S
stinkcat_14
Guest
Can you provide a citation on this? I have not seen any evidence that this is true, but perhaps you have seen a study that I have not.
- Status
S
SoCalRC
Guest
For a country spending several billion dollars a week on two wars, our taxes are actually at a historical low. Most past generations have been willing to pay their fair share of national defense.
But the best way to look at taxes is, perhaps, to look at the lion’s shares in spending. The big ticket items are defense, debt service, medicare, and social security.
It is hard to take a remotely honest look at defense spending and contracting and not conclude that it is a giant, corrupt money pit. We desperately need another Truman commission, and I think that the political battles over forming one are, in of themselves, quite telling (Ike was right).
Debt service is huge problem. We’ve roughly doubled our national debt in under 7 years. The problem isn’t debt, but type of debt. Nations face hurdles, sometimes self made (like the deregulation and enormous oversight failure that led to the current morgage crisis), sometimes not (Pearl Harbor). Other times, like a family buying a house, infrastructure investments make sense.
But when you squander the nation’s credit paying regular expenses, because you want to pretend that slashing taxes on the wealthy, increasing spending at a higher rate than LBJ, waging wars of choice, and substituting coruption and chronyism for oversight and regulation is a coherent fiscal policy (as opposed to wishful thinking and stupidity), you have no liquidity to deal with crisis.
For example, we can’t stimulate the economy to fix the massive drain that the capital market has experienced. Nor can we fix the weak dollar, which gives us zero leverage on bringing down energy prices (assuming that an administration that has directed billions of dollars to energy businesses is even interested in bringing oil prices down).
In other words, by racking up massive debt in better times, we are poorly equipped to handle bad economic times, which have been inevitable since commerce was invented.
Since modern conservatism is more of a cult that a coherent ideology, it is natural to argue that facts and history are irrelevant - “Taxes!!!” But my tax bill has dropped substantially, both in total dollars (6 figure type changes) and as percentage of income from 10 years ago, but there is zero evidence to suggest that anything but massive national debt has been the result.
On the other hand, the same folks decrying programs like Social Security and Medicare spending don’t seem to be able to make the connection that the most likely alternative is no middle class. Let’s face it, all the hand waving and mantra in the world isn’t going to change the fact that if families have to start paying for grandma and grandpa, lots of grand kids aren’t going to college. They’ll be back in the work force. Don’t believe me? Look at child labor statistics from before the New Deal (say, 1930).
There is an old saying in the study of history, that every stupid idea conceived by man is recycled every 50 years or so. I’m starting to think it needs to be revised. It only took a couple of decades for trickle down economics to come back in vogue, and even as we are staggering in the face of the obvious consequences of slashing taxes and regulation while increasing spending, there are still plenty of voices in the public square shouting for us to ‘clap louder…’
I understand why some of my socio economic peers are on the bandwagon, but I am still baffled at how many people are willing to reliably vote directly against their own childrens’ self interest. It probably is just a matter of time and pressure. If you are working hard just to get by and are fearful of the class below you threatening to take it away, you probably don’t have much time and energy to really think through what you are being spoon fed.
But the best way to look at taxes is, perhaps, to look at the lion’s shares in spending. The big ticket items are defense, debt service, medicare, and social security.
It is hard to take a remotely honest look at defense spending and contracting and not conclude that it is a giant, corrupt money pit. We desperately need another Truman commission, and I think that the political battles over forming one are, in of themselves, quite telling (Ike was right).
Debt service is huge problem. We’ve roughly doubled our national debt in under 7 years. The problem isn’t debt, but type of debt. Nations face hurdles, sometimes self made (like the deregulation and enormous oversight failure that led to the current morgage crisis), sometimes not (Pearl Harbor). Other times, like a family buying a house, infrastructure investments make sense.
But when you squander the nation’s credit paying regular expenses, because you want to pretend that slashing taxes on the wealthy, increasing spending at a higher rate than LBJ, waging wars of choice, and substituting coruption and chronyism for oversight and regulation is a coherent fiscal policy (as opposed to wishful thinking and stupidity), you have no liquidity to deal with crisis.
For example, we can’t stimulate the economy to fix the massive drain that the capital market has experienced. Nor can we fix the weak dollar, which gives us zero leverage on bringing down energy prices (assuming that an administration that has directed billions of dollars to energy businesses is even interested in bringing oil prices down).
In other words, by racking up massive debt in better times, we are poorly equipped to handle bad economic times, which have been inevitable since commerce was invented.
Since modern conservatism is more of a cult that a coherent ideology, it is natural to argue that facts and history are irrelevant - “Taxes!!!” But my tax bill has dropped substantially, both in total dollars (6 figure type changes) and as percentage of income from 10 years ago, but there is zero evidence to suggest that anything but massive national debt has been the result.
On the other hand, the same folks decrying programs like Social Security and Medicare spending don’t seem to be able to make the connection that the most likely alternative is no middle class. Let’s face it, all the hand waving and mantra in the world isn’t going to change the fact that if families have to start paying for grandma and grandpa, lots of grand kids aren’t going to college. They’ll be back in the work force. Don’t believe me? Look at child labor statistics from before the New Deal (say, 1930).
There is an old saying in the study of history, that every stupid idea conceived by man is recycled every 50 years or so. I’m starting to think it needs to be revised. It only took a couple of decades for trickle down economics to come back in vogue, and even as we are staggering in the face of the obvious consequences of slashing taxes and regulation while increasing spending, there are still plenty of voices in the public square shouting for us to ‘clap louder…’
I understand why some of my socio economic peers are on the bandwagon, but I am still baffled at how many people are willing to reliably vote directly against their own childrens’ self interest. It probably is just a matter of time and pressure. If you are working hard just to get by and are fearful of the class below you threatening to take it away, you probably don’t have much time and energy to really think through what you are being spoon fed.
T
Texas_Roofer
Guest
I know of no study however the issue is how much could the government afford to waste. If you have only 5% of the income you can not waste the money. If you have 70% you could easily waste most of it. It is simple diminishing returns, as you spend more you move to purchasing items of lower need,- that is why these items were purchased last not first
S
SoCalRC
Guest
Any theory should match measurable effect. Tax rates for the wealthiest Americans have been slashed substantially, but aside from the economy being in the toilet, watchdog groups say waste and corruption are at historical highs. The difference is that lots of the money being squandered is borrowed, which makes it even costlier still.
The problem seems to have nothing to do with actual rates and everything to do with business finance 101 and governance 101. Revenue vs. spending and responsible oversight of public spending.
That’s the problem when something goes from theory to mantra. Reagan couldn’t pass the modern conservative test. He raised taxes twice, once substantially. When confronted with reality, he gave up on theory and went to finance 101. Today, the answer is fixed, regardless of facts. Surplus, lower taxes, boom, lower taxes, deficit, lower taxes, recession, lower taxes…
S
stinkcat_14
Guest
The issue is, Al made a claim. It is certainly reasonable to ask someone who makes a claim to back it up. As an economist, I haven’t seen any evidence that verifies what he claims, but I will wait and see what he comes up with.
Y
Yerusalyim
Guest
20% Flat tax on all income above $40,000 for a family of 4…NO DECUCTIONS AT ALL. In other words, if you have a family of four and you make 40K in a year, your income tax is ZERO. If you make $40,001 your tax is 20 cents. If you make $140K your tax is $20,000. The Flat tax is FAIR.
Now then, if you want UNIVERSAL HEALTH CARE…you’ll have to pay MUCH MORE and at lower income levels.
Now then, if you want UNIVERSAL HEALTH CARE…you’ll have to pay MUCH MORE and at lower income levels.
A
Al_Masetti
Guest
I actually found the reference in a study (“Big Government Means Slower Growth”) by the Cato group. Actually, the 40% figure has been well known and quoted repeatedly for decades. But it’s more in economics books than on line.
There is a computer glitch somewhere out there. Hopefully in a day or so, I will be able to provide the detailed quote and a link.
Also found some really interesting stuff on www.taxfoundation.org
And in the print edition of Investor’s Business Daily … but not on their Web site. I asked them for one graph which they sent me as a special favor. IBD publishes anywhere from two to ten economic graphs per day.
I found a graph, relevant to the discussion, in the February 5, 2007 issue of IBD and asked them where I could get it. If they don’t come back, I will see if I can scan it and post it. No idea how well that will work.
Anyway, I spent a lot of time with them on the phone today, suggesting they have a button-type Chart Page (for non-stock charts) on their Web site. This could be similar to the Chart Page in the Air Force Association magazine (and on their Web page).
IBD does great work, but it doesn’t do much good if it’s not easily accessible.
Anyone interested needs to also read up on some of the flat tax proposals because the flat tax is being adopted in many countries and in every case, the flat tax has resulted in rapid economic growth.
T
Texas_Roofer
Guest
I certainly can not answer for anothers claim however some interest in the subject
Conclusion and Implications
How high is the revenue-maximizing tax rate? In the actual economy there are many different tax rates and many different tax bases, so it may be true that some tax rates could be cut with no loss (or even a gain) in revenue, but not others. Our analysis suggests that for ordinary income the revenue-maximizing tax rate appears to be well below 50 percent, and it may be close to the current 39.6 percent top marginal rate.house.gov/jec/fiscal/tx-grwth/gwartney/optimal/optimal.htm
*Estimating the Tax Rate That Maximizes Growth
The simple but reliable econometric model developed for this study was based on data from standard statistical sources. The parameters of the model [which is described in the Appendix] were estimated using established econometric techniques, and the equations of the model were then solved to calculate the growth-maximizing tax rate - the rate at which increased taxes and spending cease to increase economic growth and begin to decrease it. For the United States, the model was used to find that:
“The optimal tax rate is no greater than 23 percent of GNP.”
The optimal (growth-maximizing) average rate for federal, state and local taxes combined is between 21.5 percent and 22.9 percent of GNP.
Taxes as a share of GNP were at the optimal rate in 1949 and have not been there since.
The optimal tax rates derived from this model are consistent with previous studies that conclude that an optimal size of government is 19 percent of GNP and that government spending of 20 percent of GNP maximizes productivity.(19) All of these estimates imply that the economic growth rate and hence the level of GNP is far below what would have been achieved had the nation’s total tax rate been kept at its 1949 level*.-ncpa.org/studies/s188/s188.html
*
(19) 19 See P. J. Grossman, “The Optimal Size of Government,” Public Choice, Vol. 56, 1987, pp. 193-200 and E. A. Peden, “Productivity in the United States and Its Relationship to Government Activity: An Analysis of 57 Years, 1929-1986,” Public Choice, Vol. 69, 1991, pp. 153-73*
Even though the latter is older I tend to agree with its finding. Again the issue of optimum is an issue of deminishing returns.
S
stinkcat_14
Guest
I don’t think we can claim that cutting our current tax rates would increase our tax revenue, A CBO study conducted when the Republicans still controlled congress said we wouldn’t even come close:
cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf
The whole study can be found here:
cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf
A
Al_Masetti
Guest
U.S. corporate income taxes are the second or third highest on the planet. Currently, they vary from 34% to 38% although there may be an additional 3% not to exceed $100,000. Depending on the amount of profits. These taxes are lower than they used to be … they were up around 46%. And the lower rates are due to expire.
As a result, U.S. based companies are at a competitive disadvantage versus, for example, companies in Ireland. Or almost anywhere else.
In addition, the tax rules are extremely complex, both for corporations as well as for individuals. And a lot of the taxes are not indexed for inflation, such as capital gains taxes.
For example, take a look at IRS Publication # 590. Get a copy and just flip through it.
You can get it for free or read it on line. The title of Pub 590 is “Individual Retirement Arrangements (IRAs)” Originally the rules regarding IRAs were only a page or two. NOW, however, the instruction booklet is 108 pages.
The IRA was supposed to be a DIY pension program for people not covered by company pensions. Now, it is so complicated that understanding and compliance with the rules is almost impossible. AND, if when you are older and need to start drawing out money, there are rules so complicated (stuff like … the year after the year you turn 70 1/2 … who thought that one up … and penalties for miscalculating the minimum mandatory distribution … penalties are discussed on pages 44 to 57 … AND they have a special form ( #5329) JUST FOR CALCULATING THE PENALTIES … also known as “Additional Taxes …”
Visit www.taxfoundation.org and click on data and mouse around in there. If your eyes water from the fatigue of it, think of what the people in the accounting departments at your employer have to put up with. The CCH tax manuals fill up book shelf after book shelf.
AND then you have to contend with the various state taxes and every state is different. More forms. More manuals.
taxfoundation.org/taxdata/
As a result, U.S. based companies are at a competitive disadvantage versus, for example, companies in Ireland. Or almost anywhere else.
In addition, the tax rules are extremely complex, both for corporations as well as for individuals. And a lot of the taxes are not indexed for inflation, such as capital gains taxes.
For example, take a look at IRS Publication # 590. Get a copy and just flip through it.
You can get it for free or read it on line. The title of Pub 590 is “Individual Retirement Arrangements (IRAs)” Originally the rules regarding IRAs were only a page or two. NOW, however, the instruction booklet is 108 pages.
The IRA was supposed to be a DIY pension program for people not covered by company pensions. Now, it is so complicated that understanding and compliance with the rules is almost impossible. AND, if when you are older and need to start drawing out money, there are rules so complicated (stuff like … the year after the year you turn 70 1/2 … who thought that one up … and penalties for miscalculating the minimum mandatory distribution … penalties are discussed on pages 44 to 57 … AND they have a special form ( #5329) JUST FOR CALCULATING THE PENALTIES … also known as “Additional Taxes …”
Visit www.taxfoundation.org and click on data and mouse around in there. If your eyes water from the fatigue of it, think of what the people in the accounting departments at your employer have to put up with. The CCH tax manuals fill up book shelf after book shelf.
AND then you have to contend with the various state taxes and every state is different. More forms. More manuals.
taxfoundation.org/taxdata/
A
Al_Masetti
Guest
Yeah, I read the CBO report. First off, it is “old” and was part of the debate about whether tax rates should be cut or not. It is highly theoretical and uses a static analysis (instead of the more historically accurate dynamic analysis). It ignores reality. Actually, in reality, whenever the tax rates have been cut, tax revenues have increased dramatically. That is from actual experience.
In fact, here is a “pre-release” article that elaborates more fully.
heartland.org/Article.cfm?artId=22894
One proposal is to offer people a choice: to pay from the complex system of forms and manuals now in effect or to pay a flat tax. People could make that determination for themselves.
Here is the link to a flat tax site:
freedomworks.org/informed/key_template.php?issue_it=17
I’m not necessarily in favor of either the flat tax (one percentage rate for all on income) or the “fair tax” … a national sales tax which would exempt savings and investment (basically, job creation) from taxation and only tax money when it is spent.
Here is the link to the “Fair Tax”:
fairtax.org
If you get a chance to listen to Neal Boortz, he does an excellent job of explaining the Fair Tax.
boortz.com/
I’ve heard him speak on www.booktv.org and he is excellent.
amazon.com/FairTax-Book-Neal-Boortz/dp/0060875410
The nice thing about the Fair Tax is that there are no forms and no IRS.
B
BamaRider
Guest
I forget the name of the author, and historian who came up with a thesis on the rise and fall of republics, going back to ancient times.
I’ll try to give the short version-
rise up to overthrow oppression
freedom makes them prodcutive
They enter the golden era
Wealth brings about changes. “Everyone gets fat”
Because they are a democracy they learn they can vote themselves free checks. Political parties buy votes with “we’re gonna do this for ya, so vote for us”
With the gates of the treasury thrown open, they turn their freedom over for cradle to grave govt and the decline begins.
A once productive society pretty much doesn’t want to do anything anymore. (mandatory 6 week vacations, tough minimum wage laws, strict 30 hour work weeks, all the while demanding free education, healthcare, and retirement packages) The things that made the society great are forgotten.
A state of depression sets in
From the doldrums a party or dictator emerges with grandiose promises.
I’ll try to give the short version-
rise up to overthrow oppression
freedom makes them prodcutive
They enter the golden era
Wealth brings about changes. “Everyone gets fat”
Because they are a democracy they learn they can vote themselves free checks. Political parties buy votes with “we’re gonna do this for ya, so vote for us”
With the gates of the treasury thrown open, they turn their freedom over for cradle to grave govt and the decline begins.
A once productive society pretty much doesn’t want to do anything anymore. (mandatory 6 week vacations, tough minimum wage laws, strict 30 hour work weeks, all the while demanding free education, healthcare, and retirement packages) The things that made the society great are forgotten.
A state of depression sets in
From the doldrums a party or dictator emerges with grandiose promises.
S
stinkcat_14
Guest
Actually, this is something that we can verify by looking at the data, let’s see the effect of the Bush tax cuts on tax revenue:
Fiscal Year Individual income tax revenue
2001 $1,178,210
2002 1,037,734
2003 987,209
2004 990,249
2005 1,107,501
2006 1,236,259
2007 1,366,241
The data are in millions. In other words when taxes were cut revenue fell for 4 years before increasing. And these are in nominal dollars, not inflation adjusted dollars. So the real effect of the tax cut is very minimal at best.
T
Texas_Roofer
Guest
Yes but far from inclusive first that is “Individual income tax revenue” not taxes. These numbers represent about a quater of taxes. Second many tax cuts are designed to spur a small group. Additionally these are often hidden behind a big volume low dollar selling feature. The bigger issue is with overall taxes at ~40% and spending at about ~42% what would happen if we went to taxes at ~30% and spending at about ~29%. I think it would be a better USA
S
stinkcat_14
Guest
Ok, let’s look at overall tax revenues, here they are in inflation adjusted dollars (in billions):
2000 2,025.5
2001 1,945.9
2002 1,777.8
2003 1,665.5
2004 1,707.3
2005 1,888.2
2006 2,037.1
The lower tax rates reduced overall tax revenues for 5 years!
Certainly not much of an argument that we can cut taxes and raise tax revenues!
T
Texas_Roofer
Guest
The IRS says 2004 US Federal Income tax alone was 2,518.68 while you list total tax as 1,707.3 that would seem too much to adjust? irs.gov/taxstats/article/0,id=102886,00.html
btw were are you an economist at school, government or private?
B
BamaRider
Guest
You make it sound like its a crime to take ANY money outta the hands of Washington or am I misunderstanding something?
Lets see, despite a LOWER tax rate, revenue is a wash! The govt has the same amount of money coming in a few years later as it did with the higher rates. Now I dunno much, but sounds like a good deal to me.
But throw all that out, I kept MORE of MY MONEY, and I spent it on TVs, taking motorcycle trips, and who knows what else at Wal Mart, and I was glad to instead of forking it over to the govt. I don’t understand you people. You WANT the govt to have as much of your money as possible? What the heck for? To waste it? Which they surely will.
Speak for ya self when you say no effect, I can tell ya how much it helped me, I had at least 2500 extra a year in MY pocket. And don’t tell me “helps only the rich” unless firefighters have suddenly become the social elites.
Look, I know you’re genuinely sincere when you say tax cuts are bad. What you need to do is be consistent, before you come on here and bemoan tax cuts. Call the IRS and tell em you’re giving YOURS up, and want to go back to the Clinton tax rates. I’m sure they’ll be glad to made the adustment. Heck, you ain’t even gotta do that, just tell the lady at work to take a little more outta ya check, and come refund time, tell the IRS you don’t want it. When ya do all that, then you can make posts about how bad tax cuts are for the country and you don’t believe in them. Till them not gonna have much credilbility.
Here’s another idea, just leave out a couple of dependents or home interest to ya feel the difference is made up, and you’re back to paying your fair share! What does it make ya feel bad to know I’m payin LESS?? LOL.
When you do that a man with your outlook should feel better, but the leave the rest of us the heck alone! LOL
B
BamaRider
Guest
So Cal sez-
Now I dunno about YOU brother, but if the govt and the people who think like you, left MY paycheck alone, and let ME keep all that I EARNED, I could do a much better job of taking care of my kids and elderly parents. Just like my grandparent did and those before them. I don’t see any difference what y’all believe then walking out my front door with a tin cup demanding my neighbors put some coins in so I can buy my mother her meds. If I got to keep ALL that I earned I wouldn’t need any of that, instead I have no choice, and I felt like I was shook down everytime I picked up my paycheck. Crazy. It’s called socialism brother and it NEVER worked anywhere its tried, and those still trying it are mired in mediocrity. But some here refuse to give up on it.
S
stinkcat_14
Guest
Unfortunately, I cannot find any number on the page you link to that comes close to 2,518.68. In fact, for 2006 the page claims that individual income tax collections before refunds was $1.2 billion, so you probably made a mistake reading the website.
I made a mistake in not linking to my source of data, here is where I got my data:
census.gov/compendia/statab/tables/08s0455.pdf
BTW, I currently teach economics in a university.
T
Texas_Roofer
Guest
The issue is the assessment assumes no change in spending at all. The quoted changes are based on the tax increase overcoming the government spending. Or said in Texan " the estimate is a 1 to 32 percent increase in collections at the new rate" it goes like this if 40% tax generates $100 then a change to 36% tax would generate between $90.90 - $108 the key is the 10% drop from 40% to 36% does not drop revenue 10% which would have been to $90. To understand the numbers listed the author assumes the government spent $102.50 both years, whether the tax was 40% or 36%, so odds are the federal deficit when up both years!
- Status