By now, unless you’ve been on a long-term deployment with your SEAL team to some forsaken portion of Afghanistan, you are aware of the kerfuffle in DC about what are being called the “Bush tax cuts” and whether they should be extended.
The simple truth of the matter is that they are not tax cuts. They are the new old baseline, having been around for almost 10 years.
If I sold pumpkins for the usual price of 10 cents per pound and then decided that I needed to drop the price to 8 cents per pound–the base price is now 8 cents per pound. It simply does not matter to the consumer or the seller what the price used to be. That is history, but it is also immaterial. The current price, the price that pie-baking chefs and pumpkin-raising farmers are planning on is 8 cents per pound. If I, at some point, have to raise my prices back to 10 cents per pound, I can’t get away with calling it a return to what the price used to be and telling everybody to get over the fact that they are required to pay 25% more than they have been. The fact is, the real price just went up.
The tax cuts which were implemented nearly 10 years ago set the new “price” for taxes. Anything above that baseline is a tax increase, anything below that baseline is a tax reduction/cut.
The issue is not “extending the Bush tax cuts” but rather whether we are going to see an increase from our current levels–the levels that the farmer, the chef, and everyone else who pays taxes has been budgeting for and otherwise including in current and future business plans.
If we do not recognize that calling this tax increase an “extension of tax cuts” is an abuse of the English language, then, to be consistent, we would need to recognize that since the highest marginal tax rate on those married couples, filing jointly, making above $200,000 was 94% in 1946, then anyone in that bracket who is not paying at least 94% of today’s income in income taxes has already received a massive tax cut and should be insanely happy to give the federal government some of its money back.
Which leads us the the heart of the matter: is your income really yours, or does it belong to the government?
Thomas Sowell does a better job of the matter.