I believe that many well-meaning conservatives have supported things that actually work against Conservative principles because of ignorance or misunderstanding. Tax policy has many examples of this inconsistency.
Consider tax write-offs for state and local taxes. On one hand, this lowers people’s taxes, which would appear to be a Conservative gesture, right? Don’t conservatives always favor lower taxes?
The problem is that’s it’s not really lowering taxes. What determines the total amount of taxation? Is it not spending that determines total taxation? All money spent by government can only be spent if it is first taken from someone, or borrowed. And when it’s borrowed, that credit worthiness only comes from the promise of future takings from people, or of printing more money. Confiscation and inflation are always the only two sources of federal government funding.
Therefore, the only way to raise or lower all taxes uniformly is to raise or lower spending.
When you talk about raising or lowering any particular tax, you are rather talking about the allocation of confiscations—a distribution of the burden. Who will pay more and who will pay less? It is always relative and zero-sum. If you allow local taxes to be written off, then the amount of someone’s write-off is a function of how much local taxation there is. So that person who lives in a highly populated area with onerous tax burdens will be able to shift his federal tax burden to those who live in area where state and local taxation is low.
This creates a transfer of wealth to high-tax areas from areas that are low-tax, as the burden for federal taxes is shifted towards those with less local tax expenses to deduct.
But if you would listen to the Grover Nordquists of the world, any and all tax reductions are good, so it’s OK to bail out large, costly cities at the expense of lower tax areas—and in the name of ‘conservatism’ no less!
The truth is that what is taxed and how much is just an allocation. You can change the shape of the burden- to whom it falls and in what share, but you can’t change the total burden, which is set by spending and interest rates. It’s like squeezing a water balloon can make take any number of shapes, but the amount of water in the balloon does not change.
Those who narrowly focus on just one tax or deduction are completely missing the point.