Democrats versus Republicans

[sck5]

Oh, I see why you say what you say. Sure, revenues grow when the economy grows. What I am talking about is revenue as a percent of GDP. It goes down when tax rates go down (which is exactly what they want it to do). The real answer to the question is this - does a tax cut inspire enough growth to make up for the impact effect of lower rates (which everyone agrees is negative - i.e. before there is growth there is lower revenue, which was my point)

Most all studies I have seen answer this question negatively - that is, you dont get a big enough kick to more than make up for the negative impact effect (impact effect is the negative effect of lower rates before any positive growth effect kicks in since this takes some time). This is why the deficit has grown (though indeed it also grows because of greater spending).

To get a more or less impartial view of all of this from bipartisan budget hawks look at the Concord Coalition. They have both Repubs and Dems who are united by hatred of deficits and ability to do arithmetic. They say that increased spending and decreased revenue are BOTH responsible for the bigger deficit. That is, they figure that lower tax rates has meant lower receipts than we would have had if we had left tax rates alone, even after accounting for any growth effects.

But at the end of the day I stick with my original thought - Mindless tax cutting is just as pernicious as mindless spending - And in a way just as immoral since we arent actually cutting the tax bill - We are just sticking it to our kids, who arent going to be too happy about it.

[chucklesR]

I hate to double post BUT

I identify myself as generally middle of the road politically speaking.

Why is it that every time a liberal talks economics's/Taxes etc.. when I do ten seconds of research I find them to be blatantly wrong?

Even Kennedy (the greatest liberal president we had) knew tax cuts spur growth and revenue - where did the current crop of liberals gone so wrong?

Presidents Warren Harding and Calvin Coolidge significantly cut tax rates in the 1920s, which caused both the national economy and federal revenues to grow. Harding repealed the World War I excess profits tax, dropped the top tax rate on individuals from 73 to 58 percent and set the capital gains tax rate at 12.5 percent. Coolidge further reduced individual tax rates and inheritance taxes. The Harding and Coolidge tax rate cuts caused income tax revenues to rise 61 percent from 1921 to 1929. At the same time, the economy grew by 59 percent. Additionally, the share of taxes paid by the wealthiest Americans grew from just over 44 percent in 1921 to over 78 percent by 1928.
President John F. Kennedy introduced a plan in 1963 to lower the highest individual tax rate of 91 to 70 percent, and the top corporate rate from 52 to 48 percent. The Revenue Act of 1964, passed after Kennedy’s death, containted his proposed rate cuts and sparked considerable economic growth. Federal tax revenues rose 68 percent through 1968, and the economy grew 42 percent. The share of tax revenues paid by the wealthiest in the 1960s dwarfed the amounts paid by the middle class and poor. Tax revenues from those individuals making over $50,000 rose by 57 percent following the Kennedy rate cuts, while revenues from those making under $50,000 rose by just 11 percent. :
from : http://www.humanevents.com/article.php?id=13721

And no SCK5
Deficits being caused by over spending was not your original comment - it was tax cuts decrease revenue. Okay, you changed it as a percent of GDP - here goes
15% of 1.6 trillion is more than 17% of 1.2 trillion. It's all related - do the math.
Must I pull up charts for that too?

[chucklesR]

triple post

What did the market crash thread move to here or what?

[PBzeer]

sck5 - revenue as a % of GDP in the previously cited source grew 1.9%. So not only did gross revenue grow, but as a percentage of GDP as well.

[sailaway21]

The much maligned Laffer Curve explains this phenomena. At both 0% taxation and 100% taxation the government receives 0 tax dollars. Hypothetically, somewhere in between those two points there is a spot where government can maximize it's revenue. Where that spot is actually at is a matter of some debate.

Taxes influence behavior. I forget the numbers exactly, but somewhere between 40-60% of the populace pays more in FICA/SS than they do in taxes. Let's throw these people out of the discussion, since they don't have any money to effectively tax anyway. What are we going to do with that segment that has money? At what point in income do we increase the tax rate on the individual? The conservative says the question is bogus. Leave the individual tax rate alone and the individual will work more, earn more, and the government will reap the rewards. The progressive ( the preferred new/old term for the left/libs) says that this is unfair because those on the lower end of the spectrum assume a greater proportion of the tax burden, BASED ON THE ABILITY TO PAY. Anotherwords, the progressives say that, after living expenses the lower income worker has far less money left while the higher income worker, with the same living expenses, has far more left in his pocket. We should tax the high income workers at a progressively higher rate. Conservatives reject this notion for a variety of reasons.

The preceeding is called progressive taxation and, not surprisingly, the progressives love it. And this is where the Laffer Curve becomes important. At some point, the worker is going to go from a 30% tax rate to a 45% tax rate. For every dollar he makes, after entering the 45% bracket, he takes home 15% less. Anotherwords, the worker took a pay cut. Many workers feel that their labor is worth a certain minimum amount and, if it's going to be cut 15% below that, they'd just as soon have the time off ,instead of the extra money. This is the first example of taxes influencing behavior. As income and rates go up progressively, at some point the worker feels he's only working for the government. Most of the tinkering with the tax code involves fiddling with these margins. And, for reasons that will become apparent, the fiddling is done primarily with the middle class rates.

My numbers are dated but are accurate enough for illustration. If we tax everyone making over a million dollars a year in income at 100%, we've got about enough money to run the government for 15 days. Obviously, we need to look to those making less than that if we're to fund the government. the pursuit of that objective is how you, in the middle class, become "rich" for tax purposes. The government's objective is to tax you more, yet not reduce your work output. See, while the progressives do not like the Laffer Curve, because they don't like the idea that by lowering rates you'll actually work more, and pay more overall taxes, they still use the laffer Curve themselves. They just don't call it that. They usually use words like fair share, etc...

So why am I ignoring the rich? I ignore them only because they can, if rich enough, hide their money from taxation. The rich can afford to retain accoutants to make sure they stay rich. But, at some point, as you lower the rich's tax rate, it becomes less cost effective to hide the money than to pay taxes on it as income. So the real deal with the rich is that, no matter what, the government is not going to get a high percentage of the rich's income unless the rich decide to give it to the government. If you lower the top rate of taxation the rich receive an incentive to pay taxes. That's why government revenues go up when you lower the tax rates on the rich. Tax receipts go up in terms of real dollars, percentage of GDP, and any other method you wish to calculate it by. But the rich are keeping alot more money now than they were before the progressives say. Well, yes they are. The question is though, what are they going to do with it? They're rich, all their needs are met, and it's not like they're going to buy another Ferrari with it. But the rich want to stay rich so they put their money to work. they invest it. Investing means making money, from one point of view. From another point of view it means that the rich are lending those not rich some of their money. If I give the rich fellow 10% on the money he lends me, or invests in me, he'll give me enough to buy a house.

This is why, when you lower tax rates, tax receipts go up. And it's also how you grow the economy. Once it's understood that, at a certain rate, you are not going to get the rich person's money for the government, the laffer Curve begins to make sense. If you raise the tax rate too high the money will move to Portugal or some place else. Or the person will "lower" his income by changing how he is compensated, ie..stock options, etc..

The odd thing about all of this is that none of it is a problem until you decide you want to be "progressive". If you taxed the last dollar just like you did the first dollar you'd have all the money in the world for the government. But it wouldn't be "fair". Whether we're talking about a rich man or a poor man certain behaviors hold true. If you tax something, you get less of it. Whether you're taxing labor, money, or cigarettes to the extent you tax it you're going to get less of it. If you want people to work more, tax them less. If you want more money to enter the market as capital, tax that money less. Everybody understands it when it comes to smoking cigarettes, why is it so difficult to understand it otherwise?

[sailaway21]

McCain gave a pretty good speech at CPAC today. lotsa red meat and all that for us cons. I remain sceptical.

[xort]

just why did the LIBERALS change their name to progressives? Did they not like how it sounded? Too much like Liberace? Paid to do so by a soup company? Or were they embarrassed about being liberals and are trying to hide something?
I don't see conservatives trying to change their names. I do see Liberals trying to change conservatives names to NEO-Con with a derisive tone. Nothing like a little derisiveness to help us all get along. And then, of course, blame conservatives for the devisiveness in politics.

[RAGNAR]

nnn

[PBzeer]

Budget growth is not a matter of revenue, but of politcal calculation.

[sck5]

Hey if cutting taxes increases revenue, why not just cut them to zero. That way the deficit will go away completely!! Do the arithmetic!!!