It Adds to the Debt

I just have to say.... the "We can't afford tax cuts because it will add to the debt" argument drives me crazy.  Watch any news broadcast and you'll hear that argument used over and over again by pundits and politicians as a justification for raising taxes.

The first problem with the argument is the assumption of ceteris paribus, that all things (before and after any legislation is passed) will remain the same.  In other words, there will be no reaction (much less a large scale one) to changes in law, especially taxes.  They assume that the "Rich" will not change their behavior in any way, nor will the poor.  The same number of people will be in each tax bracket, with the same exact income as before.  How could some one possibly expect such an assumption to be reality?

Furthermore, tax raises, far from benefiting from ceteris paribus, often draw tax in less in revenue than predicted.  Tax cuts, however, don't see the taxed population remain the same either.  In fact, historically tax cuts have brought in more in revenues than was supposed to be "lost" through the static population assumption.

Check out this example:

"The Reagan tax cuts, like similar measures enacted in the 1920s and 1960s, showed that reducing excessive tax rates stimulates growth, reduces tax avoidance, and can increase the amount and share of tax payments generated by the rich. High top tax rates can induce counterproductive behavior and suppress revenues, factors that are usually missed or understated in government static revenue analysis. Furthermore, the key assumption of static revenue analysis that economic growth is not affected by tax changes is disproved by the experience of previous tax reduction programs. There is little reason to expect static revenue analysis to evaluate the economic or distributional effects of current tax reform proposals much better than it evaluated the Reagan tax program 15 years ago"
- Christopher Frenze, Chief Economist to the Vice-Chairman (Joint Economic Committee, 1996)
source

Please, please, stop using the tired old "tax cuts are costly" argument!  I'm very tired of hearing that nonsense.