In December 2017, the Republican majority-led Congress delivered an amazing Christmas present to the American people in the form of tax cuts. These rate cuts were bigger than we’ve seen in decades.
Not everyone is happy with the “Tax Cuts and Jobs Act”. There are those who rail against the tax cuts as only being for the rich. Setting aside the fact that almost every income bracket should see their taxes reduce, these critics do not understand that the wealthy are the funders of growth in our nation’s economy. They are the ones starting companies, investing in small (or even large) businesses, and hiring people. When they see tax rates rising on these money-making endeavors, they divert their capital into other channels, like tax-exempt securities, where it doesn’t see as much taxation. This doesn’t help America’s economic growth or tax revenue. In fact, studies have shown that in the long term tax rate cuts and not tax rate increases grow the government’s revenue.
Looking on another side of taxing you can see a direct connection between lower taxes and higher individual freedom, or vice versa. Put simply: When taxes go up government grows and expands into more and more areas of our life. We lose individual freedoms when government grows. When taxes are cut and government’s take of each of our daily activity’s reward grows smaller, then government has to shrink and freedom abounds.
We should say at this point also that this only works if the federal government balances the budget at the same time. Otherwise, we are left with a scenario where at least in the short term before tax revenue starts to see an increase, deficits will grow. Expanding our national debt is not healthy and should be condemned by leaders in both our major political parties at all times (and not just when the other party is in power). Instead, history has shown both parties to be in support of passing legislation raising our debt ceiling that actively grows the national debt once they are in the controlling majority of Congress.
In short, tax cuts may be the only time in government where more is actually better.