/* Google Analytics Code asynchronous */

Tuesday, November 16, 2010

What does "Fiscal Conservative" Mean?


I'd suggest, again, that it is Andrew Mellon: tax cuts only if they are paid for in advance by spending cuts.

What do we find instead, keeping in mind the Reagan-era debt explosion? Well, Andrew Sullivan lauds:

1986-style tax reform (largely removing deductions and lowering rates) - link

Why is this "conservative" or "fiscal conservative"? It sounds more Republican than conservative.

Lower marginal income tax rates looks like chasing the already long-in-the-tooth Reagan era. You can't fight diminishing returns to a strategy...

Why isn't the "conservative" position simply to recognize the structural deficit created by the Bush tax cuts and to raise taxes?

Last, the legacy of the Reagan era reforms looks Republican and even more risky for nation with a completely different set of economic realities:

When all was said and done, the total tax burden imposed on the American people from all sources—state and local taxes, federal income and capital gains taxes, and payroll taxes—remained basically unchanged throughout the 1980s. In the end, Reagan's reputation as a tax-cutter far outran his actual performance.

Reagan's tax policies did, however, redistribute the tax burden significantly, even if they failed to reduce it overall. By cutting income taxes, which are paid at a higher rate by the wealthy, while increasing payroll taxes, which are paid at a higher rate by the working poor and middle class, Reagan shifted the tax burden down the income scale. During the 1980s, the total effective federal taxation rate for the poorest one-fifth of American families actually increased by more than 16%. By contrast, the effective taxation rate for the wealthiest one-fifth of families fell by 5.5%, and the richest one percent of Americans saved even more: their tax rate fell by 14.4%.25