Senate Republicans have it wrong on taxes!

Hallelujah! It's raining money!

Once again, a few Senate Republicans are just plain wrong when it comes to tax policy.

Previously. some supported delaying the corporate tax reforms. Such a delay is a bad idea for the reasons I wrote here – Don’t Delay.

Now, according to Politico: “a handful of deficit hawks — including Corker and Sens. Jeff Flake of Arizona and James Lankford of Oklahoma — are discussing a trigger mechanism that would kick in and potentially change tax rates if the economic growth needed to defray the cost of the tax overhaul doesn’t materialize.”

As for the issue of deficits, I wrote this: It’s The Spending – Politicians and Spending.

As for the use of a “trigger,” it demonstrates another complete lack of understanding of economics.

The triggered tax increase would come into play if not enough revenue was being generated by the economy.  So, why would an economy not generate enough tax revenue?  In today’s world of endless taxation, the only answer is that the economy is weaker than desired.

The answer to a weaker than desired economy, however, is NEVER to take money out of the private sector. Such an answer defies common sense.

Think about it:

  1. If you do not have enough money, i.e. your economy is weak, is the answer to take money away from you?
  2. If a store does not have enough revenue, in a weak economy, is it’s answer to raise prices? Or is it to put items on sale to lure in customers and generate revenue?

The same concepts apply to the economy as a whole.

As I wrote in Forbes in 2012,

“Raising taxes during bad economic times is much like throwing more weight on a overburdened mule; it slows it down even more. For government, economic downturns mean less business transactions and less income, which, of course, means less tax revenue.”

I went on to note that John Maynard Keynes “well understood the concepts above. That is why he wrote long ago:

Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance, than an increase, of balancing the budget.’

By writing that, Keynes wanted others to understand that tax policy should be guided to the right level so as to not discourage income but, instead, to maximize income and therefore revenues. Keynes was not finished there, however. He went on to explain:

Read the rest at: Dont pull the Trigger

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