Marco Rubio Calls for More Tax Cuts, But Could That Hurt The Economy More?
It seems so simple that Republicans have taken it as fact: tax cuts will lead to greater economic strength. Lower taxes mean people have more money to spend, businesses have more payroll to add jobs, and hence our economy should get a jolt, right? It's no surprise that Marco Rubio has now come out with a campaign platform he calls, "23 Simple Ways To Create Jobs, Grow Our Economy And Help The Gulf Coast Recover," and that eight of his 12 ideas for the economy involve ending or cutting various taxes.
But what if that thinking is wrong? What if tax cuts could actually further exacerbate our economic situation. Hillary Clinton and a growing number of those on the left are pointing to history, economic theory and the situation of other countries to claim just that.
Rubio's new platform includes calls to permanently extend George W. Bush's 2001 and 2003 tax cuts for the rich, cut taxes on businesses, end the death tax and double taxation, stop the value added tax, reform the alternative minimum tax and the US tax code itself, stop the value added tax, and prevent a national energy tax. Suffice it to say, Rubio seems to have never met a tax he didn't want to end or cut.
But what if overzealous tax cuts actually hurt the economy in the long run? It's an idea to at least investigate.
Greece has suffered more than most western countries during the recession, and now sits on the brink of economic collapse. Some blame its "welfare state," but the Center for Economic Progress says that Greece's problems may actually be low taxes.
"Greece is undoubtedly in dire fiscal straits, but the blame does not lie with overspending. On the contrary, Greek spending is exactly in line with what one might expect from a modern, Western member of the European Union," claims a CAP report. "Its tax revenues, on the other hand, are clearly on the low end. Average spending plus below average revenues equals large, persistent deficits, and that is precisely what happened in Greece."
And what of those countries with high taxes? Are they hurting during the recession?
"Brazil has the highest tax-to-GDP rate in the Western hemisphere," Hillary Clinton claimed recently while addressing the Brookings institute. "And guess what? It's growing like crazy. The rich are getting richer, but they are pulling people out of poverty."
But that's Greece and Brazil, sure, and Rubio is talking about America.
"There is a certain formula there that used to work for us until we abandoned it -- to our regret, in my opinion. My view is that you have to get many countries to increase their public revenues," Clinton concluded. Earlier she had stated, "the rich are not paying their fair share in any nation that is facing [major] employment issues ... whether it is individual, corporate, whatever the taxation forms are."
"This makes perfect sense. Though the Reagan zeitgeist created the illusion that taxes stunt economic growth, the numbers prove that higher marginal tax rates generate more resources for the job-creating, wage-generating public investments (roads, bridges, broadband, etc.) that sustain an economy," claims David Sirota over at Salon.
"They also create economic incentives for economy-sustaining capital investment. Indeed, the easiest way wealthy business owners can avoid high-bracket tax rates is by plowing their profits back into their businesses and taking the corresponding write-off rather than simply pocketing the excess cash and paying an IRS levy."
So, the left seems to think that the only way out of this recession is to spur infrastructure investment through higher taxes on the rich (it's not a new idea, it seemed to work during the Great Depression).
It's a provocative idea, that many probably won't agree with, and isn't exactly the kind of thing that gets voters out to polls, but it's something to think about before sending a guy to Washington who's only answer to anything economic related is tax cuts.
Those 2001 and 2003 tax cuts didn't seem to help America avoid the recession, and Jeb Bush's effort to cut taxes in Florida didn't seem to help this state avoid becoming one of the worst hit by that recession. Perhaps some cuts could help the economy recover, but it doesn't seem like that's the only answer to our problems.