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stinkcat_14
Guest
Did the Clinton tax cuts do this? I didn’t vote for Clinton, nor did I support his tax increases, but clearly tax revenues didn’t fall, nor did the economy tank.
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stinkcat_14
Guest
Good point, and let me offer you a suggestion. If you want to understand the effect of taxes on economic behavior, you need to go beyond reading opinion pieces, which oftentimes use sloppy thinking in their analysis. You need to read the literature which has been peer reviewed.Keep the faith. Do the homework.
For example, if we look at tax revenues from 2003 to 2007, we see that they increased. Now, the question is, what caused revenues to increase? It is fairly straightforward, incomes went up because of several factors:
inflation, economic growth, and increased work effort.
So to figure out whether the tax rates were the sole cause of the higher tax revenues, we would need to determine the extent to which the tax cuts caused higher economic growth and higher work effort. If taxes were not cut, would economic growth have been zero? Probably not, since tax increases in the 90’s didn’t kill economic growth.
I would suggest that you do your homework and try reading the American Economic Review, the Journal of Political Economy and the Journal of Public Economics if you want to understand how taxes affect the economy.
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Al_Masetti
Guest
Visit www.taxfoundation.org
And also aier.org/
If one were to compare the papers published by Brookings and by Cato, there would be radical differences.
So, all papers, peer-reviewed or not, have the potential to display political bias. [It all depends on who is the person doing the “peer review”. So peer reviewing is no guarantee of any sort of even handedness.]
The point of presenting opinion papers is that they present data and information that provide the basis for further investigation.
What happens is that someone has a point of view and reflects that point of view in their research papers, peer-reviewed or not.
So once you have a diversity of opinion, you have the opportunity to pursue information along different lines.
That’s the beauty of opinion papers.
They provide a jumping off point for research. A place to start looking.
Journal articles are not the place to stop looking.
And also aier.org/
If one were to compare the papers published by Brookings and by Cato, there would be radical differences.
So, all papers, peer-reviewed or not, have the potential to display political bias. [It all depends on who is the person doing the “peer review”. So peer reviewing is no guarantee of any sort of even handedness.]
The point of presenting opinion papers is that they present data and information that provide the basis for further investigation.
What happens is that someone has a point of view and reflects that point of view in their research papers, peer-reviewed or not.
So once you have a diversity of opinion, you have the opportunity to pursue information along different lines.
That’s the beauty of opinion papers.
They provide a jumping off point for research. A place to start looking.
Journal articles are not the place to stop looking.
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stinkcat_14
Guest
And of course, neither Brookings nor Cato publish the top refereed journals. In addition, there would differences, but they wouldn’t be radical differences.
Peer review does tend to eliminate some of the sloppy thinking that you see in opinion pieces. For example, one piece you cited claimed that the increase in tax revenue claimed that the increase in tax revenue since 2003 was caused by the tax cuts. You could never get away with making such a claim, even in a conservative refereed journal.
I don’t disagree that opinion pieces are a reasonable place to start, however, if you stop there you are not doing your homework. To get to the real analysis, the type that goes into the painstaking detail that is necessary to understand the effect of tax cuts on economic behavior, there is no way in which you can avoid the journals.
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Yerusalyim
Guest
Stinkycat,
Unless I misunderstand what you’re saying, the CBO disagrees with you, at least somewhat. According to the CBO between 2003 and 2006 federal revenues increased by 35%, most of this growth was due to increased corporate income taxes…most of this increase due to growth in the GDP. I strongly argue that growth in the GDP was due to the tax cuts. What say you>
cbo.gov/ftpdocs/81xx/doc8116/05-18-TaxRevenues.pdf
Unless I misunderstand what you’re saying, the CBO disagrees with you, at least somewhat. According to the CBO between 2003 and 2006 federal revenues increased by 35%, most of this growth was due to increased corporate income taxes…most of this increase due to growth in the GDP. I strongly argue that growth in the GDP was due to the tax cuts. What say you>
cbo.gov/ftpdocs/81xx/doc8116/05-18-TaxRevenues.pdf
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stinkcat_14
Guest
Revenues increased after 2003, but of course, they fell in 2001 and 2002. Taxes were initially cut in 2001, so the more reasonable comparison would be from 2001.
As to the growth in GDP being due to tax cuts, while tax cuts may have had some effect on GDP growth the real question is how much? The changes in marginal tax rates were relatively small, especially when compared to the Kennedy and Reagan tax cuts. President Kennedy cut the top marginal tax rate from 91% to 70%. What that means is that if you are in the top tax bracket and make an extra $1000, you get to keep an extra $200. That is quite an incentive. When taxes were cut in 2001, when someone like me makes an extra $1000, I get to keep an extra $30. While I am happy to have the extra $30, it is not going to do much to get me to work harder. So I would argue that the impact of the tax cuts on economic growth are minimal at best. But, I am willing to look at the evidence, so if you have some, please bring it on.
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Texas_Roofer
Guest
How will you adjust for the dot.com bust and the Terrorist attack???
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stinkcat_14
Guest
Actually, if you look at the GDP growth rate data, GDP was for the most part growing during this time period. Not strong growth, but growth nonetheless. So the reduction in tax revenue was due mainly to the decrease in rates, not the economy.
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Texas_Roofer
Guest
Actually if you look at the 8 quarters of 2000, 2001, 3 of the 8 were negative. bea.gov/briefrm/gdp.htm I hope you understand I was not in favor of the tax cuts because all tax cuts should be accompanied with cuts in federal spending.
Can I ask are you a girl?
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stinkcat_14
Guest
Actually, if you go back and look at the data, tax revenues fell very little between 2000 and 2001, it was in 2002 and 2003 that we saw significant decreases in tax revenue.
You can ask, but the answer is no.
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Texas_Roofer
Guest
The drops reported by the IRS are 5%(2002 collections) and 3%(2003 collections) Neither should be surprising as 2000, and 2001 had market shocks. Additionally, the sharper shock was near the end of 2001. attached is a manipulated data sheet with a cite of the original sheet. The bigger issue is continuous tax increases over 2 decades have resulted in increase debt not fiscal responsibility
View attachment 2665
irs.gov/pub/irs-soi/histab18.xls
CORRECTION: in post #36 I reported 2006 data as 2004 data-sorry
View attachment 2665
irs.gov/pub/irs-soi/histab18.xls
CORRECTION: in post #36 I reported 2006 data as 2004 data-sorry
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trogiah
Guest
I have followed this thread now and then and thought I would share my likely-to-be-contested opinion.
If our government is continuing to borrow money, then taxes are not high enough. There is a great social injustice being perpetrated. One generation is spending the wealth of a future generation. I feel strongly that this a far greater injustice than any tax burden felt by citizens today. We have a voice. We can vote, We can run for office. We can share our views in print, radio, TV, any other media. Future generations can not do that today. Taking their money is unjust. There is no justification for it. There is nothing we can spend the borrowed money on that will prevent future generations from having their own problems to deal with.
You claim that somehow the raising of taxes have increased our debt. Now somehow there may be a connection there but debt is caused by spending money one doesn’t have. Not by taking in money.
Until our government stops borrowing money and starts paying it back in a responsible way, taxes are not high enough. Any complaints about wastefulness, greed, or corruption does not justify our passing on the problem to our children.
Thank you for letting me get that off my chest.
Jim
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Al_Masetti
Guest
The fact is that average after-tax profits are generally low. So sometimes the $30 per thousand, which is 3%, is the difference between profit and loss.
For individuals, the differences are also important. It’s not $30; it’s some multiple of $30.] But even so, it’s much more than that. It also is the difference between spending the extra money and investing the extra money.
For an individual, if you spend the money, even if it’s only $30, it’s gone. Pffft!
But for an individual, if you invest the money, it will keep working for you … through the miracle of compounding. [Yes, there are risks in investing, but individuals can choose their level of risk and mitigate them by using mutual funds and by doing a lot of reading. There is not now and has never been any substitute for doing homework. If we call it “reading”, it is somehow less intimidating than calling it “homework”. Start with Forbes. ]
And it’s not JUST the $30; it’s the multiple of $30 this year and the multiple of $30 next year and on for the rest of their life. Small amounts do, in fact, add up to a substantial amount. Individuals need to “pay themselves first” … meaning … put as much money away in savings and investment as humanly possible. No excuses. No whining. Food, clothing and shelter can be had for minor amounts. Get debt-free and stay debt-free. Save and invest the rest. [Yes, there are exceptions; there always are.]
3% of your pay, invested in mutual funds, with or without a 401k program, will amount to a large amount over a lifetime. And once you get used to living on 3% less, then you get used to living on 6% less or even 10% less. Pretty soon, all that money being invested instead of spent away … is adding up.
One of the MAJOR problems is that the government places severe disincentives to investing by both individuals and corporations. And those disincentives are in the form of taxes and in the form of bureaucratic complications … the tax forms.
But the government’s spending is insatiable. They ALWAYS talk in terms of increases over the previous year. Individuals always talk about how much they can REDUCE spending over previous years. Governments NEVER do.
In NJ, NYS and NYC, they talk about “budget shortfalls” … of $5 billion and $10 billion per year! What they don’t tell you is what their actual spending is. They NEVER tell you that. I made it a point to dig it out. In NJ, it’s around $50 billion; in NY, about $100 billion. Those shortfalls are 10% . What they COULD do is to consolidate departments and cut the spending by 10% below the previous year; and have a hiring freeze [retirements would reduce the total head count]. And stop fraud in Medicaid, which is nearly half the shortfall. And then start reducing tax rates to make the states and cities more “user friendly”.
Instead what they do is cut police and fire services. And make a big splash about it.
And then they raise taxes. And when they don’t raise taxes, they raise user fees. And when they don’t raise real estate tax rates, they increase the assessed valuations.
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stinkcat_14
Guest
Of course, the corporate profits tax was not changed, so this is irrelevent.
While I certainly benefited from the lower tax rates, that was not the point I made. Remember, your claim was that the government could cut taxes and tax revenue would increase. This would only happen if the changes in tax laws had an effect on people’s behavior. In other words, the change in the tax law would have to encourage either myself or my wife to work more. In my case, that would mean if I go out and earn an extra $1000, I get to keep an extra $30 of it. While I am happy to have the extra $30, it had no effect on my decision to work more or less. Now, of course, I could be atypical of upper income taxpayers. If you have empirical evidence that the tax cut caused upper income taxpayers to work more, please provide it.
While what you say is true, if people saved their tax cuts, they could have a lot of money piled up. There are a couple of problems here. First, by and large, people didn’t save their tax cuts. The savings rate has been falling for some time and is quite low. Second, the increased savings has little positive effect on the economy if the extra savings is just being lent to the government to pay for the things that the taxes would have paid for.
The question here is why is the savings rate lower than it was in the 1970’s. If you are old enough to remember the 70’s, the tax rates were higher and tax laws were more complicated. Yet we saved more as a percentage of disposable income, it hovered around 10%, while today it is closer to 2%.
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stinkcat_14
Guest
You raise an interesting issue. I agree that intergenerational equity is an important issue, although the fact that the government is borrowing money is not by itself a sign of injustice. Some government spending projects benefit future generations, such as the interstate highway system. It is certainly reasonable to expect the future generation who benefits from spending to help pay for it. On the other hand, if we expect the future generation to pay for our current benefits, that would be wrong.
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trogiah
Guest
Selling 30 year bonds to finance a road project that will last 30 years makes sense. To a degree.
What is the long term benefit of giving $600 to many tax payers in order to “stimulate the economy”
What is the long term benefit of fighting a war? (How do you measure such a thing)
We are borrowing so much and owe so much already that those who die today are leaving a debt for those who are still alive and those who are not even born yet. There is no effort being made (that I have seen in any report) to make sure that any of the debt is for long term projects or that the debt will be paid off by the time the projects useful life is over.
I think the only just action for the government is to raise taxes substantially or cut spending substantially. I fully realize that such actions will make life signficantly less convenient for us today. But if the only way to keep those conveniences is to take from future generations then anyone interested in real justice should opt for greater inconvenience.
Jim
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Texas_Roofer
Guest
Hi Jim
There is a mixing of two issues 1) overspending which is undeniable ( see golden fleece awards) 2) retarding the economy through over taxation. Taxation is not a more is better nor a less is better. Starting at zero tax benefits exceed tax for a while as the tax moves from 0% → X%. After X% the taxation retards the economic activity. So what is X%? My guess is in 18%-33% range and X varies it is not a constant(based on opportunity) . Today we tax about 42% so I believe we are above X. Now to evaluate your theory how much is needed to clear the national debt in 2009? Well it turns out the average worker would have to pay 100% taxes plus borrow and send to the US government about $7,000 each. The non worker will owe $31,000 each: how will you collect that? Or should we ask the workers to barrow and mail $40,000 each after the100% taxation? Are the average working people willing to do that?
The actual plan is to over tax through social security then as the people die off their excess social security(SS) is forfeited. I wish you had read Milton Friedman on that issue. He claims SS has always taxed the working class to pay the wealth class. In summary it is not an issue of whether spending is too high but how to tax maximum income( which maximizes tax income): which means finding X%.
I hope that helps
There is a mixing of two issues 1) overspending which is undeniable ( see golden fleece awards) 2) retarding the economy through over taxation. Taxation is not a more is better nor a less is better. Starting at zero tax benefits exceed tax for a while as the tax moves from 0% → X%. After X% the taxation retards the economic activity. So what is X%? My guess is in 18%-33% range and X varies it is not a constant(based on opportunity) . Today we tax about 42% so I believe we are above X. Now to evaluate your theory how much is needed to clear the national debt in 2009? Well it turns out the average worker would have to pay 100% taxes plus borrow and send to the US government about $7,000 each. The non worker will owe $31,000 each: how will you collect that? Or should we ask the workers to barrow and mail $40,000 each after the100% taxation? Are the average working people willing to do that?
The actual plan is to over tax through social security then as the people die off their excess social security(SS) is forfeited. I wish you had read Milton Friedman on that issue. He claims SS has always taxed the working class to pay the wealth class. In summary it is not an issue of whether spending is too high but how to tax maximum income( which maximizes tax income): which means finding X%.
I hope that helps
T
Texas_Roofer
Guest
The government report you posted earlier indicated they agree with a tax cut changing behavior. Their issues were 1) the tax cut was not combined with reasonable spending cuts and 2) The changed behavior would not overcome increased spending. Remember if the behavior did not change the tax collection would drop exactly equal to rate of tax cut. Your own data shows the tax cut did not result in a freeze in revenue if you will review the data in post #70 tax collections by the IRS increase 18 out of 20 years
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trogiah
Guest
I appreciate your comments.
I am a high school math teacher but I don’t pretend to understand all the convolutions of taking from SS or other government funds to repay other government debts.
I expect there is much overspending and I couldn’t begin to estimate what the best tax rate would be to keep a robust economy.
But I continue to maintain that failing to fix those things is no excuse to borrow money to avoid economic difficulty. I have no expectation that the debt would be paid off in 1 year or 10. Possibly in 100 years. But as a matter of social justice, the borrowing should stop now. Some plan should be devised for paying the debt. And we shouldn’t wait until we have a government that is totally without waste or a tax rate that is perfectly optimal.
Peace
Jim
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Al_Masetti
Guest
Jim, you may find it helpful to research the Laffer Curve. Wiki is one place to start, although Wiki generally has some shortcomings. Laffer described how if the tax rate is too high, the government will collect very little.
Since you are a math teacher, you may also find some of the other things he described to be of interest. The point though is if the government raises taxes high enough to pay the debt, the economy will severely negatively affected.
en.wikipedia.org/wiki/Laffer_curve
You can probably pick a lot of holes in the way Wiki describes it. For example, formerly Communist countries that have adopted a flat tax structure have growing economies.
In addition, the Wiki article offers some implied criticism of Ronald Reagan, referring to him as an actor, although the article fails to mention that his college degree had a sort of double major, with one being in economics.
en.wikipedia.org/wiki/Arthur_Laffer
Also suggest scrolling down to my post #31 and click on both the fair tax and the flat tax links for further discussions.
There are also some useful links in posts # 56, 58 and 62.
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