Tax cuts don’t pay for themselves Pt. 5,341

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One of those illogical arguments that Republicans continue to make, on a state and federal level, is that tax breaks end up paying for themselves. The argument usually goes something like this: the government will offer a tax cut on something, either income taxes, business taxes, property taxes, etc., and because that person/business no longer has that tax liability they will be free to spent that money doing something else, either investing it in a business that leads to new jobs, spending it to increase demand of something, or is some cases even saving it. Since the government has offered the person/business a tax credit they will not be receiving that revenue but since that money was spent on either creating a new job or creating demand for a product the government will still receive that revenue in a indirect manner.

Of course, it is never that easy, nor that clear. In fact it seems to be the complete opposite. Here is Bruce Bartlett on MSNBC, a Republican that use to work for President Regan and Bush I, explaining in clear terms why tax cuts never ever pay for themselves and how many notable REPUBLICAN economists have been saying this for awhile. The major take away from this is that the Republican idea that a tax cut will ever not decrease government revenue is a myth at best.

The reason I bring this up is because about a week ago The Dispatch reported that Governor Kasich had gone to the budget conference committee deliberating on the current House and Senate budget proposals and asked that a new tax called on capital gains taxes being inserted into the final agreed to budget. He even has a name for his tax cut, “Invest Ohio”.

The plan, called “Invest Ohio,” is two-pronged. Ohioans who invest in an Ohio company and hold onto that investment for at least two years would not pay state income taxes on its gains.

Additionally, if investors use gains from a sale of stock to reinvest in an Ohio company and keep that investment for two years, they may apply for a refundable state tax credit related to that original sale of shares.

“If you have been a successful entrepreneur and you want to sell some of what you’ve earned, you move to Florida, because (in Ohio) you pay the federal capital-gains tax, and then you pay the Ohio income tax,” Kasich told reporters yesterday after his speech to the Ohio Society of Certified Public Accountants, in which he announced his plan. “So, the ability to give people a reason to sell their asset and then reinvest it but not pay Ohio taxes on it is huge,” Kasich said.

Oh and guess what, this tax cut is exactly like every other Republican tax cut, it is going to pay for its self!

Mark Kvamme, Kasich’s director of job creation and a California venture capitalist, played a role in “Invest Ohio.” He said the program would be cost-neutral over the next two years and eventually would result in gains for the state’s coffers. “This program helps every Ohioan … across all incomes,” Kvamme said.

Mr. Kvamme seems overly confident that this tax credit is going to be somehow different than every other tax credit that is in existence. Considering how “Invest Ohio” is not only is a tax credit but also represents a refundable tax credit (meaning the state will be PAYING people for the sale of their stocks/bonds), there is exactly a 0.01% chance of this plan paying for its self. In the face of over-whelming evidence to the contrary, that tax credits do not pay for themselves and will only lead to a loss of revenue for the state, Gov. Kasich and his BFF Mr. Kvamme continue to spin this myth that they know what they are doing.

And to just clarify, I am not categorically opposed to all tax cuts. I think they are a tool that can be used to spur growth or demand in the short term but just don’t tell me that your tax cut isn’t going to cost anything because that just isn’t true. Someday, hopefully, Republicans will start to realize that the there is a real cost to these tax cuts they keep giving to their rich friends which comes at the expense of those in the middle and lower classes.



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  1. Through the corporate-funded American Legislative Exchange Council (ALEC), global corporations and state politicians vote behind closed doors to try to rewrite state laws that govern your rights & boost their revenue.

    These so-called “model bills” reach into almost every area of American life and often directly benefit huge corporations. Through ALEC, corporations have “a VOICE and a VOTE” on specific changes to the law that are then proposed in your state.

    ALEC is a conduit, an intermediary between Corporate America & Politicians—whose campaigns are funded by the same corporations.

    One objective of ALEC is limited taxation on corporations & wealthy.

    Check this site to understand the pre-packaged bills either introduced or recently passed in multiple states:


  1. Early reports from Conference | Ohio Budget Watch
  2. The House-Senate conference report on the Kasich “Jobs” (Killing) Budget
  3. More tax breaks coming for wealthy investors? You bet.

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