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Debunking liberal myths on taxes

March 26, 2008 | By Nathaniel Ward

A central tenet of liberal economics is that high taxes are good for America because they mean more government spending and greater benefits for society. This view has been repeatedly and conclusively debunked, yet leftist economists persist with ever more creative justifications for penalizing hard work and investment.

“In recent years,” reports Heritage Foundation economist J.D. Foster, “some advocates have shifted to arguing that higher taxes are benign with respect to the economy and, in some circumstances, can actu­ally enhance economic performance.” That’s right: they believe higher taxes can improve the economy.

» Take our poll: Can higher taxes improve the economy?

This is nonsense, Foster writes in his thorough debunking of this left-wing tripe: “on balance, clear and compelling evidence shows that higher taxes reduce economic output.” Furthermore, “the modern historical record strongly suggests a clear and robust relation­ship between lower taxes and higher economic output.”

In fact, the only theoretical upside to higher taxes—deficit reduction that leads to reduced interest rates—“is superficially appealing” yet ultimately “threadbare.” This is because the substantial downsides to the tax increases on the table—“poten­tially significant losses in both business investment and labor supply”—greatly outweigh the modest purported benefits.

“As a first priority,” Foster concludes, “federal, state, and local policymakers should eschew tax increases. As the tax burden in the United States continues to rise, policymakers at all levels of government should pursue tax relief to preserve and enhance a strong economy.”

Does Heritage support a candidate?

Many Heritage Foundation members have written in asking our position on the presidential election.

We don’t have one—save that candidates and citizens alike should keep conservative principles in mind as the election season continues. No matter who secures the Democratic and Republican Party nominations, we will work with them to explain our positions and promote our shared values.

Fundamentally, Heritage is an idea factory, not a political organization. Our goal is not short-term electoral gain (or electoral defeat) for one party or candidate. Instead, our challenge is more profound. We seek to reshape the entire national debate along conservative lines, to advance the core principles of the Founding Fathers: free enterprise, limited government, individual freedom, traditional American values and a strong national defense.

If we are to accomplish this mission, we have to be an honest broker of ideas and present our proposals to all who will listen—regardless of whether they have a D, an R or an I after their name. To that end, our policy experts offer briefings on today’s most important issues to candidates of all parties, and we work with members of Congress from both sides of the aisle to spread our message. This strategy has paid dividends: many of our greatest successes—from welfare reform to tax cuts—have come from work with allies across the ideological spectrum.

In addition, we’re limited in our activity by law. If we’re to retain our status as a 501(c)(3) non-profit organization—which allows you to deduct your membership dues from your taxes, for example—we cannot involve ourselves with partisan politics or electioneering.

Other Heritage work of note

  • Protect America. “Ordinarily, we wouldn’t alert international terrorists that the United States is easing its efforts to detect and dismantle their plots,” Heritage legal scholars Andrew Grossman and Robert Alt write. “But since Congress has already, in effect, given the terrorists the green light to plot without fear of discovery, calling attention to the House’s gross irresponsibility in allowing crucial intelligence-gathering laws to expire probably won’t cause further harm.”
  • Energy and Environment. The Environmental Protection Agency is considering a new ruling that carbon dioxide emissions from cars are harmful to public health. This is a step Congress has proved unwilling to take. Such a move, Heritage expert Ben Lieberman argues, “would spark many costly measures with the potential to harm the U.S. economy and intrude on citizens’ daily activities.” Regulations on burning fossil fuels, designed to curb these emissions, may have “costly and disruptive effects on the economy and on living standards.” And he points out that because of the Clean Air Act’s provisions, these regulations “could now be imposed for the first time on many commercial buildings, farms, and all but the smallest of businesses.”
  • Energy and Environment. “To help educate policy makers about the realities of nuclear power, The Heritage Foundation and Third Way joined forces to tackle the Three Mile Island myth head-on by sponsoring a tour by a bipartisan group of Senate staffers of Three Mile Island,” reports Heritage’s Foundry weblog. Five Senate staffers—three Democrats and two Republicans—accompanied Heritage’s experts on the tour.
  • Transportation. The federal government has over the last several decades lavished taxpayer dollars on a wide array of misguided transportation projects in and around the nation’s capital that have done little to relieve congestion. Heritage’s Ron Utt and Wendell Cox now draw attention to “the biggest boondoggle of them all,” a $5.1 billion project to extend the city’s rail transit system 11.6 miles to Dulles International Airport. Here’s the kicker: “the project’s own estimates that show it would do little to relieve congestion, pollution, or energy use in the corridor where it would operate, let alone in the region as a whole.” Utt explained last fall that the D.C. Metro rail system needs reform, not more taxpayer cash.

In other news

  • A new study, USA Today reports, finds that today’s “high schoolers still lack important historical and cultural underpinnings of ‘a complete education.’” These results come after decades of massive increases in federal education spending.
  • The New York Philharmonic Orchestra has traveled to Pyongyang, North Korea to take part in what the New York Times calls a “heavily choreographed visit” to the oppressive Communist state.
  • The immigration debate has returned. Moderate “Blue Dog” Democrats in the House of Representatives are working with Republicans to push a border-security bill, Congressional Quarterly reports (no link available). They’re up against “Hispanic, liberal and farm-state Democrats who want Congress to at least temporarily legalize millions of working illegal immigrants already in the country—especially students and farmworkers—and expand visa limits to allow the entry of more foreign labor, especially seasonal workers needed this summer.”
  • Canada’s National Post reports that snow cover in North America and Asia is greater than at any point in the past four decades, while American temperatures were below the average for the last century.
  • The chairman of the FCC has said he is considering imposing “net neutrality” rules that could limit how telecom service providers offer content to their customers. Congress is also considering legislation that would limit private providers’ flexibility in managing their own data networks.

Coming up at Heritage

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  • On Monday, March 3 at noon, Brian Latell of the Institute for Cuban and Cuban-American Studies at the University of Miami will discuss Raúl Castro’s regime in Cuba.

Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. Chris Albright contributed to this report.