While Obama tours the country promoting his personal donation plan, the Republican Presidential hopefuls are in a pitched battle for the nomination and arguing which tax simplification plan is best. Threatened with the possibility of rate cuts, the Media and politicians trot out the usual suspects of lies about tax hikes and tax cuts.  This is a battle Republicans must win and, to do so, they need to expose those lies.

Keep in mind that the battle between those who create wealth and those that want to redistribute it, mainly politicians, is as old as civilization itself.  We read of tax battles and even reform in every age, like Urukagina’s tax reductions in Babylonia/Sumer in 2350 BC.  Equally venerable are the constant set of demagogic lies by those against tax cuts and simplification.  It is important to note that politicians like complicated tax codes and high tax rates because they control those rates and dispense the loopholes and regulations that complicate the tax code.  Tax simplification means they lose power.  As a result, resistance to tax reform is more often the rule than reform. As for the lies, they abound, so let’s consider just a few:

Lie # 1: Tax cuts cause deficits/Tax hikes balance the budget.  The Media and the Left often say that the Reagan and Bush tax cuts led to deficits while Clinton’s tax hikes led to a balanced budget. In truth, according to the IRS, federal tax revenues rose dramatically after the overall Reagan tax cuts/reforms (98%) and the Bush tax cuts (a record $700+ billion). This is just as they did after the Harding/Coolidge cuts (61% revenue increase) and after the Kennedy/Johnson cuts (62% revenue increase).  Those are the four major income tax reductions we have had since the inception of the income tax in 1913 and every time revenues rose after they were in place – every time.

So did the tax rate cut cause a deficit? The lie, of course, is to blame the revenue gathering mechanism (tax code/rate cut) instead of the revenue spending mechanism, i.e. Congress/Presidents.  The spenders kept spending – often at an accelerated rate when they saw the new revenues.  Thus, the fault for continuing deficits lies not with tax rate cuts, which produced higher revenues, but with politicians who spent too much.

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In what is becoming a perennial affair, the California budget deficit is projected to be over $21 billion in the coming year – including a $6 billion hangover from this year.  With the same degree of regularity, in pursuit of stable education funding (a good idea), educators in California are calling for tax rate increases (a bad idea) and blaming Republican legislators for blocking those increases (an unproductive idea).   Rather than call for more tax rate increases – one of the causes of our current problems –educators should call for policies that will increase private sector jobs so we have more people paying taxes – not less.

At first blush, it may be hard to believe that we have another deficit.  After all, in 2008, expenditures were far in excess of $100 billion.   Expenditures for the upcoming fiscal year were just over $90 billion.  With all that cutting, shouldn’t we have a balanced budget?  The answer is no – because budgets are a two-part equation: deficit/surplus = spending – revenues.  In California’s case, revenues have plummeted faster than expenditures – and continue to do so at a perilous rate.  Worse yet, California’s Legislative Analysts Office projects huge deficits for years to come.

Nevertheless, Democrats and many educators are calling for ever more tax rate increases in a dangerous game of economic roulette with California jobs.  Keep in mind that California already has the 6^th highest tax rate in the Country.  Why not shoot for number #1?  Three reasons:

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