The magical Groupon thinking of Republican tax policy

We kept seeing it over and over again from Paul Ryan in his last Fox News interview. I thought he was dodging a question….

But no. In fact, it seems from the debate last night that the entire Romney Campaign has opted for the confused mish-mash of magical Republican tax “policy” as the rabbit hole they plan to hide their intentions down.

No, they say. All the cuts in taxes we’re making are “revenue-neutral.” This is based on the notion that, if you cut taxes, you’ll make up those tax revenues in spurred economic growth. That, and of course closing a few undisclosed tax loopholes that the millionaires who fund elections apparently won’t mind losing.

Let us, for the moment, set aside the fact that most professional scorers cannot seem to find a way in which the closing of loopholes closes the revenue gap. Lets focus on the idea that lowering taxes will increase revenues. Or rather, that without the slightest bit of accounting or math, we can just assume the money will come back in increased revenue.

The Groupon analogy

Think of this like you’re a restaurant owner using Groupon. You create a coupon that says “20% off your dinner,” and you hope people pick up the Groupon and come to your store. No matter how you slice it, every time someone walks into your restaurant with a Groupon, you lose 20% of your normal revenue. Whatever else may be true, that discount cost money.

You hope that, by offering the coupon, you get an increase in customers, therefore offsetting the loss: if every single customer that day comes in with the Groupon, you lose 20% of your revenue for the day. You hope to increase your sales by at least 20% to offset the cost. But there is – as many, many business owners have already discovered to their great chagrin – absolutely no guarantee that, because you’ve created the coupon, the resulting revenue will make up for it.

Republicans are making the same bet and hoping you won’t notice. The proposed 20% across the board cut in taxes will cost the government… 20%. They insist that cuts are “revenue neutral,” but what they’re really saying is, “we bet they’re revenue neutral,” because they’re betting we make more money from increased economic growth. That’s a much different statement.

Say it out loud: there is no guarantee that, because you’ve cut taxes, you automatically gain revenue.

There are lots of other problems with this magical tax cut policy. Like for example: just because you’ve had your taxes lowered, that doesn’t mean you’ll get more money from your boss, does it? How does lowering payroll taxes automatically mean increased revenue? Because of sales tax? Oh, right. There isn’t one of those.

The only people for whom this Groupon thinking (might) work is the vaunted “Job Creator®” class. Which by the way, is the only group of people Mitt’s actually talking to.