Bush has NOT cut taxes
First, in order to consider how Bush's policies have affected tax burdens, I need to define the term "taxes." Taxes are a revenue source for the state and the state is the entity that has a monopoly, or at least claims the right to a monopoly, over the use of coercion within its political borders. Therefore, Hans Hoppe's explanation of taxation as "a coercive, non-contractual transfer of definite physical assets" (Economics and Ethics of Private Property, p. 28) provides us with a sound definition of taxation. Taxes are the takings of private property in order to fund the state. They are a form of aggression against private property.
We normally think of taxes as coercive non-contractual transfers that are based on the sale price of some exchange, such as excise taxes on the sale of goods or services, tariffs on imports, or income taxes on the sale of labor. Our federal government's largest revenue sources are due to taxing workers for showing up to work and earning incomes. In 2006, the federal government collected $1,044 billion and $838 billion, respectively, in income taxes and payroll taxes, which are a form of income taxes.
In addition to what we normally think of as taxes, the state also has the option of borrowing money by selling government securities in order to finance its spending. This is a significant form of finance as the federal debt, including intragovernmental debt, increased $574 billion in fiscal year 2006. Budget deficits are generally not considered to be a form of taxation and it's oftentimes useful to distinguish between revenues generated by taxing the sale of a good or service and revenues generated by selling securities. However, government debt is a coercive transfer of property from private hands to government coffers.
Those who lend the government money are purchasing a promise to take someone's property in the future in order to repay the loan. If the securities that are issued are to be repaid, then the state is simply shifting tax burdens away from current taxpayers on to future taxpayers. We should recognize that there is a current burden from government borrowing and that is the opportunity cost of the resources the state commands due to the revenues resulting from the sale of securities. However, we must also recognize that government securities are simply promises to take someone's property in the future and give it to the bondholder. This future aggression against private property is a tax. Deficit spending is simply another way of shifting tax burdens.
What about the case where the state incurs debt but later repudiates that debt? Suppose that the state borrows $100 from me with the promise to take $100 plus interest from someone in the future and use those funds to repay the debt. However, when the time comes, the state refuses to tax the future taxpayer and declares that the debt is repudiated. In this case, the state has taken $100 of my property as assuredly as if it had taken $100 from me in direct taxes. In fact, debt repudiation is another coercive non-contractual transfer of assets, in other words, it's a method of taxation.
Other than revenue options that have already been discussed, the state, at least at the national level, may also have the option of creating new money. The price inflation resulting from the increase in the money supply decreases the purchasing power of incomes and savings. Printing money is a hidden form of taxation. Look at it this way, the state can take $100 of a taxpayer's money by taxing his income or the state can create money and reduce the purchasing power of that taxpayer's monetary assets by $100. In either case, the taxpayer has had $100 taken from him. Price inflation is a coercive transfer of assets, and printing money, therefore, fits the definition of taxation.
In 2006, the federal government collected $30 billion in "earnings" from the Federal Reserve. According to the CPI, the 2006 inflation rate was 2.5%. Given that the money supply, defined as M3, is about $11 trillion in this country, inflation decreased the value of our monetary holdings roughly $260 billion. We were taxed $260 billion and this hidden tax only generated $30 billion of federal revenues over and above the cost of funding the inflationary agency itself. Not only is price inflation a form of taxation, it's an inefficient way to fund the state. Given the current goals of federal spending, expanding the empire and the domestic welfare state, maybe we should be thankful for inefficient methods of taxation. Maybe inefficiencies like this decrease the government's ability to expand its reach.
Since all forms of government revenue are generated by a coercive, non-contractual transfer of assets, it would be accurate to refer to all government spending as some form of taxation. Now, what can we say about Bush's tax-cutting reputation? Simply put, it's undeserved.
Including the estimates for the 2007 budget, in the first six years of Bush's term in office, federal income tax revenues have increased 18% and payroll tax revenues have increased 26%, the money supply, defined as M3, increased 41% in just the first five years since Bush took office, and the federal debt has increased 52%, and is approaching $9 trillion, since the beginning of fiscal year 2002.
The most appropriate measure of the level of taxation is government spending. In seven years, from fiscal year 2001 to the proposed budget in fiscal year 2008, federal spending will increase from $1,863.2 billion to an estimated $2,901.9 billion, an increase of 55%. Actual spending in 2008 will probably top $3 trillion, so it's likely that federal spending will increase more than 60% in the first seven years of Bush's reign. The president has supported these spending increases and is pushing for even higher levels of spending.
Bush should not be credited with cutting our tax burdens. He has engaged in tax shifting and in hiding the burdens of his expansions of the welfare and warfare state, and he has demonstrated that he's opposed to lowering our tax burdens. Deep into his second term, we have plenty of evidence to show that Bush should be blamed for increasing our tax burdens at a phenomenal pace.
The Republican Party claims to be the party of limited government and economic freedom. Don't believe it. Republicans have shown that when they are in power they are even more fiscally irresponsible than their Democratic counterparts, and that takes some doing.