Vail Daily letter: Tax cuts for the rich? |

Vail Daily letter: Tax cuts for the rich?

Ross Wagner
Avon, CO Colorado

The Republicans, Democrats and the Obama administration have finally reached an agreement to extend the Bush tax cuts. This is good or bad or both, depending upon your perspective. Many have argued that this is an unfunded tax cut for the rich and, therefore, fiscally irresponsible. Responsibility is a matter of opinion, difficult to determine, so I’ll ignore it for now. But, unless I’m mistaken, nobody will pay lower marginal tax rates next year compared to this year. Therefore, it is not a tax cut; it is a continuation of the tax rates as formulated by legislation in 2001 and 2003. Also, the rates apply to all taxpayers; therefore, it does not specifically benefit the rich.

In addition to the extension of the current tax rates, there is also a one-year reduction of the employee contribution to Social Security, so all wage earners will have less withheld from their paychecks. There are also some new tax deductions and exceptions designed to encourage hiring and investment by employers. So, if you consider all employees and employers rich, it’s possible that this is the unfunded tax cut for the rich that everyone keeps lamenting. But most of the people bemoaning the agreement are supporters of the Democrats and President Obama, the very people who made these additions, so that seems unlikely.

Then there is the matter of being unfunded. As a former business owner, I understand the concept of an unfunded expense. That’s simply spending money you don’t have through the use of credit. In government parlance, this is called deficit spending.

But the concept of an unfunded reduction in revenue, which is how many define a tax cut, does not exist in the business world. When McDonald’s lowers the price a Happy Meal, the stockholders don’t call it an unfunded price cut. Now, you can argue the merits of raising or lowering prices, just as you can argue the merits of raising or lowering taxes, but the question of funded or unfunded with regards to revenue seems irrelevant to me. Funding, by definition, refers to expenditures everywhere except Washington.

So why do so many in the media keep saying this is an unfunded tax cut for the rich? My theory is that it’s all about perception with regards to popular versus unpopular ideas. For example, tax increases and unfunded government expenditures are unpopular ideas with the public. Conversely, tax cuts and funded government spending are popular ideas with the public. If you haven’t already guessed, I happen to be fiscally conservative. That means I think our government should tax less and spend less. That’s my opinion. Many think our government should tax more and spend more. But if you think Washington should increase taxes and tax increases are unpopular, how do they win the day with public opinion? First, you frame the tax increase as a tax cut. But tax cuts are also popular, so now you add that they are only for the rich. And presto, you suddenly have something that’s unpopular which you can easily argue against.

In simplified terms, the debate in Congress has been about extending the current marginal tax rates or allowing them to go back up to the levels during the Clinton administration. That is, should taxes stay the same or increase? I am all for debating the merits of this or any issue. But defining this question as an unfunded tax cut for the rich is at best misinformed or at worst dishonest. And any professional journalist who is misinformed is a poor journalist, indeed.

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