Joe’s Income Doesn’t Belong to Sam

by Don Boudreaux on November 4, 2010

in Debt and Deficits, Taxes

Here’s a letter to the New York Times:

Gail Collins criticizes the Bush tax cuts because “there was no money to pay for them” (“The Day After the Day After,” Nov. 4).

Ms. Collins’s perspective is distorted.

Taxes are payments people are obliged to make in return for services provided by government.  Because it’s misleading, at best, to talk of ‘paying for’ reduced payments, it’s misleading to talk of ‘paying for’ tax cuts.  So, in fact, what “there was no money to pay for” was not the tax cuts but, rather, the goods and services that government continues to supply despite having insufficient tax revenues to pay for them.

Sincerely,
Donald J. Boudreaux

It’s true that future taxpayers and (because of inflation) consumers will be stuck with the bill for today’s debt-funded expenditures – in the same way that spendthrift Joe will be stuck with the bill, in his future, for his debt-funded expenditures today.  In both cases, the thing appropriately identified as being unaffordable today – the thing that is today too costly for the spender, given his income, to purchase – is not his reduced income but, instead, the goods and services he buys that he cannot afford.

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