A Dog Chasing Its Tail
President Obama’s tax proposals for the 2011 budget will yield a $4.9 trillion shortfall (rather than $1.1 trillion, as the Obama administration claims). The Tax Policy Center reports:
The budget assumes a baseline in which the 2001-2003 tax cuts are permanent (including the estate tax at its 2009 level), the exemption in the alternative minimum tax (AMT) is permanently indexed for inflation from its 2009 level, and that temporary expansions of refundability of the child tax credit and of the earned income credit are permanent. Those provisions would reduce revenues by $3.8 trillion over the 2010-2020 period. TPC’s analysis measures the impact of the tax proposals not against the administration baseline but rather against a current law baseline that assumes the 2001-2003 tax cuts expire as scheduled in 2011 and that the AMT exemption maintains its permanent level. Against that baseline, the administration’s tax proposals would cause much greater revenue losses than official budget estimates show [$4.9 trillion v. $1.1 trillion].
Taxation cannot create prosperity. While some taxation is necessary to provide for essential government functions (a police force, fire protection, a judicial system, national defense, etc.), wealth, progress, and prosperity can only be created through de-centralized planning. In other words, each individual pursuing his/her selfish interests leads to general prosperity – control disguised as altruism leads to stagnation and ruin. Adam Smith attempted to teach the world this lesson in 1776 – putting Obama’s economists over 300 years behind in their field. Perhaps Sir Winston Churchill summarized the argument best:
Can a people tax themselves into prosperity? Can a man stand in a bucket and lift himself up by the handle?
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[...] Democratic Party will take this a call for increasing taxation, but as Bevan Sabo of Free Market Mojo (and Adam Smith) comments: Taxation cannot create prosperity. While some taxation [...]
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