The Budget, Taxes and Free Money

If you asked most people whether it would be a good idea for the government to print more currency, just to give people more cash, they'd probably intuitively understand that this wouldn't quite make sense.  Yet if you tell them they're getting a tax cut, but there will be no equivalent cut in spending, they don't see this as basically the same thing.  If they did, there'd be a lot more disturbance about the level of U.S. federal deficits. 

Tyler Cowen makes a similar point, with respect to nominal tax rates and actual tax rates, based on federal spending:

Megan McArdle (what do you call her when Jane links to Megan?  And can they have an infinite regress?) and Brad DeLong seem to agree that the Bush tax cuts should not be made permanent.  My take is the following: Taxes already were raised when the government spending occurred.  In that sense the "tax cuts" never were permanent. But when do we wish to admit this?  We could raise (nominal) tax rates sooner rather than later, and hope that the subsequent "financial calming" effect will improve the chances for better policy in the future.  Alternatively, we could play "chicken" with the marginal tax rates, and hope that holding them lower, for longer, will increase the chance of the appropriate entitlement reforms.

Comments

[Quints]

I have always believed that deficit spending is taxation without representation and thus anti-constitutional. The current government spends money that will be paid by a future electorate. It's not fair, and it is un-american. We should spend whatever we want but pay for current spending with current tax receipts. Anything else is not legal.

[jill]

Tax revenues have steadily increased during the tax cut period. In 2000, the last full year of Bill Clinton's term, tax receipts came to $2.025T. They dipped in 2001 and 2002 with the recession, dropping to a low of $1.783T in 2003, when the tax cuts got implemented. They have jumped in the last two years, to $1.88T and $2.154T, the last a 14% increase and the highest amount of federal tax dollars collected in history.

The Heritage Foundation has released this report titled Federal Spending - By The Numbers:

The federal budget has grown across the board since 2001, outstripping inflation (12% overall) in several categories, such as Education (137%), Community and Regional Development (342%), Medicare (58%), Housing and Commerce (58%), Medicaid (49%), and Water Transportation (46%). The federal budget for Health Research and Regulation has grown by 78% since 2001 and now consumes $76B of our budget.

http://www.heritage.org/Research/Budget/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=93690

The tax cuts worked just fine. It is the out of control Congressional spending that has muted the benefits from the tax cuts. But what can you do when people constantly deliver them bags of money?

[Cpa Gainesville]

In 2000, the last full year of Bill Clinton's term, tax receipts came to $2.025T. They dipped in 2001 and 2002 with the recession, dropping to a low of $1.783T in 2003, when the tax cuts got implemented. They have jumped in the last two years, to $1.88T and $2.154T, the last a 14% increase and the highest amount of federal tax dollars collected in history.

[new york loan]

How does tax certificates work after the redemption period?