Letter: Getting it wrong on the economy - East Valley Tribune: Opinion

Letter: Getting it wrong on the economy

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Posted: Friday, August 17, 2012 5:47 am | Updated: 11:48 am, Fri Aug 17, 2012.

Nobody is getting it right when they refer to the “Bush tax cuts.”

They weren’t really “Bush tax cuts.” They were really Bush tax increases which were a result of rate cuts. The reduction in tax rates under the Bush administration resulted in an increase in revenue — because the economy actually expanded. Raising tax rates on the wealthy will have exactly the opposite effect: They will reduce, not increase revenue. When tax rates are increased on the wealthy, they move their money from taxable exposure to nontaxable exposure. The trouble is, when they do that, the economy shrinks, producing less revenue than the lower tax rates did. This “static analysis” method never works. The correct method is “dynamic analysis” which actually takes into account the change in behavior that the rate increases will produce. Dynamic analysis does not assume the wealthy will sit idly by and simply absorb the tax rate increase without reacting to it. That never happens. History proves this, and the facts prove this. Now some smart aleck will say, “Why don’t we reduce tax rates to zero to really increase revenue?” At some point reducing rates will reduce revenue but only when the rate gets low enough and current rates are much higher than that break even point

We have a spending problem, not a revenue problem.

Lower tax rates to increase revenue. Then cut out billions of waste in the federal budget. Only a fool believes we have no waste in the budget.

Steve Ball

Gilbert

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