Paul L. Caron

Thursday, July 29, 2010

Johnson: It's Hard to Predict the Future, Especially About Taxes

Following up on last week's post, WSJ: Washington's Tax Oracles and Revenue Estimates (July 21, 2010): Calvin H. Johnson (Texas) has published a letter to the editor in today's Wall Street Journal, It's Hard to Predict the Future, Especially About Taxes:

I think that the Journal is on to something on revenue estimates from spot changes to the Internal Revenue Service code ("Washington's Tax Oracles," Review & Outlook, July 21). Taxpayers flock to a new loophole in ways current statistics available to the Joint Committee on Taxation cannot pick up, so the revenue loss from a new opening exceeds the estimate. Taxpayers also find ways around loophole closing.

But you have the effect mixed up. Overestimating the gain from closing loopholes means Congress does not raise revenue as much as it needs to. It declares it will win, and goes home too early. Underestimating the losses from opening a new loophole means that Congress explodes the deficit when it just thinks it is giving a little item for some constituent. The effect of not taking into account tax planning means a greater deficit and more of a head-in-the-sand attitude. The errors lead to lower taxes than we need to cover the deficit and bigger loopholes. The errors thus, if true, create not a bigger government, but less responsibility in paying for it.

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I think that the second letter in the link expresses a more important philosophy on taxes.

The failure of the Republican Party to "take intellectual control" over the staff of the Joint Tax Committee and the Congressional Budget Office while they held the majority in Congress was surely a big mistake, but adopting the language of the political opposition is a bigger one. Never again should a fiscal conservative tout a tax cut as one that "pays for itself." Why should it? Such language assumes that every penny earned by an individual or business rightfully belongs to the state and that the government generously determines how much we can keep for ourselves. It's time to stop treating tax cuts as government expenditures.

Carol Arscott

Posted by: Woody | Jul 31, 2010 7:51:32 AM