Two Legitimate, Conflicting Goals for Tax Cuts

I am not an economist. I have never taken a course in economics. But I have a few hunches, hopefully at least semi-informed hunches.

One hunch is that there is actually more than one legitimate reason to give tax cuts. The problem as I see it is that these two goals, while both legitimate in their own right, actually tend to work against each other. As might be expected, partisan political rhetoric typically does not carefully distinguish between the two goals. The result is the typical confusion of politics.

The first goal is to stimulate the economy. The idea is that if we give more revenue to the right individuals and businesses, the businesses will spend it in ways that increase their profitability and the individuals will buy more goods, also benefiting the economy. This is classic Reagan Republican trickle down economics.

Toll roads seem to me to be great illustrations of how taxes have a way of shooting an economy in the foot. Take a few hours on the turnpikes and toll roads of Florida or Ohio and you will have a long boring trip with few choices for food. I usually time my eating for before and after I get on. The number of cars is also much lower than other highways.

Now go on an interstate. Not only is the traffic prohibitive sometimes, but you'll find McDonalds and countless other stores mile by mile. I don't know the numbers, but I suspect that states make more money off the sales tax on the interstates by far than from the tolls on the turnpikes.

I don't know enough to discount the theory that targeted tax cuts can stimulate the economy. It at least seems like Bush's tax cuts coincided with a rather quick change of directions in the recession. But to have this effect, such tax cuts presumably are given to those with the greatest financial influence. And there is a certain common sense to the idea that you deserve the money you work for more than someone you have never met who maybe is not working at all.

But a second goal is also legitimate, namely, to alleviate the burden of those under the greatest economic pressure. Many of us believe there is a certain moral responsibility on the part of those who are "blessed" to share their blessings with those less fortunate. And if you don't believe in such a moral responsibility, the purest examples of capitalism in history have sometimes ended in bloodshed and revolution--let alone an increase in crime and general discontent. If you don't buy the moral argument, it is to the utilitarian advantage of everyone to empower those under the thumb of fate.

Tax cuts to releave the burdens of society are also legitimate and beneficial to society as a whole. But the groups such a tax cut targets are unlikely to help the economy. Indeed, tax cuts of this sort seem more likely to burden the economy.

So what conclusions do we reach if these hunches are correct? One is that none of the politicians are very clear about these conflicting goals. Democrats accuse the Republicans of hating the poor when their goal is to stimulate the economy. And Republicans accuse the Democrats of having no other interest but taxing and spending.

Maybe the two groups need to take turns... of course no one can tell what a person's economics are anymore, despite their party.

Just some thoughts...