The topic of tax cuts is front and center after the historic sweep of the House of Representatives by the Republican Party. The President and Democrats argue that entrepreneurs and job creators who make more than $250,000 should pay higher taxes. Republicans question why the federal government would punish the very people who have the power to get the economy growing again.
During his post-midterm elections interview with 60 Minutes, President Obama said the Republicans must explain how they will “pay for” the estimated $700 billion in maintaining the current tax rate. It was at this moment that I turned to my wife and said, “You don’t pay for tax cuts because it’s not the government’s money to begin with.”
This is the fundamental deception in the tax cut debate that the poor see as some grand giveaway to “fat cats”. First, a tax cut is when the government takes less of your hard-earned money. Second, the government only has to pay for expenditures. If the government does not spend money, a payment is not warranted. Therefore, tax cuts do not have to be “paid for” because they are not expenditures.
Now from a budgetary perspective, the loss in government revenue as a result of the tax cuts has to be addressed. The decision for Republicans and Conservatives is quite simple – follow the example of American families. When families receive a reduction in revenue because of a layoff or reduced hours, they reduce their expenditures. Unfortunately, the federal government refuses to reduce its spending.
In the final analysis, the debate is not about tax cuts for middle-class families or Steve Jobs billionaires. This debate is about the refusal of the President and Democrat Party to cut federal spending. If you lose $700 in household income, you will cut household spending by that same $700. Since the President claims the treasury will lose $700 billion as a result of the tax cuts, he should reduce his spending by $700 billion. If you can do it, why can’t our federal government follow your example?