Do Tax Cuts Cost the Government Money?

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By RonPaul.com on October 23, 2006

Whenever tax cuts are discussed in Washington, the media and most politicians use the phrase, “cost to government.” “How much will this tax cut cost the government?” we are asked, as though some crime is being contemplated when we consider reducing taxes. The American people have every right to fund the federal government at whatever level they deem acceptable, and if they choose– through their elected representatives– to reduce that funding level, they are not somehow injuring the government.

If Congresses passes a new law that results in you paying $1000 less in taxes next year, have you taken something from the government that rightfully belongs to it? Or has the government simply taken less from you? You don’t cost the government money, the government costs you money! Of course it’s reasonable to demand that politicians cut spending when they cut taxes. That’s the definition of real fiscal conservatism: government should not take too much from the private economy in taxes, but neither should it spend too much and run up deficits. That’s why I vote against the wasteful appropriations bills that relentlessly increase federal spending year after year.

I reject the notion that tax cuts harm the economy. The economy suffers when government takes money from your paycheck that you otherwise would spend, save, or invest. Taxes never create prosperity. Private-sector innovation and productivity are the engines that drive our economy, regardless of what politicians tell us. Tax reduction is my first priority in Congress. The reality is that most working Americans lose about half of their incomes to federal, state, and local taxes. “Tax Freedom Day,” representing the portion of the year you must work to pay for government at all levels, is roughly June 1st for most Americans. Imagine all of your hard work this year between January and the end of May going to the government! One tax in particular should be eliminated as soon as possible– the tax on Social Security benefits. Those benefits were never taxed between the 1930s and 1984. Treating them as taxable income represents nothing more than a trick to reduce Social Security benefits by stealth.

I supported legislation that successfully repealed a 1993 tax increase on benefits, and my own bill, HR 180, would go further and eliminate all taxes on Social Security. Our seniors paid taxes throughout their working lives to fund the Social Security system, and it is immoral to tax them again on their benefits. Various other taxes also must be reduced. Capital gains taxes are terribly counterproductive, punishing those who save and invest. Payroll taxes impose a tremendous compliance burden on businesses, especially smaller entrepreneurs who cannot hire an accounting department. Federal gas taxes should be slashed to provide taxpayers relief at the pump. Most importantly, federal spending must be dramatically reduced so that all Americans can go back to working for themselves instead of working to pay their taxes.