Do Tax Cuts Cost the Government Money?

by Brian Bisek

During his address Wednesday on the federal budget deficit, President Obama bashed the House Budget Committee’s plan, in part for focusing on reducing the deficit through cuts in spending without major tax increases.

Obama said that “there’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires.”

Does the President consider cutting or maintaining lower taxes to be “spending”? In order to use that language, you have to assume that the government essentially owns everything we produce, before we do. Thus, the reasoning goes, by allowing people to keep more of their property from being confiscated through taxation, the state is “spending” that money on those people.

I always cringe at this sentiment. The reality is that the government does not own anything, it only redistributes existing wealth– first by taking it from the people through taxes. Incidentally, this is a main reason why the government tends to spend resources so inefficiently. Since it doesn’t have to earn its revenue, the incentive to maximize efficiency is weakened. Unfortunately, the notion that by taking less of our money, the state is “spending” it on us is too seldom exposed as the morally offensive argument that it is.