Virtual Voices

Death and taxes: Another test for my 'progressive' friends

Economy

"It is a paradoxical truth, that tax rates are too high today, and tax revenues are too low, and the soundest way to raise revenues, in the long run, is to cut taxes …"

Does this quote come from:

  1. A campaign speech of a GOP presidential hopeful in 2012.
  2. The first State of the Union speech delivered by George W. Bush.
  3. Ronald Reagan's inaugural address in 1981.
  4. A lecture by economist Arthur Laffer in the late 1970s.
  5. The chapter on fiscal policy in Milton Friedman's Capitalism and Freedom.

The right answer is "none of the above." These words were spoken by President John F. Kennedy, whose 1961 tax cuts are the first in a series of fiscal experiments that gave empirical support to a concept popularized in the 1970s as the "Laffer curve."

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Unlike the current CEO in the White House, previous presidents were able to avoid congressional stalemates and pass pro-growth bills that not only left more money in the hands of the private citizens but also increased government revenue. It happened under Republicans Reagan and Bush and under Democrats JFK and Clinton. How hard can it be then for Barack Obama to learn a lesson in leadership from his predecessors?

Our president and leaders in Congress like to talk about improving America's competitiveness, yet only Japan places a heavier tax burden on job creators than Uncle Sam. Businesses have to pay 10 percent higher taxes here than in China. Investing in America costs 15 percent more than the average for developed countries. It is cheaper to run a corporation in Sweden than in my state of Illinois (and don't get me started on New York or California). At the same time, intentionally planted loopholes in our insanely complicated tax code allow the major political campaign contributors to win the global race in tax avoidance year after year. You do not need a Ph.D. in economics to figure out what should be done about it or the reason why implementing the solution has been delayed for decades.

The idea that decreasing the tax burden on the supply side can pay handsomely for itself is much older than Laffer and JFK. David Hume expressed it in his Of Taxes, as did Adam Smith in The Wealth of Nations. Democrats passionately argued for it in the 19th century, as did Republicans in the 20th century. It has worked miracles in East Asia and Eastern Europe. And it should not be controversial in the 21st century environment of almost universal high government taxation and overspending. How hard can it be to realize that people respond to incentives-perceived benefits (wages, dividends, profits, etc.) and expected costs (federal, state, and local taxes, fees, surcharges, etc.)-and that taxes on work, investment, and entrepreneurial success combined with excessive red tape are the real job killers?

During the past century, when Americans gradually surrendered to the federal government the right to "fix" the national economy, they also opened up an opportunity for Washington to replace the consumer as a sovereign in picking market winners and losers. Thus the people assisted in the creation of a cartel of insiders whose sole purpose was and is to extract more power for the political establishment and more wealth for corporations sponsoring the elections.

I see hopeful signs that those whose thought process was severely inhibited by a recent exposure to stimulobacillus obamicus-the most debilitating keynsobacterium subspecies since the efdiarobium tractonovum plague 80 years ago-are on the retreat. I am cautiously optimistic that an increasing number of people have been realizing that since 2009 what I called at the time an "unholy alliance" is choking our freedoms and that We the People can and should reclaim this great Republic.

Alex Tokarev
Alex Tokarev

Alex is the chair of the Department of Business at Morthland College in West Frankfort, Ill., and teaches at Northwood University in Midland, Mich. The native of communist Bulgaria fanatically supports the Bulgarian soccer team, Levski.

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