To Comfort The Afflicted
And Afflict The Comfortable

To Comfort The Afflicted And Afflict The Comfortable

Thursday, October 22, 2020

New Observercast

Tax Cuts And Deficits

on

BY SHARON MARTIN

I don’t have a PhD in economics, so can someone please explain to me how we can reduce the deficit and lower taxes at the same time? It’s like saying, “Honey, we need to pay off these credit cards. Why don’t you quit your job? I think we can pay these off faster with less money.”

I know some smooth talker will have an answer to that, but I don’t want a smooth answer; I want an honest answer. We aren’t getting many.

Democrats and Republicans must have some real conversations about the deficit and taxes. No more talking points! Legislators need to quit posing for the cameras and get to work.

President Obama has taken some flak for his deal making, and the cut in payroll taxes does scare me. I don’t want Social Security compromised or privatized. But cooperation is progress. Sen. Kennedy and President Clinton, among others, knew that a deal had to start somewhere. The president is hoping that members of his party will quit griping and start haggling.

Liars and cheats can take a seat on the sideline while the honest legislators, both of them, get to work. There is an economy to save. Meanwhile, here are some economic figures to think about.

According to economists, every dollar spent on unemployment checks means a dollar and a half for the economy. Unemployment benefits buy groceries and pay the rent or mortgage payment. That money, in turn, becomes groceries on the landlord’s table, new loans from the bank, wages for grocery store clerks, and a few cents for the farmers.

The same dollar spent on high-end tax cuts gives back forty cents. Forty cents return on every dollar spent doesn’t seem like a viable option to me, but we can’t take that deal off the table. The bought-and-paid-for legislators will insist on rewarding their donors.

Tax cuts for those with low and moderate incomes return something between forty cents and a dollar and a half. Some tax cut recipients will go out and spend, some will invest, and a few will stick their paychecks under the mattress. But there’s room to work here.

Legislators can decide what constitutes moderate income. Make it $350,000 a year. It’s a compromise. Democrats must compromise to insure extensions of unemployment benefits. Republicans need to do a little compromising of their own before they compromise the recovery. Both parties need to act like can-do Americans and get the job done.

Sharon Martin lives in Oilton, OK and is a regular contributor to The Oklahoma Observer

1 COMMENT

  1. Sharon:

    Your question “can someone please explain to me how we can reduce the deficit and lower taxes at the same time?” has a simple answer really.

    Reducing marginal tax rates incentivizes people to work more. It can easily be that the percent increase in output resulting from a tax cut will exceed the percent decrease in the tax rate. For example, a 10% cut in tax rates may increase output by, say, 15%. In such cases, total revenue to the government will increase. Art Laffer once famously illustrated this possiblity by drawing a curve on a napkin over dinner. The logic is simple and airtight.

    Hope this helps! Merry Christmas!

    Brian Jackson
    3105 Cherry Pl.
    Muskogee, OK

Arnold Hamilton
Arnold Hamilton
Arnold Hamilton became editor of The Observer in September 2006. Previously, he served nearly two decades as the Dallas Morning News’ Oklahoma Bureau chief. He also covered government and politics for the San Jose Mercury News, the Dallas Times Herald, the Tulsa Tribune and the Oklahoma Journal.