December 6, 2011

Debt and Taxes: Settled Science

By Randall Hoven
When a Democrat says he is serious about our debt problem, what he means is that he's pleased as punch to have another way to sell you on a tax increase.  Democrats, being smarter than Republicans, use math and logic to make the case: if you raise tax rates, you get more revenue; if you get more revenue, you decrease the deficit; decrease deficits and you get debt under control. It all sounds so simple and unassailable: debt is the disease and taxes are the cure.  Colin Powell calls it algebra. However, the hidden assumption behind all those syllogisms is everything else equal.  Unfortunately, everything else does not stay equal.  Believe it or not, humans tend to change their economic behavior when you change their economic circumstances.  (Hard to believe, I know.)  To understand that, one needs to go beyond the Music Man's "think method" and look at real-world data. The first syllogism, that raising tax rates yields more revenue, can be demolished by...(Read Full Article)