Its like Coupons

On October 3rd  2012 Mitt Romney and Barack Obama had their first presidential debate. Whether or not you like either one of them you can’t really deny the fact that who becomes president has a large impact on our lives and our country. It would also be hard to deny that the policies either of them would employ could at least potentially have a large impact on our lives. I will be addressing a single aspect of the debate and that is Tax policy. I feel there is entirely to much misunderstanding regarding it and this leads to both unintentional and intentional Straw man arguments. A straw man argument is a formal fallacy where an opponent of an argument or position, misstates or mischaracterizes the argument in a way that allows them to easily defeat it. Think of it like talking to a child. Imagine a child said “mommy I’m hungry!!” and the mom replied “you just ate a few minuets ago you don’t need food right now” and then the child said “you must want me to starve!!”

Now the mother certainly doesn’t want the child to starve, but by characterizing it in this way the child bypasses the mothers argument in favor of one (the starving one) that’s easy to defeat or cast doubt on. In this way I feel the tax policy of Mitt Romney is being mischaracterized and results in a large amount of misinformation, and it just might, mislead some voters who would otherwise agree with it. The main crux of it is the fact that people attack only the part of it that would result in a weakness without dealing with the holistic aspects that make a robust and sound policy.

In the current fiscal environment of Washington, the deficit is out of control. There seems to be a consensus belief on how to reduce it: increase revenue to the federal government and reduce the spending of the federal government. One of the main attacks towards Romney’s plan is that it doesn’t effectively achieve this. He certainly is clear that he wants to cut spending, however he wants to cut taxes as well, and without increasing revenue how will he pay down the deficit?

The answer is simple; his plan to cut taxes is being mischaracterized and the key parts that would increase revenue are being ignored in order to make his plan look bad. His plan has two main parts: Reduce the rates, and reduce Deductions. The part where he reduces the rates is the part where he wants to ‘cut’ taxes and is attacked for not raising revenue. The part where he reduces deductions is the part being ignored.

Imagine that the revenue to the federal government worked like a large super market. In this supermarket you have various products at various prices (tax brackets). The store raises and lowers the price of these products to attempt to raise their revenue. However, there exist these special coupon’s that customers can use (deductions) these coupons have no limit and there is not tie in or special by that you have to do to get them, if you have them, you get the discount. So people who by the more expensive items (the rich) get more benefit out of the coupons. The problem arises when the company is losing money to all these coupons. Then imagine someone said “hey lets just raise the prices!” well this doesn’t solve anything because all of the coupons that people can just use. If you raise the price, they can just use more coupons. Then imagine that say, Romney, begins managing the store. His plan would be to eliminate the coupons, and to compensate for that, he would lower the prices some. So while the prices are lower, people are actually paying the prices. This is very analogous to our current tax system in place.

People complain about the rich not paying taxes, but the problem isn’t the rate of the taxes. The rich, due to the fact that they own more property, have more income, etc; have access to more tax ‘coupons’. Romney’s plan is to lower their rate a bit, but get rid of these coupons. This will actually raise revenue while making the math a lot easier when filing your taxes. There won’t be as many weird forms to fill out to get the full refund, and the rich won’t be able to wiggle out of taxes by taking large deductions. This is balanced by the fact that the rate will be lower, but it will actually get paid instead of skirted through loopholes and deductions.