Tax Cut Magic

There's world salad, and then there's word salad.

“I propose to eliminate all federal corporate income tax,” Palin had said in a speech to the tea party in Iowa Saturday. “This is how we create millions of high-paying jobs… To eliminate any loss of federal revenues from this tax cut, we eliminate corporate welfare and all the loopholes, and we eliminate all the bailouts.”

Wait, what? Huh? Errr... What?

So we're going to zero out the corporate income tax, and then to ensure that we don't lose any revenue while zeroing it out, we're also going to eliminate loopholes?

Brilliant. Why didn't I think of that?

There's just one problem -- How can you have loopholes if the income tax rate is zero to begin with? How do you maintain revenue with a tax rate of zero? Magic?

Not surprisingly, clown car co-pilot Michele Bachmann heartily agreed when asked about Sarah Palin's ideas.

“We could go that route,” Bachmann told CBS’ Bob Schieffer Sunday. “If we went that route then we’d have to have a fundamental restructuring of the tax code. I’m open to having that debate… What we do know is that the current corporate tax rate is killing job creation.”

Yes. The current tax code, which allows some of the largest corporations in the world to pay no taxes, and in some cases even receive a government subsidy, is really killing job creation.

Tell me -- If corporation X and Y are already paying no federal income taxes, and we eliminate the federal income tax, does this means they will start hiring again even though their effective tax rate was already zero?

Of course not, because there's no demand, and the only entity with the power to create demand right now is the federal government. This is why the Republicans will oppose further stimulus until their last breath.