The Queen City on the Ohio

It would be fair to say that my values are not typical of those expressed in my town’s newspaper. If one were to judge Cincinnati, Ohio strictly on the editorial content of the Cincinnati Enquirer, one might conclude that Cincinnati that the baseball team isn’t the only thing that’s red about this town. The paper leans hard to the right on economic and social issues with a smattering of racial ickiness thrown in for good measure.

As you might guess, they have been unwilling to publish any and all letters I’ve written to the editor. However, as I spend literally several minutes on these things, I’ve decided to go ahead and share them with you, my most favorite reader(s) in the whole world wide web.

Today’s subject is a letter written to explain, in simple terms, Rand Paul’s “Economic Freedom Zone” scheme. Ladies and gentlemen, I give you: Mike Menkhaus:

What are potential sales if all the income of potential customers is exempted from taxes? Note that the decision about what will be purchased by customers now lies solely within their own purview. Vendors who provide the most desired and needed products and services will be most successful. Realize also that this is not the case for money deducted from income by the government for tax purposes – purchase decisions for that money is determined by bureaucrats based upon what is politically expedient.

There’s a lot more. It’s a marvelous oversimplification of libertarian economic theory. In fact, it was so simply that I felt compelled to fill in a few blanks:

Dear sirs,

I am writing in response to Mike Menkhaus’ outstanding letter to the editor “Simple way to understand Paul’s economic zones” on 24 July, 2014. While I appreciate the simplicity of the examples that Menkhaus cited, I’d like to expand on a couple of points that he appears to have skipped over in the interest of clarity.

Mr. Menkhaus’ example seems to imply that there is a direct inverse relationship between economic activity and tax rates, which is true up to a point. However, history has shown that there is a point at which lowering taxes actually decreases economic growth. This seemingly counterintuitive fact is due to the loss of infrastructure investment (roads, utilities, law enforcement,education) that government spending produces. Without a solid, safe foundation upon which to build, economic growth is stifled.

The other point that Mr. Menkaus failed to mention is that the vast majority of people currently living in these proposed Economic Freedom Zones already pay essentially nothing in personal income taxes. Lowering tax rates in these zones would do very little to increase purchase power or demand. The greatest beneficiaries of these zones would people people who already have a large amounts of discretionary income. A better answer would be simply to cut people who have no discretionary income a check, but that’s another discussion.

This leads me to the final, most obvious point that I’m sure Mr. Menkhaus left out due to space considerations: Lowering income tax across the board so long as it is accompanied by a tremendous increase in capital gains taxes and the implementation of an accumulated wealth tax. If you want to use tax policy to create economic growth, as Mr. Paul clearly does, the best way to ensure that money continues moving is to incentivize people to spend it and create jobs.

I would like to commend Mr. Menkhaus for his outstanding but oversimplified explanation of Mr. Paul’s economic policies. I hope that my letter expanding on his ideas provides people with additional understanding of the details of these policies.

Thank you,

WTF Pancakes
Cincinnati, OH

I’m not really expecting to see it in print, but I didn’t want to let what little work I put into it go to waste. I didn’t mention it in my reply, but I think Mr. Menkhaus deserves kudos for referencing a book that has two “editorial reviews” on Amazon.com…by Ayn Rand and Ron Paul. This circle has now officially been jerked.

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