The New York Times Advocates a Tax Hike, but Low Taxes Work

The New York Times ran an opinion piece on taxes and national healthcare that is clearly the antidote to a healthy economy. It’s scary to think that this is the type of view that a Democratic president would champion. The Times says:

“This country’s meager tax take puts its economic prospects at risk and leaves the government ill equipped to face the challenges from globalization.

"Germans…paid more in taxes, as a share of their economies.”

But when you look at what makes an economy tick, it’s generally low taxes, limited regulation, and a fair system of justice. Major tax cuts have historically proven that individuals - champions of innovation and limitless human ingenuity - drive positive and robust growth when government is not overbearing. For example, Kennedy’s major tax overhaul, Reagan’s supply-side reform, and Bush’s 2003 program, show cutting taxes, not raising them is the handmaiden of success. Take a look at the three charts at the top, which show revenue, employment, and GDP growth since the Bush cuts were enacted. The third box also shows that the middle class is not shouldering this burden. In fact, it's just the opposite.

Think this only works in the United States? In a 2005 op-ed, Thomas Friedman extolled the virtues of lowering taxes in Ireland, a perennial bottom-feeder.

This is what he had to say:

“Ireland today is the richest country in the European Union after Luxembourg…while those following the French-German social model are suffering high unemployment and low growth…a program of fiscal austerity, slashing corporate taxes to 12.5 percent, far below the rest of Europe...And overall government tax receipts are way up.”

Growth and innovation are on the march in the land of St. Pat's. The world is certainly flat when Dell, Intel, and other corporate captains of industry call Ireland home. Among other things, they were both attracted by “low corporate taxes.”

The Times is also a proponent of a Hillary Clinton-type national healthcare:

“From universal health insurance to decent unemployment insurance, other rich nations provide their citizens benefits that the United States government simply cannot afford.

“The consequences include some 47 million Americans without health insurance and companies like General Motors being dragged to the brink by the cost of providing workers and pensioners with medical care.”

Greg Mankiw, professor of economics at Harvard University counters this perspective nicely:

"What the Times seems to be saying is that because companies like General Motors have promised levels of compensation too large to make them competitive in the international marketplace, we should shift the responsibility for some of that compensation from the companies to the taxpayer. An alternative approach is for the companies to reduce compensation to levels they can afford. One might respond that reduced compensation would be hard on workers. But so would the higher taxes needed to pay for the national health insurance the Times is lobbying for. There is no free lunch here."

As economies in the 21t century become more knowledge and information based, successful governments will allow individuals to flourish and promote a light-footprint approach. Heavy-handedness will only serve to stifle both rich and poor alike.