A Taxing Proposition

Newt Gingrich, alleged genius, has an imbecilic tax plan:

The tax plan proposed by Republican presidential candidate Newt Gingrich would add $1.3 trillion to the U.S. budget deficit in 2015 alone, a new analysis shows, complicating his goal of balancing the government’s books. [That’s an understatement, to say the least. –ed.]

The analysis by the nonpartisan Tax Policy Center compares the federal government’s take under Gingrich’s proposal with projected U.S. revenue if current tax law ran its course and existing income tax cuts expired as scheduled after 2012.

Here’s the thing: Federal expenditures are always paid for by productive people. Always.

The options for funding are direct taxation, inflation, and debt. The taxing effects of direct taxation are obvious and well-known. The taxing effects of inflation, however, are a little more pernicious because they aren’t felt right away. In fact, some even find inflation to work as a subsidy. However, inflation causes the nominal price of goods to rise, generally before most people see their income rise at a corresponding rate, and the difference between increased prices and increased income is effectively a tax. And then debt is simply taxation deferred, wherein bonds are sold under the implicit promise that the government will pay them later, generally by direct taxation.

The key to actually reducing taxes, then, is to first reduce real spending, elsewise taxes will never truly go down. At best, they will simply be time-shifted. Thus, Gingrich’s tax proposal is nothing more than a farce because tax cuts are not accompanied by spending cuts. And, until taxes and spending are cut in tandem, Gingrich should be viewed only as a slimy charlatan, and nothing more.

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