I’m asked repeatedly whether it’s true that the tax cuts will cause deficits. The short answer is no. Here’s why. First, it is a well-settled principal that you don’t raise revenue by raising tax rates. Raising rates always has the effect of reducing economic activity. What you tax, you get less of. When you tax income and productivity, you get less of each. When you reduce rates, there’s more incentive to worker harder because people keep more of that they earn. It’s immutable human nature. Harder work means more income, which means more tax revenue, if even at lower rates. Secondly, tax cuts, no matter how deep, NEVER cause deficits. There’s only ever been one reason for deficits—and that’s spending. When you spend more than you take in, you get a deficit. The best example is what happened after Reagan’s first two tax reform measures in 1981 and 1982. Federal revenue about doubled by 1989. But deficits kept climbing. Why? During that same period, Congress increased spending by over 4 times. No tax increases can possibly keep up with that kind of spending. Don’t be deceived. Tax cuts are always good for the economy.
