From The Heritage Foundation

February 26, 2008 | By Nathaniel Ward

Debunking liberal myths on taxes

A central tenet of liberal economics is that high taxes are good for America because they mean more government spending and greater benefits for society. This view has been repeatedly and conclusively debunked, yet leftist economists persist with ever more creative justifications for penalizing hard work and investment.

“In recent years,” reports Heritage Foundation economist J.D. Foster, “some advocates have shifted to arguing that higher taxes are benign with respect to the economy and, in some circumstances, can actu­ally enhance economic performance.” That’s right: they believe higher taxes can improve the economy.

» Take our poll: Can higher taxes improve the economy?

This is nonsense, Foster writes in his thorough debunking of this left-wing tripe: “on balance, clear and compelling evidence shows that higher taxes reduce economic output.” Furthermore, “the modern historical record strongly suggests a clear and robust relation­ship between lower taxes and higher economic output.”

In fact, the only theoretical upside to higher taxes—deficit reduction that leads to reduced interest rates—“is superficially appealing” yet ultimately “threadbare.” This is because the substantial downsides to the tax increases on the table—“poten­tially significant losses in both business investment and labor supply”—greatly outweigh the modest purported benefits.

“As a first priority,” Foster concludes, “federal, state, and local policymakers should eschew tax increases. As the tax burden in the United States continues to rise, policymakers at all levels of government should pursue tax relief to preserve and enhance a strong economy.”