Visit the Archives for U.S. Politics Online -- U.S. Politics Online . net
Moderator
First... a small test: Who said:
Anyone?Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle—workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit—why reducing taxes is the best way open to us to increase revenues.
Anyway...
Anyone who is familiar with the historical data available from the IRS knows full well that raising income tax rates on the top 1% of income earners will most likely reduce the direct tax receipts from the now higher taxed income—even without considering the secondary tax revenue effects, all of which will be negative. And who on Earth wants higher tax rates on anyone if it means larger deficits?
Since 1978, the U.S. has cut the highest marginal earned-income tax rate to 35% from 50%, the highest capital gains tax rate to 15% from about 50%, and the highest dividend tax rate to 15% from 70%. President Clinton cut the highest marginal tax rate on long-term capital gains from the sale of owner-occupied homes to 0% for almost all home owners. We've also cut just about every other income tax rate as well.
During this era of ubiquitous tax cuts, income tax receipts from the top 1% of income earners rose to 3.3% of GDP in 2007 (the latest year for which we have data) from 1.5% of GDP in 1978. Income tax receipts from the bottom 95% of income earners fell to 3.2% of GDP from 5.4% of GDP over the same time period.
These results shouldn't be surprising. The highest tax bracket income earners, when compared with those people in lower tax brackets, are far more capable of changing their taxable income by hiring lawyers, accountants, deferred income specialists and the like. They can change the location, timing, composition and volume of income to avoid taxation.
Just look at Sen. John Kerry's recent yacht brouhaha if you don't believe me. He bought and housed his $7 million yacht in Rhode Island instead of Massachusetts, where he is the senior senator and champion of higher taxes on the rich, avoiding some $437,500 in state sales tax and an annual excise tax of about $70,000.Tax cuts increase the size of the overall economy.We all know that there are lots of factors influencing tax revenues from the rich, but the number one factor has to be the statutory tax rates government tells the rich they have to pay. Not only do the direct income tax consequences of higher tax rates on those in the highest brackets lead to higher deficits, the indirect effects magnify the tax revenue losses many fold.
As a result of higher tax rates on those people in the highest tax brackets, there will be less employment, output, sales, profits and capital gains—all leading to lower payrolls and lower total tax receipts. There will also be higher unemployment, poverty and lower incomes, all of which require more government spending. It's a Catch-22.
Higher tax rates on the rich create the very poverty and unemployment that is used to justify their presence. It is a vicious cycle that well-trained economists should know to avoid.
tax cuts increase the size of tax revenue.
Sorry... here is the link
http://online.wsj.com/article/SB1000...112674598.html
Last edited by tsquare; 08-02-2010 at 10:14 AM. Reason: Link
President
JFK said it.Originally Posted by tsquare
These facts aren't interesting to the current criminals running America into the dirt.
Mr. Obama is doing everything he can to destroy this country and he has willing helpers in nancy and harry and the rest of the "democrats."
Sometimes reality is way worse than a "konspiracy theory."
President
What you numbers show is that tax cuts have redistributed wealth from the middle class to the wealthiest individuals, who can now afford to fund the propaganda machine that puts out this hooey.
Secretary of State
Maybe you can explain, if what you said is true wouldn't Obama have raised taxes the day he was sworn in. I mean Obama is a socialist liberal and bangs on his desk he is for the little guy. So surly he would want to raise taxes to give more to the middle class.
Moderator
Right again goober...During this era of ubiquitous tax cuts, income tax receipts from the top 1% of income earners rose to 3.3% of GDP in 2007 (the latest year for which we have data) from 1.5% of GDP in 1978. Income tax receipts from the bottom 95% of income earners fell to 3.2% of GDP from 5.4% of GDP over the same time period.
I'd have to disagree with the OP. If taxes are too high, then yes they cut into private sector investment in wealth creation, which could potentially slow down economic growth. But inversely, if they're too low, they'll bring in too little revenue. There is the concept of the optimum tax rate, the one that will bring in the most revenue. Higher that that rate will bring down revenue owing to lack of private sector growth. Lower than the optimum also brings down revenue owing to taxes ust being too low. To assume that the lower the better brings us to the fallacy that cutting taxes altogether would be the best way to raise revenue.
That said, I could see the benefit of restructuring taxes along a more user-pay system. For example, a resource tax would result in those using the roads the most paying more tax, thus discouraging people from using roads except when necessary. As a result, government could then reduce spending on freeway construction for example.
Restructuring the tax system is not the same as just blindly cutting taxes though.
Administrator
Interesting.
You begin by disagreeing with the OP and then, in essence, describe the principle of the "Laffer Curve". Oddly enough, the article which you disagree with was written by Arthur Laffer....the guy that the "Laffer curve" was named for.
Your idea of a consumption tax also seems to be a little off. As the cost of a particular good or service increases the consumers of that good or service tend to look for alternatives. Cigarettes are a great example. When they were less than a buck a pack everybody smoked. Now that they are more than $5 per pack the number of smokers has dropped dramatically.
On top of that, a consumption tax on necessities (food, transportation, etc.) tends to impact the poor far more than the wealthy yet, such a tax is necessary to maintain revenue. Advocates of the "Fair" tax suggest resolving that problem with a "prebate" which is designed to offset the cost of tax on basic needs. This works, kind of, but one must ask "If the government is able to determine how much of a 'prebate' a person or family needs then how much farther do they need to look to see that instead of a 'prebate' they could just issue a voucher for some amount which is "fair and equitable" while all other proceeds of your labor go to the State?"
The OP makes it clear in the last couple sentences that the lower the tax the better. It may be a misunderstanding of Laffer's theories (he would never have proposed 'the lower the better' himself), and so that's what I was opposing. It would be as fallacious as 'the higher the better'.
President
You don't even see it do you?
The wealthiest 1%, with greatly reduced tax rates now pay a larger % of the taxes collected than they did before, and the middle class, with smaller breaks, pay a smaller % than they did before.
The only mathematical explanation for that is that the % of the income earned by the top 1% has expanded, while the % of the income earned by the middle class has shrunk. This is made possible by the lower tax rates allowing greater capital accumulation, and greater concentration of wealth.
Administrator
No, it's not the only explanation.
Your explanation assumes a static pool of income. The fact of the matter is that from 1960 through 2008 GDP grew every year. That is, the "pie" kept on getting bigger. In such a dynamic it is entirely possible that the lower income earners would earn more income as a percentage of the whole than the top earners.
President
No, income doesn't have to be static. The pie can grow, but the top 1% keep getting a larger % of the pie, and the middle class get a smaller percentage.
That's been happening since the Reagan tax cuts, the share or wealth owned by the top 1% has increased, before that the top 1% increased their wealth, but the % of the total wealth owned by the top 1% declined every year from FDR until Reagan.
Free Market theory says that when wealth accumulates over time with a small group it is due to a distortion, the natural effect of a free market is the relative leveling of wealth, as was happening from the 1930's until the 1980's.
The changes to the tax system made under Reagan have distorted the economy of the US and concentrated wealth with a few to the detriment of the many and to the long term detriment of the nation as a whole.
Vice President
GW's tax cuts increased revenues by 13% of the tax cuts, meaning that in fact, tax revenues went down by a net of 87% of the tax cuts. For every dollar of tax cut, revenues fell by 87 cents.
"There is no gain in arguing with a poo flinging monkey. While his
gibbering and raucous cries of victory may seem obnoxious in your ears
as you walk away, he will soon be quietly sitting behind his bars again
and licking his own feces off his fingers as you carry on with your day."
Vice President
The "tax cuts are always better" crowd always cite the Laffer curve without understanding that the peak in the Laffer curve is quite possibly at a higher tax rate (~50%) than we pay now (~35% for the wealthy, ~16% for the really really wealthy).
Vice President
Their problem is that they don't see the Laffer Curve. They see the Laffer straight line.
Yahoo! Personal Finance: Calculators,Money Advice,Guides,& More For a very good debunking of the myth.
"There is no gain in arguing with a poo flinging monkey. While his
gibbering and raucous cries of victory may seem obnoxious in your ears
as you walk away, he will soon be quietly sitting behind his bars again
and licking his own feces off his fingers as you carry on with your day."
Administrator
Your "Free Market Theory" is confusing accumulations of a single resource with accumulations of all resources. In a truly free market if one individual or group controls all of a particular resource then others will seek out an alternative or, if no alternative exists, will take "corrective action". Money, the resource you keep on going back to, is an infinite resource or, more correctly, is only a place holder for the infinite resources of labor and ingenuity.
Posting Permissions
LinkBack URL
About LinkBacks
Reply With Quote
Bookmarks