Lower Tax Deductions are Higher Taxes

Some of the Republicans in DC are capitulating, including John Boehner, the Speaker of the House.  Some well-known Republicans are suggesting that they would be willing to go along with a compromise that would involve some increases in tax revenue (as if the government is selling something to get “revenue”).

These politicians are now playing word games, saying that they might be willing to eliminate certain tax “loopholes” or deductions.  This way, they can avoid calling it a tax increase.  But the problem is that eliminating or reducing deductions is a way of raising taxes.  Most people filing taxes have some kind of deduction or tax credit, even when not itemizing.  Tax deductions and credits allow us to keep more of what we earn.

I heard the despicable Karl Rove on Hannity’s radio show.  I could only stand about two minutes of it, but I heard him say that Republicans should stand against tax rate hikes.  This is his slick way of saying that he favors getting rid of deductions and tax credits, which means that people will keep less of what they earn.

I often hear Republicans talk about how our tax system is so complicated (to which they have contributed) and that we need a simpler system.  While this is certainly true, it is not the number one concern of most libertarians when it comes to tax policy.  The biggest issue is not how complicated the tax system is.  The biggest issue is how much money it takes out of our pocket.  I would rather save $10,000 per year on my taxes than save an extra 5 or 6 hours per year preparing them.

Perhaps I would be in favor of eliminating deductions and credits if the tax rate were brought down to 2% or less.  But most Republicans aren’t talking about reducing tax rates any more.  They are talking about lowering deductions and credits with the existing tax rates.

Don’t believe that Republican politicians are really interested in low taxes.  Most of them only say this because this is what their constituency wants to hear.

Of course, this whole talk about taxes is ridiculous in the first place.  The federal government has a spending problem, not a taxing problem.  The big problem is that politicians refuse to cut any significant spending and the voters keep letting them get away with their promises of a free lunch.

Libertarians should not be focused on taxes.  Libertarians should be focused on the spending side.  If we want the economy to improve significantly, then we need massive cuts in government spending.  Once spending is cut, then taxes can follow.  But as long as the federal government is spending close to $4 trillion per year, then it doesn’t really matter much in the end on how it is collected.