Wednesday, November 17, 2010

Thomas Sowell on tax cuts

Please stand for this month's reading from The Gospel According To Saint Thomas....

Economist Thomas Sowell, the smartest man in the world now that Milton Friedman is dead, has given us an assortment of new scriptures to ponder.

As Saint Thomas has grown old, his offerings to his disciples have become shorter, but no less pithy. We should treasure them, ponder them, and hold them in our hearts.

In this reading, The Good Doctor has arisen from his pallet to straighten out the issue of perverse incentives, tax cuts, and the issue of why people hire people and bother to be productive in the first place. 
We know that it has become tiresome for Saint Thomas to be bothered with stamping out ignorance in his old age, and value his contribution all the more because of his patience. 

Please remain standing until the end of the reading from the scriptures:

The first big cut in income taxes came in the 1920s, at the urging of Secretary of the Treasury Andrew Mellon. He argued that a reduction of the tax rates would increase the tax revenues. What actually happened?

In 1920, when the top tax rate was 73 percent, for people making over $100,000 a year, the federal government collected just over $700 million in income taxes-- and 30 percent of that was paid by people making over $100,000. After a series of tax cuts brought the top rate down to 24 percent, the federal government collected more than a billion dollars in income tax revenue-- and people making over $100,000 a year now paid 65 percent of the taxes.

How could that be? The answer is simple: People behave differently when tax rates are high as compared to when they are low. With low tax rates, they take their money out of tax shelters and put it to work in the economy, benefitting themselves, the economy and government, which collects more money in taxes because incomes rise.

High tax rates which very few people are actually paying, because of tax shelters, do not bring in as much revenue as lower tax rates that people are paying. It was much the same story after tax cuts during the Kennedy administration, the Reagan administration and the Bush Administration.

The New York Times 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 in the eyes of the beholder-- and in the rhetoric of the demagogues. If class warfare is more important to some politicians than collecting more revenue when there is a deficit, then let the voters know that.

The man has spoken.

Thus endeth the reading from The Gospel According To Saint Thomas.

You may be seated.

We do not ordinarily show videos on pull-down screens here at the Chapel of Saint Sowell, but in this case, as an aid to worship, we have included the following:
This is a video of someone who just....doesn't....get it.  If you have children in The Chapel who can't view this type of material without laughing, please take them to the nursery now. 

This is why Our Gospel must be spread throughout our land, the world, even to D.C. and The New York Times. 

Thank you all for attending our services this morning. Let's all go to Luby's !

1 comment:

TarrantLibertyGuy said...

Saint Thomas is so wise. Good Doctor - O Physician, heal thy economy. Please.