The Great Tax Divide


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The 800-pound gorilla that gets ignored by people who use these talking points is the dominant economic factor of those years — namely the huge and unsustainable housing boom that led to a catastrophic housing bust that took down the whole economy on Bush 43′s watch.

Tax cuts are not a panacea. In fact, nothing is a panacea or else, by definition, all the problems of the world would already be solved.

Ironically, it was Mr. Leonhardt’s own newspaper that reported in 2006, “An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.”

Expectations are of course in the eye of the beholder. Rising tax revenues in the wake of a cut in high tax rates was a possibility expected by five different administrations, both Democratic and Republican, over a period of more than three-quarters of a century.

No one expected automatic and instant surges in economic growth. Both John F. Kennedy and John Maynard Keynes spoke in terms of the long-run effects of lower tax rates, not the kind of instant results suggested by Mr. Leonhardt’s graph of growth rates — least of all during a very volatile housing market in which American homeowners took trillions of dollars in equity out of their homes.

Back during the 1920s, when there was no such monumental economic factor as the housing boom and bust until 1929, there was a rapid increase in both tax revenues and jobs after the tax rates were cut. Today, the uncertainties generated by an activist and anti-business administration probably have more of a chilling effect on investments than the tax rate does.

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  • PaulRevereNow

    Calvin Coolidge's Treasury secretary, Andrew Mellon, cut taxes twice in the 1920's–1923 and 1926, and thus postponed the onset of the Great Depression, in the United States. The Depression of 1929 was actually world-wide; beginning in 1927 in the Far East. But liberal college professors almost never mention Mellon's tax cuts, or that the 1929 Disaster wasn't limited to America. Dr. Sowell's article is a good case for extending the Bush tax cuts.

  • guest

    Low hanging fruit exists to avoid this division on tax policy. Obama's corporate friends pay no taxes. Jeffrey Immelt's GE, Westinghouse, Disney, Warren Buffet and the UAW not only pay no taxes but receive money from the federal government in subsidies. Media Matters is tax exempt. We should ask Obama why can't his grafting friends pay anything before he takes more of our money. Ryan has a good message in increase the tax base, lower the rates. If GE wants to move to China and Mexico, let them go. Other companies, like Caterpillar and Boeing, will be happy to take their market share.

    Liberals today are focused on greed and avarice. Conservatives should focus on fraud. Fraud has the face of an honest man and the tail of a scorpion and acts as the true root of all evil. No law can prevent fraud. Fraud, not greed, caused the 2008 housing crisis. Barney Frank and Chris Dodd had explicit conflict of interests and GSEs fraud started in the early 90s.

    • trickyblain

      "Media Matters is tax exempt."

      As is FPM.

  • OregonBuzz

    I cannot believe that in the upper right hand corner of this page there is a petition to "Denounce The Violent Rhetoric of Michelle Bachmann". This is a joke, right Mr. Horowitz? What a travesty.

  • dmw

    Dr. Sowell's assertion that: "Today, the uncertainties generated by an activist and anti-business administration probably have more of a chilling effect on investments than the tax rate does." reminds me of a commencement address given by talk show host Neal Boortz to a group of graduating college seniors. Boortz warned the graduates that, when they endeavor to start a business of their own, they will automatically take on a large and influential partner — the federal government; and depending on where they are located and what they're doing, local and State partners as well. Taxing can be more than just "taxes".

  • cynthia curran

    Republicans are also against urban environment versus the suburbs. A study showed more process for immigrants in Santa Clara County versus La or La versus Orange or San Diego. Santa Clara is a blue county but its more suburban compared to LA. I think Suburban counties have an advantage of more job opportunities and upward mobility. Orange is slightly red and San Diego purple. Fresno is the rural example and its immirgants do poorly since they remain to do farm work or go on to casual labor read Victor Hansen on this Besides Tax policy encouarge Suburban development over urban. In fact among large counties in Ca,Santa Clara around 8.2 and Orange County and 7.9 have the lowest unemployment in California.

    • objectivefactsmatter

      "I think Suburban counties have an advantage of more job opportunities and upward mobility"

      When high tech industries took off, that is where the real estate was to open businesses quickly. The jobs grew more rapidly there from the mid-1980s onward till today as far as I know. The banking crash did not help matters either with so many urban office locations.

      You might have a point among those with children who prefer the suburbs on ideology but most of the jobs with attractive upward mobility potential appeared in the suburbs. Funny how liberals don't care as much about whether their children have room to play etc.

  • objectivefactsmatter

    "As President John F. Kennedy put it, “it is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.” This was because investors’ “efforts to avoid tax liabilities” make “certain types of less productive activity more profitable than more valuable undertakings,” and this in turn “inhibits our growth and efficiency.”

    Now you've confused Obama supporters. That is the problem. Truth has gone out of fashion because it's too damn hard to teach to the unconverted.