Too Taxing for Reporters?

...It can be dangerous for a government to have an excessively large debt, and there are also problems when a country like the United States has no debt...

...BY RICHARD W. RAHN ON FOX NEWS SUNDAY a few weeks ago, Senate minority leader Tom Daschle was twice asked a simple question that he refused to answer: "What do you think the maximum income tax rate should be for any American...

...Again, it is rare to see a member of the media press these points...

...The Kennedy tax cuts were, relative to the size of the economy, about three times larger than the cuts that Bush proposes...

...These facts are rarely reported...

...Reporters do face the problem of knowing which economists are sound, but fortunately any who care to can easily check the track records of most public policy economists by researching their articles through the years...

...Some who have argued for a smaller tax cut have made the conceptual error of assuming that economic and employment growth would be as strong with higher tax rates as they would be with lower tax rates...

...In light of the history of the Kennedy rate cuts, why is the press not asking those who say the tax cut is too big to give supporting evidence...

...The growth in the supply of goods and services is greatly influenced by tax and regulatory impediments on productive activity...

...Public opinion polls have consistently shown that most Americans believe that no one should have to pay more than approximately 25 percent of his Richard W. Rahn is a senior fellow at the Discovery Institute and an adjunct scholar of the Cato Institute...

...That is why, following the Reagan tax cuts, we were able to have record drops in the rate of inflation and interest rates, a very large increase in real incomes for most Americans, and a major decline in the unemployment rate, despite increasing deficits...

...I, for one, would really like to know what each member of Congress thinks is the maximum "fair" tax rate, and the ideal size of government (as a percent of GDP) and why...

...The Kennedy tax cuts in the early 1960s are correctly considered a great success, and are given credit for much of the economic boom of that decade...

...The press, Democrats, and even Republicans seem to have forgotten that the Kennedy tax cuts were put in place at a time when the government was running a deficit and the debt was a larger share of GDP than it is now...

...Those who say that we cannot afford the tax cut should be required to show that the government programs they want to use the money for are more cost effective and add more to the social welfare than leaving the money in the private sector for the taxpayer to spend or save...

...Many of those who argue that we cannot afford tax cuts often confuse tax rates and tax revenues...

...The non-business mainstream press has almost uniformly treated debt and deficits as bad, and surpluses and debt reduction as unambiguously good...

...The Kennedy cuts were proportional, while the Bush plan cuts the bottom rate by 33 percent, giving a greater benefit to low income workers, and actually increasing the progressivity of the income tax...

...This is pretty basic, yet few journalists even try to get us the answers...

...Reporters do not have to be trained economists to ask the right questions and get their stories right...

...If tax rates are lower, individuals and businesses have more incentive to produce and invest, which means that more people obtain jobs and pay taxes...

...Economic models that include the incentive effects of the rate changes in the tax plan show revenue feedbacks of hundreds of billions of dollars (which means the actual revenue loss would be much smaller), but few in the press have bothered either to report or explain this important fact...

...Could we be seeing political bias, or is it just ignorance of economic history...

...Almost daily, reporters say or write that big deficits cause inflation...

...income to the government...

...In the Kennedy plan, the top rate was cut by 23 percent, versus only 17 percent in the Bush plan...

...If a member of Congress cannot answer, how can he or she responsibly vote for any tax or spending bill...

...Taxes from the additional job holders offset some of the decrease in revenue caused by the rate reduction...

...Inflation is caused by the money supply growing faster than the supply of goods and services...

...And what about the Democrats who say the Bush proposal is too beneficial to the rich: Didn't most Democrats support the Kennedy plan, which was much more beneficial to the rich...

...George W. Bush has often said that no American should have to pay more than a third of his income in taxes...

...The Federal Reserve controls the growth rate of the money supply...

...The statement is both theoretically and empirically untrue...

...All too often, laziness and a left-leaning ideology in much of the mainstream press have led to sloppy economic reporting, which has led to sloppy economic policy, which has led to lower economic growth...

...Most interesting, in today's parlance, they benefited the rich much more...

...Most recently we have been experiencing a sharp drop in economic growth, increasing unemployment, and a bump in inflation, despite record budget surpluses...

...This question is at the core of the debate about the structure of the tax cut, yet very few reporters have asked members of Congress to answer it...

...The objective evidence shows that most of the supply-siders got it pretty much right, and most of the Keynesians were pretty much wrong over the past two decades...

...Such uncritical reporting and advocacy can lead to very bad and potentially disastrous policies...