Why are taxes so high?

[stinkcat_14]

You make it sound like its a crime to take ANY money outta the hands of Washington or am I misunderstanding something?

Actually, I never criticized tax cuts. I just quibbled with Al’s notion that cutting taxes will cause tax revenue to increase. His hypothesis that we can cut taxes and raise revenue is an empirical one. And the data flatly refutes it, when tax rates were lowered, tax revenues fell.

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.

Where on this thread have I said that the tax cuts were a bad idea? I challenge you to find where I said it or apologize. As Christians, we need to be interested and defend the truth, even when it doesn’t fit our particular agenda. The truth is, when tax rates were cut, tax revenues fell. Tax revenues eventually came back up to their old level, but only after several years of lower revenue. In other words, as a means to raise revenue, cutting taxes is a very inneficient way to do so.

When you do that a man with your outlook should feel better, but the leave the rest of us the heck alone! LOL

And just what is my outlook? Since you seem to know me so well, why don’t you tell me my view on how the economy works?

 

[Texas_Roofer]

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.

Thank you
The number I listed is the sum of the right column. I like your source it is very direct note that it only lists the US Federal Budget which excludes many things yet if you read the right side it tells you the US Federal Governments on line budget alone is over 20% of GDP!!! So, if that were the only taxes we would be good. I hope you looked at the 1990’s the budget dropped from a high of 22.3% to a low 18.7% now that is the way to operate a government. BTW free market companies run 10-11% for their overhead; see money does not know who owns it. The drop in federal control of GDP and the expansion of the economy are not accidental; remember we balanced the budget while dropping the government spending as a % of GDP.

 

[lukewarm]

If you include sales tax, property tax, medicare, federal and state income tax, road tolls, beer and cigarette tax etc… it is definitely more than 40% of my pay.

The taxes are insane in the USA, I bet the English didn’t tax their subjects in the colonies anywhere near where we get taxed today. Maybe we need another revolution?

 

[Texas_Roofer]

We have to remember there is a certain amount of tax creep most years

Inflation + progressive tax system = progressive tax on real income

This is a small number however every couple of years rates should be tweaked down to compensate.

 

[BamaRider]

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

I inferred from this comment you thought the Bush Tax cuts were bad policy? If not, I stand corrected, and apologize. If yes, refer to the post above.

Help me understand your position. Were the tax cuts good or bad?

Don’t need a weather report, just yes or no.

I’ll go ahead and give my position as not to leave any doubt. YES!

 

[stinkcat_14]

I inferred from this comment you thought the Bush Tax cuts were bad policy? If not, I stand corrected, and apologize. If yes, refer to the post above.

Help me understand your position. Were the tax cuts good or bad?

Don’t need a weather report, just yes or no.

I’ll go ahead and give my position as not to leave any doubt. YES!

I said that the cut in individual tax rates caused tax revenues to go down, and I backed it up with facts. My comment was made in response to Al’s hypothesis that tax cuts always cause increases in tax revenue. So, no I was not making a comment on whether the tax cuts were a good idea or not. I await your apology.

As to whether the tax cuts were a good idea. The problem is, what is better to pay for government through taxes or through borrowing? Because that is basically what we did, we paid for the tax cuts by borrowing money. Is that a good thing? I am not convinced it is. I am agnostic as to whether the tax cuts were a good idea. I benefited from them personally, but I don’t see much change in the character of government that suggests that they had much of an impact on the economy one way or another.

 

[BamaRider]

Actually, I never criticized tax cuts. I just quibbled with Al’s notion that cutting taxes will cause tax revenue to increase. His hypothesis that we can cut taxes and raise revenue is an empirical one. And the data flatly refutes it, when tax rates were lowered, tax revenues fell.

Where on this thread have I said that the tax cuts were a bad idea? I challenge you to find where I said it or apologize. As Christians, we need to be interested and defend the truth, even when it doesn’t fit our particular agenda. The truth is, when tax rates were cut, tax revenues fell. Tax revenues eventually came back up to their old level, but only after several years of lower revenue. In other words, as a means to raise revenue, cutting taxes is a very inneficient way to do so.

And just what is my outlook? Since you seem to know me so well, why don’t you tell me my view on how the economy works?

Well since ya asked. LOL I’d say you think tax cuts are not a good idea to raise revenue. And that several years of the govt taking in less revenue was a bad thing? That govt deserves as much money as possible, and should not be denied what it righfully wants outta our paychecks (sarcasm). Washington needs money because they know what is best for us, how to get us healthcare, educate us, etc. Would that line of thinking be waaaaaaaay off? (I hope so) Would I be wrong in sayin you don’t believe in trickle down economics? Look, I honestly don’t know I’m just guesin!

So just tell us, do you think the Bush Tax Cuts were a good thing? Yes or No? Don’t need a weather report, a yes or no answer.

My answer is YES! Just so* everyone* knows where I stand.
I don’t *care *Washington took in a few dollars less for whatever many years.

My inference from the above posts was you thought tax cuts were bad (in my book they are ALWAYS good, just so ya know where I’m coming from) if that is not the case, I stand corrected and apologize, but if it is not, then I dunno, just agree to disagree.

 

[Texas_Roofer]

I said that the cut in individual tax rates caused tax revenues to go down, and I backed it up with facts. My comment was made in response to Al’s hypothesis that tax cuts always cause increases in tax revenue. So, no I was not making a comment on whether the tax cuts were a good idea or not. I await your apology.

As to whether the tax cuts were a good idea. ***The problem is, what is better to pay for government through taxes or through borrowing? *** Because that is basically what we did, we paid for the tax cuts by borrowing money. Is that a good thing? I am not convinced it is. I am agnostic as to whether the tax cuts were a good idea. I benefited from them personally, but I don’t see much change in the character of government that suggests that they had much of an impact on the economy one way or another.

there are problems here

1. The 2000 & 2001 numbers contain both a natural pull back from the dot.com industry recession and a 2001 Terrorist attack (see stock market 2001)
2. The main tax cut was in 2003 meaning the affects will at best show up in 2004. This is a fundamental argument among economists concerning all stimulus packages
3. the tax revenues show from 2003 on an increase so the 2003 change does not appear to have lowered collected revenue.

Having noted the above I do agree with the Economist who signed the letter. The issue was no cuts to spending, thus the plan was to borrow. We have already over borrowed and thus the problem. Our tax revenue is too high!, however our government spending is far, far too high. Eventually revenue = tax so the spending today is tomorrow’s tax. Today’s spending is about 42% so we know tomorrow’s tax rate.

 

[goofyjim]

Maybe everyone would be happy if we just lowered taxes to zero. There would be alot of hungry and homeless people because I doubt seriously whether charitable donations would go up enough to cover all of them. There would also be no way to pay for the war, which isn’t such a bad idea. And our elected representatives would be volunteering. Again, not such a bad idea.

 

[BamaRider]

I said that the cut in individual tax rates caused tax revenues to go down, and I backed it up with facts. My comment was made in response to Al’s hypothesis that tax cuts always cause increases in tax revenue. So, no I was not making a comment on whether the tax cuts were a good idea or not. I await your apology.

They went down for a few years, before bouncing back up, so I don’t know how revenues are down, but I guess technically the govt “suffered” through a few years with at least 1.6 trillion dollars in revenue before climbing back up to over *2 trillion *in 2006. Mind boggling numbers no matter how ya look at it.

I apologize for thinking you thought the Bush tax cuts were bad from your post with Al, but don’t ya think its kinda a moot point in light of this post? LOL. But yes, technically you were addressing the issue of revenue, but it was not hard to read between the lines you thought the tax cuts were not much good.

As to whether the tax cuts were a good idea. The problem is, what is better to pay for government through taxes or through borrowing? Because that is basically what we did, we paid for the tax cuts by borrowing money. Is that a good thing? I am not convinced it is. I am agnostic as to whether the tax cuts were a good idea. I benefited from them personally, but I don’t see much change in the character of government that suggests that they had much of an impact on the economy one way or another.

 

[stinkcat_14]

I apologize for thinking you thought the Bush tax cuts were bad from your post with Al, but don’t ya think its kinda a moot point in light of this post? LOL. But yes, technically you were addressing the issue of revenue, but it was not hard to read between the lines you thought the tax cuts were not much good.

I am not sure what you mean here. Even if I thought that the tax cuts were unambigously a good thing, I still what have posted what I did to Al, because it is clear that the tax cuts caused tax revenues to fall. That is a fact that has to be recognized, otherwise, those who support a smaller government sector in the economy are going to lose credibility, because the facts don’t support the idea that you can cut taxes and expect a tax revenue windfall, at least at our current tax rates.

 

[BamaRider]

I dunno stinkcat, the way I look at the numbers the govt took in more then ever before in 2006, at a reduced rate. Did revenue “fall” for few years, yes, thats what the numbers say. I think you could cut govt 25% and no one would ever miss it.

But I agree, I wouldnt’t call it a “windfall,” but in my world thats a good thing. For crying out loud, I don’t wanna see the govt get a quarter more then what they ask for, at least NOT from me!

If a tax cut put a “windfall” in the lap of Washington, I’d be jumping up and down for ANOTHER round.

All “windfalls” should be returned to the people that earned the money in the first place.

But back to the tax cut question. Can’t figure out in this weather report -

As to whether the tax cuts were a good idea. The problem is, what is better to pay for government through taxes or through borrowing? Because that is basically what we did, we paid for the tax cuts by borrowing money. Is that a good thing? I am not convinced it is. I am agnostic as to whether the tax cuts were a good idea. I benefited from them personally, but I don’t see much change in the character of government that suggests that they had much of an impact on the economy one way or another.

Or this weather report-

am not sure what you mean here. Even if I thought that the tax cuts were unambigously a good thing, I still what have posted what I did to Al, because it is clear that the tax cuts caused tax revenues to fall. That is a fact that has to be recognized, otherwise, those who support a smaller government sector in the economy are going to lose credibility, because the facts don’t support the idea that you can cut taxes and expect a tax revenue windfall, at least at our current tax rates.

if you think the Bush tax cuts were a good thing, but I’m leaning not?

 

[stinkcat_14]

I dunno stinkcat, the way I look at the numbers the govt took in more then ever before in 2006, at a reduced rate. Did revenue “fall” for few years, yes, thats what the numbers say. I think you could cut govt 25% and no one would ever miss it.

Of course, Al and I weren’t arguing whether the fall in revenue is a good thing, he claimed that the cut in taxes would increase tax revenue. Initially tax revenue fell, then it rose again, but it would be a stretch to say tax revenues fell solely because of the tax cut.

But I agree, I wouldnt’t call it a “windfall,” but in my world thats a good thing. For crying out loud, I don’t wanna see the govt get a quarter more then what they ask for, at least NOT from me!

If a tax cut put a “windfall” in the lap of Washington, I’d be jumping up and down for ANOTHER round.

All “windfalls” should be returned to the people that earned the money in the first place.

Of course, the Laffer curve folks argue that cutting taxes should affect the economy so much that tax revenue would immediately increase. It didn’t, so this is irrelevent.

But back to the tax cut question. Can’t figure out in this weather report -

Or this weather report-

if you think the Bush tax cuts were a good thing, but I’m leaning not

Perhaps there is a lesson here. What is better, to pay small taxes now, or to pay higher taxes later? Clearly, we paid for the tax cut by borrowing money, money that we will have to pay back in the future with interest. Why is paying more money
in the future a good thing?

 

[BamaRider]

I dunno stinkcat, I’m thinkin its better to pay small taxes, and small taxes later, even less later on. And instead of RAISING taxes, cut the budget. I promise we’ll survive.

The Bush tax cuts expire in 2010, would you be for renewing them?

So who come they call ya SinkCat?

 

[Al_Masetti]

The issue is that lower tax rates stimulate economic activity and the increased economic activity results in higher aggregate tax collections.

The data presented in this debate ignores that the tax rate reductions were phased in over a long period of time, thereby diminishing and delaying the beneficial effects. It is important to note the date when the tax rate reductions actually took effect in the tax code versus when the tax rate reductions were passed by Congress.

The debate also revolves around the use of static analysis versus dynamic analysis. Static analysis totally ignores the increase in economic activity released by the tax rate reductions.

The effect is most clearly seen when capital gains tax rates are reduced. People who have capital assets such as real estate and stocks will tend to hold them when faced with high(er) tax rates and will tend to sell them when lowe(er) tax rates apply.

---

Here is a link … first a brief quote … and then the URL:

QUOTE:

The Evidence
Both sides of the debate cite an extensive array of statistics, often about the exact same events and studies. Neither side agrees with the statistics provided by the other, but both groups generally agree that the Laffer curve is legitimate. Supporters of supply-side economics argue that the economy is always positioned on the Laffer curve in a manner such that tax cuts increase revenue, whereas their counterparts argue the reverse.

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For example, to support their argument that tax cuts jump-start the economy, supply-siders, including Laffer himself, cite statistics from the three major tax-cut proposals implemented in the United States over the past 10 decades. Laffer notes that the Harding-Coolidge cuts in the 1920s, the Kennedy cuts in the 1960s, and the Reagan cuts in the 1980s were “remarkably successful as measured by virtually any public policy metric” (“The Laffer Curve: Past, Present, Future” (2004)).

On the demand side, democrats cite the differences between the economy under Bill Clinton versus the economy under Ronald Reagan and George Bush. They characterize Clinton as having raised taxes on the wealthy, but also as having created jobs, implemented budget surpluses and presided over years of prosperity.

---

investopedia.com/articles/08/laffer-curve.asp

 

[Al_Masetti]

Another interesting aspect to the debate is the structure of search engines … there is a tendency of more recent articles to be located first and less recent to appear further down in the pile.

Nevertheless, there are a number of useful articles. Here are a few:

freedomworks.org/informed/issues_template.php?issue_id=2685

Here is another:

opinionjournal.com/columnists/pdupont/?id=110010798

Here is the key idea from DuPont’s article:

QUOTE:
Tax rate reductions increase tax revenues. This truth has been proved at both state and federal levels, including by President Bush’s 2003 tax cuts on income, capital gains and dividends. Those reductions have raised federal tax receipts by $785 billion, the largest four-year revenue increase in U.S. history. In fiscal 2007, which ended last month, the government took in 6.7% more tax revenues than in 2006.

These increases in tax revenue have substantially reduced the federal budget deficits. In 2004 the deficit was $413 billion, or 3.5% of gross domestic product. It narrowed to $318 billion in 2005, $248 billion in 2006 and $163 billion in 2007. That last figure is just 1.2% of GDP, which is half of the average of the past 50 years.

Lower tax rates have be so successful in spurring growth that the percentage of federal income taxes paid by the very wealthy has increased. According to the Treasury Department, the top 1% of income tax filers paid just 19% of income taxes in 1980 (when the top tax rate was 70%), and 36% in 2003, the year the Bush tax cuts took effect (when the top rate became 35%). The top 5% of income taxpayers went from 37% of taxes paid to 56%, and the top 10% from 49% to 68% of taxes paid. And the amount of taxes paid by those earning more than $1 million a year rose to $236 billion in 2005 from $132 billion in 2003, a 78% increase.

 

[Al_Masetti]

Here is an article on the Irish experience with lower tax rates.

It’s not a great article, but it provides a place to start and it’s an easy read:

timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article673816.ece

Here is another article … this one from the Heritage Foundation … it’s a little older … the perils of search engines … but Hertitage has a lot of interesting stuff generally:

heritage.org/Research/Taxes/wm327.cfm

Here is the summary from that wm327 paper:

August 13, 2003
The Historical Lessons of Lower Tax Rates
by Daniel J. Mitchell, Ph.D.
WebMemo #327
There is a distinct pattern throughout American history: When tax rates are reduced, the economy’s growth rate improves and living standards increase. Good tax policy has a number of interesting side effects. For instance, history tells us that tax revenues grow and “rich” taxpayers pay more tax when marginal tax rates are slashed. This means lower income citizens bear a lower share of the tax burden – a consequence that should lead class-warfare politicians to support lower tax rates.

Conversely, periods of higher tax rates are associated with sub par economic performance and stagnant tax revenues. In other words, when politicians attempt to “soak the rich,” the rest of us take a bath. Examining the three major United States episodes of tax rate reductions can prove useful lessons.

 

[CapIV]

If we got rid of every tax we had right now, the income of the US government would be the same as it was in 2001.

The government only needs taxes when we are at war or something. If we stop foreign entanglements and engagements, we would have more than enough money to do whatever we wanted at home.

 

[Al_Masetti]

Here is another article that demonstrates that lower tax rates result in increased tax revenues (collections):

discovery.org/a/2407

The author, Richard Rahn, is with the Cato Institute www.cato.org

If readers to CAF are interested, they are going to have to do a little digging, which is contrary to normal internet inclinations.

Visit Google and type in “do tax rate cuts increase tax revenues?” … you will also find that minor changes in the wording of the question produce significantly different results.

And then you need to go through a lot of “stuff” to find what you’re looking for, but it’s there.

But it’s there.

Tax rate cuts do indeed produce higher tax collections.

[Please note that I have tried to avoid using arguments from logic … because obviously if tax increases produce higher tax revenues, then obviously taxes should be increased significantly. But higher taxes have been proven to reduce economic activity and lower tax collections.]

[Please also note that I have tried to avoid discussion involving Liberty and the Perils and Evils of Big Government.]

These various arguments about tax rate changes and the marginal changes in tax revenue/collections are often counter-intuitive.

So it’s possible to go around and around.

But you have to dig for the data. The internet is not a user-friendly place.

Not only that … but then you get into discussions of the Laffer Curve … and you know how everyone hates that.



Keep the faith. Do the homework.

 

[stinkcat_14]

I dunno stinkcat, I’m thinkin its better to pay small taxes, and small taxes later, even less later on. And instead of RAISING taxes, cut the budget. I promise we’ll survive.

The Bush tax cuts expire in 2010, would you be for renewing them?

So who come they call ya SinkCat?

Certainly it is better to pay less now and less later. But of course, that is not what happened. We pay less now and unless we can trust that Congress somehow gets fiscal discipline in the future, we will end up paying more later. Since Congress does not have a track record of fiscal discipline, my guess is that one way or another we will end up paying more in the future.

I would be in favor of renewing them if spending could be cut so that we are just not using the government credit card to defer the pain till later. But if a government that had a Republican in charge of both the White House and Congress couldn’t cut spending, then I am not optimistic that spending will ever be cut.

They call me stinkcat because I have some stinker cats who live at my house.