Hey Romney, Here’s A Comeback To Obama’s $5 Trillion Tax Cut Canard
Framing a debate is half of winning it—especially when neither facts nor reason are on your side. The Obama campaign’s repeated claims that, if elected president, Mitt Romney will cut taxes by $5 trillion—approximately equal to the entire amount of personal income tax revenue collected during Bill Clinton’s eight years as president ($5.66 trillion, to be exact)—offers a perfect example.
Accepting an opponent’s framing when you have both the facts and reason on your side is idiotic—which pretty much sums up the lame responses given by Mitt Romney and his surrogates to date.
The Democratic charge goes something like this: Romney promises to leave in place the Bush tax cuts that are scheduled to expire at the end of this year. These are the income tax rates we have all been paying since 2003.
Forget, for a minute, that not raising tax rates has been redefined as a tax cut. That same dishonest framing has been used to convince press and pundits that a slight decrease in the rate of growth of federal spending somehow qualifies as a massive budget cut, despite the fact that spending is going up. I don’t know about you, but when I cut my budget my spending goes down. Only in Washington can you “cut” a budget and have spending go up.
As I said, forget that little framing trick; it’s a sideshow. The main event is the claim that by refusing to accept the scheduled 20% across-the-board income tax rate increase, the federal government will be out $5 trillion it could—and should—have collected over the next ten years. And because Democrats are so fiscally responsible and abhor deficit spending, they cannot let this happen.
The lame response coming from Romney and his surrogates is, yes, if I am elected president I will work to make sure that tax rates remain where they are today. But don’t worry, my administration is not going to let people go on keeping as much of the money they earned as they’ve gotten used to. I am going to do everything I can to collect more tax revenue to support the massive federal spending increases enacted under the Obama administration by closing loopholes in the tax code.
No, the missing comeback to the tax cut canard, the key to winning this debate, the demolition of the Democrats’ dishonest framing lies in one simple retort. Lower tax rates can actually lead to higher tax revenues. We know this is true because that’s exactly what happened when the Bush tax cuts were implemented in the first place.
It is not necessary to dive into esoteric economic analyses of static vs. dynamic scoring, an argument far too complex to roll out on the campaign trail. Just look at the facts. The data are available for all to see on a spreadsheet you can download from the IRS website.
As I pointed out two years ago in my RealClearMarkets column “The Truth About The Bush Tax Cuts“, Bill Clinton collected a total of $5.66 trillion in personal income tax revenue during his eight years as president. George W. Bush cut tax rates and went on to collect $7.37 trillion in personal income tax revenue during his eight years as president. This makes Dubya, the so-called tax cutter, the biggest tax collector in American history.
But wait, there’s more. After Bush cut tax rates across the board, the top 5% went on to pay $1.28 trillion more in federal income taxes than they did under Clinton. And the share of income taxes paid by the top 1%, the top 5%, and the top 10% all went up, not down. Some “tax cut for the rich,” huh? Do you know which group actually paid less in income taxes under Bush than Clinton, as well as a smaller share? The bottom 50%. Look at the data. There is no other way to spin it.
This is where Romney needs to go. Now.
The answer to the supposed conundrum of how lowering tax rates can—and did, and will—increase tax revenue is not as hard as it looks. Here’s your sound bite: Rich people aren’t stupid! Raise tax rates and the working rich will work less, defer income, and take more non-cash compensation while the idle rich will defer capital gains, shift their investments to more tax efficient securities like municipal bonds, and (yes) evade taxes. Reduce tax rates and the working rich will work more while the idle rich will accelerate capital gains, shift their investments to more economically efficient private securities, and hide less income.
Both kinds of rich people will be happy to pay more taxes if at the end of the day they end up taking home more money. And oh, by the way, if you convince enough people to work harder and longer and shift investments away from inefficient tax-advantaged government securities into private sector securities, the economy will grow. And when the economy grows, we all will be happy to pay more taxes because we all will be back at work, busy making money instead of sitting at home on food stamps and unemployment.
Ignore facts and logic at your peril. They are terrible things to waste.
Bill Frezza is a Boston-based writer and venture capitalist. You can find all of his columns, TV, and radio interviews here. If you would like to have his columns delivered to you by email, click here or follow him on Twitter @BillFrezza.