true only if you look at the small picture. Look at the bigger picture, and you will note that even a tax cut that created no jobs — and Cantor's measure would certainly generate more than zero — still deprives the federal government of revenue. In other words, tax cuts not only help the economy grow, they help Washington shrink. Sounds like a fantastic benefit to us.