Tax Cuts Are Government Spending Too

Sometimes I envy conservatives because on face value their ideas can make a lot of sense.  Budget deficits are bad (only a recent conservative idea).  The government spends too much money.  Tax cuts always help the economy by giving people more money.  Welfare makes it easy for people to become dependent.  Sounds good, right?  These arguments can often feel good in the "gut feeling" sense - it just feels right.  As a teenage conservative I think that's often the place I argued from, because I didn't have the tools to properly analyze the issues.  Since then I've had a healthy dose of social science education and nearly four years experience in state government finances.  I've learned that gut feelings often mean squat in the face of actual data.  Many conservatives, however, seem to still be unaware that the world is a complicated place often unexplainable by "I've got a good feeling."  This was on stark display last November, when Republicans just knew down to their bone marrow that Romney would win, despite poll after poll that showed otherwise.  This belief is on display in many other issues as well - in the case of climate change, they seem unaware of how to properly analyze data, as they gleefully claim that one cold snap in one location on Earth proves that global warming / climate change is a hoax..

Before I get too off track, though, I want to focus on one issue where conservative logic often seems to win on the superficial level - tax cuts and government spending.  "It's your money, not the government's," to paragraph George W. Bush, "so we're gonna give it back to you."  Sounds great, right?  Well, the Bush tax cuts and unfunded wars erased the Clinton surplus and put us on the path to the deficits we now face (but Republicans sure don't like to talk about that).  The theory goes that tax cuts will give everybody more money, which they will spend wisely and generate so much more economic activity that any lost revenue from the lower tax rates will be made up.  Sounds good in the gut, but as I've noted before, there's no real data that supports this, especially when it comes to tax cuts for the wealthy, who are more likely to save that extra money than put it back into the economy.  Meanwhile, the government has less money to spend on its services.

Which brings me to my main point, which might blow a few conservatives' minds: tax cuts are a form of government spending.  Lowering taxes will bring in less revenue than is otherwise projected.  In essence, the government is "spending" that extra revenue by giving it to people in such a way that it hopes will improve the economy (or, the cynic would argue, to curry political favor with certain groups).  The government could just as easily spend that same revenue on investing in schools, infrastructure, or health care.  In my state government experience, I've seen numerous tax cut proposals put forth by both parties.  As analyzed, not a single one projected a resulting increase in government revenue.  All pointed to a decrease.  The government was spending money it otherwise would have received.

So in all this hysteria over deficits, tax cuts need to be weighed equally with government spending cuts.  And the fact is that government spending can be a more effective way to boost the economy than giving rich people more money.  This is especially true when times are tight; when people and businesses are having to be careful with their finances, the government might be the only institution that can give the economy a shot in the arm.  This is why obsessing over deficits during an economic downturn is a mistake.  Many conservative governments in Europe reacted to the Great Recession by implementing "austerity" cutbacks, and now find themselves in a second recession as a result.  That hasn't happened in the US, thankfully, but if the planned "sequester" cuts go into effect on March 1, we could be headed that way too.  US GDP shrunk by 0.1% in Q4 2012, even though consumer-related indices generally remained stable or improved.  What was the difference?  A sudden, temporary drop in defense spending.  By the government.  To turn another bit of conservative logic on its head, government deficits are not always bad.  Sometimes they are necessary to bail out the economy when nothing else will work.  Just ask Dick Cheney in 2002: "You know, Reagan taught us that deficits don't matter."  What a socialist, that guy!

And yet this staple of conservative "logic" is now being ruthlessly applied in my home state of Kansas.  Governor Brownback and his allies slashed income taxes last year, and now Kansas is one of only two states that is projecting a decrease in revenue for next fiscal year.  Tax cuts lowered revenue??  Shock!  Meanwhile the administration might have to go to court or even amend the state constitution to ensure it doesn't have to increase school funding.  It just amazes me that the people who think increasing school funding is pointless are largely the same folks who believe throwing the same money at the rich will magically fix the economy (because teachers making $35,000 are union thugs while millionaire businessmen are altruistic saints, don't you see).  Meanwhile schools with 30+ class sizes and stripped of extracurricular activities might become the norm in Kansas.  It's this kind of thinking that leads me to increasingly believe that the "sounds good" rhetoric is really just empty cover for giving the Koch brothers and other Republican backers a tax break.

Especially since, as I've noted before, what was billed as a tax cut to help all Kansans was actually a tax shift from the rich to the poor and middle classes.  Consequently, in Kansas now a lawyer doesn't pay state income tax, but his secretary does.  A doctor doesn't pay state income tax, but her nurse does.  All in the name of "tax fairness."  Baloney.  Again, I support targeted tax cuts that will put more money in the pockets of people that need it and will spend it.  But the Brownback administration seeks to make up the lost revenue through sales tax increases and other measures that disproportionately affect the incomes of the poor and middle classes.  Kansas is now one of only three states that has no exemptions whatsoever for the sales tax on food.  That is inexcusable.  The other two are very poor Mississippi and Alabama.   And given that those two states are among the biggest moochers off federal tax dollars, maybe conservatives aren't so opposed to fostering government dependency after all.