Editor's Note: This column was authored by Susan Carleson
Confusion is the politician’s favorite device; clarity, the statesman’s most potent weapon.
Supporters of limited government too often lose Washington policy debates because we don’t challenge our opponents on their use of weasel words. Here are some needed clarifications that will help conservatives win more debates.
Revenues vs. Taxes
How many times a day do we hear about “increased revenues” and “government investments” from an unquestioning media who either don't understand or are complicit in their use of clever euphemisms for “tax increases” and “higher government spending?” Increased revenues and investments in the private sector are a good thing -- they signify economic growth. But when the left applies these terms to government activity, watch out -- they mean higher taxes and higher spending. We know from experience (i.e. real numbers) that you actually increase tax revenues (receipts) when you decrease (lower) tax rates. (If you're a woman, like me, it works like something going "on sale." I’m “saving” by spending more!)
When tax rates are increased, tax revenues tend to decrease because people change their behavior to avoid paying the taxes. Similarly, when tax rates are cut, government revenues tend to increase again because taxpayers change their behavior toward greater productivity, increased economic activity and more hours of work, or simply more faithful tax-law compliance.
Some useful facts: Since World War II, U.S. federal revenues have averaged about 19 percent of the Gross Domestic Product (GDP), and have never exceeded 20.9 percent of GDP. Both President Kennedy and President Reagan spurred economic growth – and increased overall federal tax receipts – by reducing tax rates. President Obama is proposing to increase tax "revenues" to 22 percent of GDP by increasing taxes over the next few years. While he might secure higher tax rates, he won’t obtain higher government revenues as a share of the economy. The higher rates will produce lower revenues as Americans once again change their behavior (e.g. work less, stop buying and selling capital assets to avoid taxable events, etc.) to avoid the higher taxes and thus cause the overall economy to shrink.
Misleading: The tax legislation will increase government revenue by $X trillion.
Clear: The tax legislation will increase Americans’ tax rates by Y%.
Tax Loophole/Subsidy/Expenditure Elimination vs. Spending Cut
The award for the most Orwellian recent coinage goes to President Obama for dubbing tax increases as spending cuts: “… but [if] you are serious about the deficit overall—then part of what you have to look at is unjustifiable spending through the tax code …” Taking less of our money, therefore, is “spending” government money. To be able to grasp this concept you have to understand that the left believes that all money belongs to the government. So, who do you believe owns the money that Americans make -- you, the taxpayer who earned it, or the government that wants it?
Whenever you hear a politician use the terms "tax loophole,""tax subsidy," or "tax expenditure" – grab your wallet and run!
President Obama's latest budget proposal seeks to increase taxes by eliminating several provisions in the tax code that affect how much tax certain classes of disfavored Americans pay on their income. The president wants to limit deductions for “rich folks” – however defined – including mortgage interest and charitable contributions and depreciation allowances for oil and natural gas companies. He also wants to change the way small businesses (that create almost 80% of net new jobs) account for their inventories in order to increase their annual tax bills.
As if that's not bad enough, the Obama Administration counts these clear-cut “tax increases” as government “spending cuts.” They even want to count the “interest saved” -- from the government not having to borrow any amounts raised by new taxes – as “spending cuts” as well. Thus, a stand-alone $1 trillion “tax increase” on all Americans, as explained on keithhennessey.com, would count as a $200 billion “spending cut” because of the money "saved" from the government not having to borrow the $1 trillion and pay that much in interest.
Dishonest: Senator Big Spender’s tax revenue proposal cuts government spending by reducing tax expenditures.
Honest: Senator Big Spender’s tax revenue proposal raises taxes.
Cost vs. Spending.
“Never say ‘cost’ when you mean ‘spending’.”-- Michael Cannon, Cato Institute. “Cost” implies a force beyond the poor politician’s control. “Spending” makes clear who the real culprit is – the politicians.
Misleading: The rising cost of farm subsidies.
Clear: The rise in farm subsidy spending.
There are numerous other terms that the Left uses to confuse people: “Reform,” “spending cuts” instead of cuts in spending growth rates, “tax cuts” vs. “refundable tax credits” (i.e. income transfer payments), “federal deficit” vs. “national debt,” and even “balanced budget” (by cutting spending or raising taxes, either works). It’s all geared toward hiding their true objective of bigger and bigger centralized government.
Ronald Reagan observed famously that “a government that is big enough to give you everything you want is also big enough to take everything you have.” Small government believers must insist on getting the words and concepts right in Washington before we do, in fact, lose all that we have as individuals and as a nation.
Susan Carleson is Chairman of the Carleson Center for Public Policy, which carries on the work of Robert B. Carleson, Ronald Reagan’s welfare reformer. The Center is guided by the rule, “What would Reagan do?” Dean Clancy of FreedomWorks helped draft these definitions.