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The Political Failure of Libertarian Tax-Cut Justifications

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Brian Beutler has an intelligent intervention into the discussion surrounding Jon Chait’s new book. To add on a bit to his argument, I’d like to address this from McArdle:

My quarrel is with the notion that supply-side theories have enormous influence on Republican policy. Supply-siders haven’t had the kind of influence that Chait describes since the Reagan administration. And that’s because everyone observed the Reagan tax cuts opening up huge deficits. Supply side theories are window-dressing–bad, horrible window-dressing, but still, just window dressing. You don’t need it to construct an argument for tax cuts, which is why, contra Chait, getting rid of the supply siders would not much change the desire for low taxes among Republicans. Nor do I think you even need supply-side arguments to sell the tax cuts to the public. The benefits of tax cuts to the public are quite evident: you send less money to the government.

The central argument here — that the Bush administration’s ideological program and public justification of the same would be strongly influenced by impartial empirical evidence — is…problematic. But leaving that aside, the argument that supply-side arguments are superfluous because the value of tax cuts is directly obvious also doesn’t fly, at least when we’re talking about federal income taxes. The distribution of the Bush tax cuts, in particular, is such that the overwhelming majority of the benefits go to a group that is already predominantly Republican and does not come anywhere near an electoral majority. More importantly, the claim that “you’ll get to keep more money” is insufficient as a political justification for tax cuts has empirical support. Mark Smith’s research — now available in convenient book form — found that framing tax cuts in more libertarian terms was politically ineffective. Rather, they became a potent weapon when they were linked to strong claims about their role in promoting economic growth.

Admittedly, McArdle is right that this argument does not require the very strongest supply-side claims about tax cuts paying for themselves — although Republican politicians and public intellectuals have tended to make them anyway — but greatly overstating the economic impact of tax cuts is in fact integral to their effectiveness as a political tool. Appeals to libertarian principles or naked self-interest were never sufficient.

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