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November 03, 2007


Back in February, I flagged a similar example in a WSJ editorial on fixing the Alternative Minimum Tax: "The estimated 'cost' of this fix to the Treasury over 10 years would be some $632 billion." It's not a cost, it's a "cost"! (In this case, the use of scare quotes is correct -- the WSJ doesn't think there is any cost to cutting taxes -- but the empirical argument is wrong because cutting taxes does, in fact, reduce revenue.)

I think you miss the WSJ's point here. It isn't making a Laffer curve argument; it's saying that the government taking in less money than it would have in the hypothetical world where it didn't lower taxes isn't a cost.

That is, one can describe it as a "cost" only if one assumes that the natural rate of taxation of that particular type is the higher amount, rather than zero.

(For instance, nobody would argue that it's a cost if I, e.g., impose a 2% tax on the sale of luxury yachts in 2009. But if I impose a 4% tax on the sale of luxury yachts in 2008, and then a 2% tax in 2009, some people will treat that 2009 tax rate as a "cost" because I've collected lower revenues in 2009 than 2008.)

Excuse me liberal, when you are taking something away, like reducing taxes, you are not paying for the tax cut anymore than paying to have a grocery item removed from your shopping cart that you don't want, while in a checkout line. You will have less food when you get home, fore sure, but you will also be healthier eating less CRAP!

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