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When supply-side economic theory is applied to taxation, it works perfectly. To construe into the topic that lower taxes is itself supply-side economics, is to not understand supply-side economic theory. If supply-side economic theory were applied to selected desirable qualities some rich people in America might consider beneficial, like employing American labor, then it is better to think of lower taxes more as a consequence.

Effectively reducing taxes through rebate also is not based on supply-side theory. Rather it is redistribution through entitlement. It puts money into the hands of consumers who will use it to pay debt, spend, or save. It will end up in the hands of banks or retailers, or invested in the stock market. Combined with tax cuts across the board, there is no source of revenue paying for the rebates.

WHAT IS SUPPLY-SIDE ECONOMIC THEORY?

People I talk to tend to complicate supply-side economic theory. It is simply conceived as: "reducing per-unit revenue will result in increased overall revenue, PROVIDED the total number of transactions at the reduced rate increases sufficiently to result in greater overall revenue." If the provision is not met, then a decrease in overall revenue is the result.

VOODOO ECONOMICS

Ronald Reagan's chief opponent for Republican nomination was his Vice President and successor, George H.W. Bush. As he campaigned for the nomination, Bush referred to Reagan's economic plan as voodoo economics. Reagan referred to the trickle-down theory as the reason his tax cut proposal would generate greater overall tax revenue, as people would feel confident to spend. The trickle-down theory, however, is flawed, since for success it relies on the presumption that money rich people and businesses do not pay in taxes, they will spend employing Americans.

Of course, the flaw is that rich people and businesses leverage money and investments rather than throw it away on wasteful and insignificant items like American labor. Though Reagan's tax code appeared to increase revenues, it also left loopholes for arbitrage scandals, and, more significantly, the Savings and Loans scandals.

In addition to Reagan's trickle-down tax cut, his economic and taxation plan included both increasing military strength and balancing the budget. Saturday Night Live did a remarkable sketch in which Reagan attempted to explain his plan: "On one hand we cut taxes, on another we increase military spending, and," with increasing confusion, "um, uh . . .

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