Tax Cuts Grow Govt. revenue

[Conservative]

There has been a lot of discussion on another thread regarding GW Bush causing deficits. The reality is that GW Bush alone created nothing and had a lot of help with the deficits due to a Congress that supported all the spending and a Congress of which Barack Obama was part of the last two years supporting TARP funding but now blaming Bush for that funding.

There are a lot of confused people who claim to be knowledgeable about economics but as proven most are poorly educated and lack a basic understanding of how our economy works. We have a consumer driven economy with over 60% of our Gross Domestic Product due to consumer spending and consumers do not spend when they do not have money or jobs.

GW Bush, JFK, and Ronald Reagan understood that reality and both cut taxes and with those tax cuts stimulated economic growth by allowing people to keep more of their money. Then the people did what they always do, spent it or saved it, both helped the economy. Spending stimulated job creation because people were required to make the products people wanted and saving provided banks with investment capital to lend for business growth.

The tax cuts allowing people to spend their money created more taxpayers to fund the federal govt. and greater corporate profits and more tax revenue generated. Job holders pay federal, state, and local taxes and the more job holders you have the more govt. revenue you are going to get. GW Bush, Ronald Reagan, and JFK cut tax rates for all taxpayers, not just the rich as the left would have you believe. All people that paid taxes got a tax cut as it should be.

Here is the link to the U.S. Treasury Website that supports my claim. This link is to the 2008 govt. revenue. To find out yearly revenue just change the date to whatever year you want to see

http://fms.treas.gov/annualreport/cs2008/receipt.pdf

Here are the numbers for income and corporate taxes after the Bush tax cut went into effect in July 2003
2008 2006 2004 2003 2002
Individual Income tax 1,145.7 927.2 808.9 793.7 858.3
Corporate Taxes 304.3 278.3 189.4 131.8 148.0

Total 1,450.0 1205.5 998.3 925.5 1006.3

Notice what happened prior to the Bush tax cut in 2003 with 2002 revenue.

What is happening now is govt. revenue is dropping due to high unemployment and Obama's answer is to spend trillions to pump up the public sector. The Public Sector cannot drive the U.S. economy unless Obama has its way and takes over the entire economy. Obama is destroying incentive in the private sector and will put private business out of business and that will affect inflation as you have more govt. employees trying to buy fewer goods and services and that causes inflation.

Now I understand leftwing individuals will never buy this thread but then leftwing supporters of obama have proven to be economically challenged as evidenced by actual results of leftwing economic policy especially that which we have today. No leftwinger has been able to explain how govt. revenue went up AFTER the Bush tax cuts.

 

[liblady]

There has been a lot of discussion on another thread regarding GW Bush causing deficits. The reality is that GW Bush alone created nothing and had a lot of help with the deficits due to a Congress that supported all the spending and a Congress of which Barack Obama was part of the last two years supporting TARP funding but now blaming Bush for that funding.

There are a lot of confused people who claim to be knowledgeable about economics but as proven most are poorly educated and lack a basic understanding of how our economy works. We have a consumer driven economy with over 60% of our Gross Domestic Product due to consumer spending and consumers do not spend when they do not have money or jobs.

GW Bush, JFK, and Ronald Reagan understood that reality and both cut taxes and with those tax cuts stimulated economic growth by allowing people to keep more of their money. Then the people did what they always do, spent it or saved it, both helped the economy. Spending stimulated job creation because people were required to make the products people wanted and saving provided banks with investment capital to lend for business growth.

The tax cuts allowing people to spend their money created more taxpayers to fund the federal govt. and greater corporate profits and more tax revenue generated. Job holders pay federal, state, and local taxes and the more job holders you have the more govt. revenue you are going to get. GW Bush, Ronald Reagan, and JFK cut tax rates for all taxpayers, not just the rich as the left would have you believe. All people that paid taxes got a tax cut as it should be.

Here is the link to the U.S. Treasury Website that supports my claim. This link is to the 2008 govt. revenue. To find out yearly revenue just change the date to whatever year you want to see

http://fms.treas.gov/annualreport/cs2008/receipt.pdf

Here are the numbers for income and corporate taxes after the Bush tax cut went into effect in July 2003
2008 2006 2004 2003 2002
Individual Income tax 1,145.7 927.2 808.9 793.7 858.3
Corporate Taxes 304.3 278.3 189.4 131.8 148.0

Total 1,450.0 1205.5 998.3 925.5 1006.3

Notice what happened prior to the Bush tax cut in 2003 with 2002 revenue.

What is happening now is govt. revenue is dropping due to high unemployment and Obama's answer is to spend trillions to pump up the public sector. The Public Sector cannot drive the U.S. economy unless Obama has its way and takes over the entire economy. Obama is destroying incentive in the private sector and will put private business out of business and that will affect inflation as you have more govt. employees trying to buy fewer goods and services and that causes inflation.

Now I understand leftwing individuals will never buy this thread but then leftwing supporters of obama have proven to be economically challenged as evidenced by actual results of leftwing economic policy especially that which we have today. No leftwinger has been able to explain how govt. revenue went up AFTER the Bush tax cuts.

i am all for targeted tax cuts.

 

[Conservative]

i am all for targeted tax cuts.

So am I, target ALL taxpayers. What do you think the rich do with their money and what affect does that have on the economy?

 

[samsmart]

So am I, target ALL taxpayers. What do you think the rich do with their money and what affect does that have on the economy?

While I believe that tax cuts do in fact grow government revenue, tax cuts on the middle class while progressive taxes on the wealthiest 1% will grow government revenue more.

And what the rich do with their money is spend it in third-world nations with little in the way of human rights and the life expectancy of it's people is vastly reduced because the wealthiest 1% are pandered to by the dictators and corporations of those countries who refuse to spread the wealth downwards and keep their citizens virtual slaves even though only the businesses and government profit from their labor.

 

[Conservative]

While I believe that tax cuts do in fact grow government revenue, tax cuts on the middle class while progressive taxes on the wealthiest 1% will grow government revenue more.

And what the rich do with their money is spend it in third-world nations with little in the way of human rights and the life expectancy of it's people is vastly reduced because the wealthiest 1% are pandered to by the dictators and corporations of those countries who refuse to spread the wealth downwards and keep their citizens virtual slaves even though only the businesses and government profit from their labor.

Very broad statement. Please provide a link to support that statement that the rich spend their money in third world nations. Now there is no question that some may indeed but the large percentage IMO do not. The one thing for sure is the govt. cannot tax the rich enough to pay for their spending appetite. Too many people simply do not know the true role of the govt.

 

[gopman]

How the "rich" spend their money has been frequently debated since the time of John M. Keynes. Observation has shown that the rich spend their money more or less like everyone else.

I have never heard the assertion before that they spend all of their money in third world countries (probably because it's absurd) but it has been said frequently that they hoarde money bascally in savings accounts. That has been shown to be untrue. Read for yourself:

A Theory of the Consumption Function

 

[Ikari]

revenue went up AFTER the Bush tax cuts.

Always do. Is that adjusted for inflation and GDP?

And of tax cuts grow government revenue, why don't we take taxes down to 0%?

 

[gopman]

Always do. Is that adjusted for inflation and GDP?

And of tax cuts grow government revenue, why don't we take taxes down to 0%?

What would be the point of adjusting for GDP? The point is that tax cuts stimulate GDP growth.

Despite the fact that your second argument is an obvious logical fallacy I'll address it anyway. Economic theory does not say that tax cuts always grow government revenue. There is a specific relationship between tax rates and government revenue that is rising in certain ranges and not in others. The US clearly is in the range in which revenue rises as a function of decreasing tax rates.

[ame=http://en.wikipedia.org/wiki/Laffer_curve]Laffer curve - Wikipedia, the free encyclopedia[/ame]

 

[Conservative]

Always do. Is that adjusted for inflation and GDP?

And of tax cuts grow government revenue, why don't we take taxes down to 0%?

Ever hear of the consumption tax? That does put an income tax rate at zero. Now contrary to some we do need a govt. but not a 3.5 trillion dollar one and that is the point. Politicians continue to lie to the American people and will never let the income tax die. Today almost 50% of the American people pay zero income taxes and that is a travesty.

 

[gopman]

Ever hear of the consumption tax? That does put an income tax rate at zero. Now contrary to some we do need a govt. but not a 3.5 trillion dollar one and that is the point. Politicians continue to lie to the American people and will never let the income tax die. Today almost 50% of the American people pay zero income taxes and that is a travesty.

"The principal art of government is to take as much money from one group of the people to give to another"

-Voltaire, 1764

 

[Ikari]

What would be the point of adjusting for GDP? The point is that tax cuts stimulate GDP growth.

Because when GDP goes up, so does government revenue. Instead, you're trying to claim a linear effect from a non-linear system. Cut taxes, government revenue goes up. But it is dependent upon many factors as well, including the nominal economic growth and the numbers can be scewed by not appropriately accounting for inflation.

The Laffer curve is an oversimplification which doesn't account for everything. It's an interesting idea and indeed gets the endpoints correct. 0% tax or 100% tax will produce no government revenue (given that the government isn't providing means for living for the people in general). What's in the middle? Not well known, Laffer assumes a simple curve but the fact of the matter is that this is a complicated, coupled, non-linear system and it won't be accurately described by a simple curve.

Most people who religiously cite the Laffer curve often have minimal at best understanding of economics. Tax cuts can help quite a bit (gotta cut spending too though), but it's not a simple 1 for 1 relationship. Not much in economics are linear systems.

 

[Conservative]

"The principal art of government is to take as much money from one group of the people to give to another"

-Voltaire, 1764

Paid any attention to WHIP, he wants this country just like France as do others who simply are naive, gullible, and looking for that Utopia that doesn't exist.

 

[Ikari]

Ever hear of the consumption tax? That does put an income tax rate at zero. Now contrary to some we do need a govt. but not a 3.5 trillion dollar one and that is the point. Politicians continue to lie to the American people and will never let the income tax die. Today almost 50% of the American people pay zero income taxes and that is a travesty.

I don't disagree. Though note that consumption taxes are necessarily regressive. But beyond that, it's true. The government taxes too much, the government spends too much. The problem with moving to a flat tax is that you'll have to repeal the 16th. Because you may eliminate the income tax and institute something else, but less you remove the ability of the government to levy an income tax; it will come back. Then we'll have both.

The point I was making, is that economics is a complex model and highly non-linear interactions. You're beholden strongly to starting conditions and its very difficult to predict the way economy will always go. And we then get into these threads which horribly simplify the problem. I think simplifications can be useful in discussion, but we have to note that these simplified arguments can't truly be used to characterize the system.

 

[Conservative]

I don't disagree. Though note that consumption taxes are necessarily regressive. But beyond that, it's true. The government taxes too much, the government spends too much. The problem with moving to a flat tax is that you'll have to repeal the 16th. Because you may eliminate the income tax and institute something else, but less you remove the ability of the government to levy an income tax; it will come back. Then we'll have both.

The point I was making, is that economics is a complex model and highly non-linear interactions. You're beholden strongly to starting conditions and its very difficult to predict the way economy will always go. And we then get into these threads which horribly simplify the problem. I think simplifications can be useful in discussion, but we have to note that these simplified arguments can't truly be used to characterize the system.

The problem isn't nearly as complex as you would indicate, our govt. is way too big and needs to go on a severe diet. Problem is too many people are too dependent on that bloated bureaucracy we have now.

Our forefathers built our country around a small central govt. Today our govt. consumes most of the country with it being the largest employer and involved in too many facets of everyone's lives. We do not need a 3.6 trillion dollar federal govt and getting that back down to size would take the pressure off income taxes and the bloated need for more revenue.

The low income tax stimulated economic growth and thus created taxpayers. That growth in the number of taxpayers was dwarfed however by the increase in govt. spending and entitlement spending. It is frustrating and my bet is a lot of forefathers are turning over in their graves.

 

[gopman]

Because when GDP goes up, so does government revenue.

Yes, and my point is that if tax cuts are supposed to stimulate GDP growth and thereby increase government revenue, adjusting for real GDP growth would obviously be a meaningless way to study the effects of a tax cut.

Instead, you're trying to claim a linear effect from a non-linear system. Cut taxes, government revenue goes up.

Actually, as I pointed out, it is not a linear relationship and no one ever said it was.

The Laffer curve is an oversimplification which doesn't account for everything. It's an interesting idea and indeed gets the endpoints correct. 0% tax or 100% tax will produce no government revenue (given that the government isn't providing means for living for the people in general). What's in the middle? Not well known, Laffer assumes a simple curve but the fact of the matter is that this is a complicated, coupled, non-linear system and it won't be accurately described by a simple curve.

Most people who religiously cite the Laffer curve often have minimal at best understanding of economics. Tax cuts can help quite a bit (gotta cut spending too though), but it's not a simple 1 for 1 relationship. Not much in economics are linear systems.[/QUOTE]

I find it odd that you continue to assert that the laffer curve represents a linear relationship, but I'm just going to assume that you misunderstand the word linear. In any case, the intuition of the Laffer curve is indeed sound and has been empirically supported by people with more than minimal understandings of economics.

ScienceDirect - Journal of Socio-Economics : Estimating the laffer curve and policy implications*1

 

[Ikari]

Yes, and my point is that if tax cuts are supposed to stimulate GDP growth and thereby increase government revenue, adjusting for real GDP growth would obviously be a meaningless way to study the effects of a tax cut.

But what you don't do is differentiate between nominal GDP growth and that which could maybe have been caused by tax cuts. That's the difference. As GPD increases, government revenue will as well. You claim that taxes are cut and government revenue increases. It always does. But that's not to say that the tax cuts have quite the magnitude of effect that is being claimed. You're not disentangling the system.

Actually, as I pointed out, it is not a linear relationship and no one ever said it was.

You're making a 1 for 1 assumption. Taxes go down, government revenue goes up. You then associate a direct relationship between that. While the Laffer curve is a curve, what's being claimed with taxes and government revenue is a direct, linear response. The fact is that there are a lot of factors, it's not just tax cuts which are part of the equation. To be able to state accurately the role of tax cuts, you have to solve the entire system.

I find it odd that you continue to assert that the laffer curve represents a linear relationship, but I'm just going to assume that you misunderstand the word linear. In any case, the intuition of the Laffer curve is indeed sound and has been empirically supported by people with more than minimal understandings of economics.

ScienceDirect - Journal of Socio-Economics : Estimating the laffer curve and policy implications*1

The Laffer curve makes it easy to talk about certain aspects while assuming constants in others. It's convenient to talk about it in these terms and helpful in defining endpoints and perhaps generalized trends. It cannot, however, accurately model the system. We don't really have an accurate model. That's because this is a highly non-linear system wherein multiple dynamics can have measurable affect on the system.

 

[Ikari]

The problem isn't nearly as complex as you would indicate, our govt. is way too big and needs to go on a severe diet. Problem is too many people are too dependent on that bloated bureaucracy we have now.

Our forefathers built our country around a small central govt. Today our govt. consumes most of the country with it being the largest employer and involved in too many facets of everyone's lives. We do not need a 3.6 trillion dollar federal govt and getting that back down to size would take the pressure off income taxes and the bloated need for more revenue.

The low income tax stimulated economic growth and thus created taxpayers. That growth in the number of taxpayers was dwarfed however by the increase in govt. spending and entitlement spending. It is frustrating and my bet is a lot of forefathers are turning over in their graves.

You're preaching to the choir. I dare say I'd be for well more tax and spending cuts than even yourself. But when people cite certain things like "when you cut taxes, government revenue increases" they are horrifically oversimplifying things and often the numbers used have not been correctly adjusted for GDP and inflation.

 

[gopman]

But what you don't do is differentiate between nominal GDP growth and that which could maybe have been caused by tax cuts. That's the difference. As GPD increases, government revenue will as well. You claim that taxes are cut and government revenue increases. It always does. But that's not to say that the tax cuts have quite the magnitude of effect that is being claimed. You're not disentangling the system.

I claim that in certain ranges, and there is empirical support for that statement, which I have posted.

The Laffer curve makes it easy to talk about certain aspects while assuming constants in others. It's convenient to talk about it in these terms and helpful in defining endpoints and perhaps generalized trends. It cannot, however, accurately model the system. We don't really have an accurate model. That's because this is a highly non-linear system wherein multiple dynamics can have measurable affect on the system.

So really what you're saying is the picture from Wikipedia isn't the actual relationship as it exists in the United States. Thanks, you've changed my world view.

 

[Kushinator]

We must be careful with the Laffer curve as externalities can have a very real effect on long run growth. There are scenario's in which the Laffer curve is applicable... but we are not in that boat.

 

[apdst]

While I believe that tax cuts do in fact grow government revenue, tax cuts on the middle class while progressive taxes on the wealthiest 1% will grow government revenue more.

And what the rich do with their money is spend it in third-world nations with little in the way of human rights and the life expectancy of it's people is vastly reduced because the wealthiest 1% are pandered to by the dictators and corporations of those countries who refuse to spread the wealth downwards and keep their citizens virtual slaves even though only the businesses and government profit from their labor.

I would rather cut taxes on everyone, making them more willing to pay all their taxes and creating more cash flow in the private sector. The whole tax the rich philosophy is greatly flawed.

 

[zimmer]

Tax Cuts Grow Govt. revenue

Don't tell Obama... or his Kool-Aiders... 'cause they'z ain't listen'in, ya heer.

Mr. Unity is too busy demonizing banks, Wall Street, Big This & Big That.
He's trying to Alinsky the nation to death.

Overheard in The Oval Office:

Advisor: Mr. President, we should think about across the board tax cuts. They've always worked. Even JFK said they raise all boats.

O: Whatchewtawk'inbout? Tax cuts? For the wealthy? Say what? You sick or somthin'in? Who you think you're talk'in to?...
Tax cuts? Did I really hear you say "Tax Cuts"?

O: "Tax Cuts"? Who you kidd'in? "Tax Cuts"? Did Mao ever talk about "Tax Cuts"? Castro? Marx?

O: Oh, I get it... you're fool'in with me... "Tax Cuts". Y'know, you're damn funny...."Tax Cuts"?

Is it 2012 yet?

.

 

[Conservative]

Don't tell Obama... or his Kool-Aiders... 'cause they'z ain't listen'in, ya heer.

Mr. Unity is too busy demonizing banks, Wall Street, Big This & Big That.
He's trying to Alinsky the nation to death.

Overheard in The Oval Office:


Is it 2012 yet?

.

LOL, Yep, sounds like exactly what went on in the WH. I have learned that too many Obama supporters think he really cares about them when the reality is Obama doesn't have the same values as most of us. I sincerely hope the 2010 elections start the ball rolling to show him exactly how out of touch he is with the majority. The curtain has been pulled back from this wizard.

 

[Grim17]

Great post conservative.

What I don't understand, is why economists like Paul Krugman don't seem to get it. It's really not that difficult to grasp.

The effect that raising or lowering tax rates will have on government revenue and the overall economy, isn't that hard determine. It's simple... there's a right time to raise taxes, and a right time to lower them. The History is crystal clear. Just look at the last 40 or 50 years of the governments tax policy, and it tells you all you need to know.

A president shouldn't be held responsible for, or given credit for, the shape of the economy they inherited when they took office. What they are responsible for, is how they deal with the conditions they were handed. We've had 6 presidents over the last 40 years, and all of them were faced with having to make a decision on tax rates, based on the country's economic condition.

The good news is, 4 of them got it right... The bad news is, 2 of them got it wrong.

Jimmy Carter - When he entered office in 1977, he inherited a pretty crappy economy. Unemployment was high, inflation was high, interest rates were high, and things weren't getting any better.
Action taken - Substantially raised income taxes, especially on upper incomes and big business.
Results - The economy got even worse.

Ronald Reagan - Inherited worse recession since the great depression.
Action Taken - Cut income taxes across the board in 81' and 86'
Results - Full economic recovery and many years of sustained prosperity.

George HW Bush - Inherited a good economy.
Action Taken - Small increase in taxes
Results - The economy remained good and was reasonably steady, with only a few short instances of decline. The economy was good and on the rise when he left office.

Bill Clinton - Inherited a good economy.
Action Taken - Slow and steady increase in taxes.
Results - The economy was great. It continued to grow 7 1/2 of his 8 years in office, thanks in large part to the tech boom in America. He also eliminated the federal budget deficit.

George W Bush - Inherited a mildly declining economy and a recession (caused by the collapse of tech stocks and Enron scandal), which quickly turned worse after the attacks of 9/11.
Action Taken - Cut income taxes across the board in 2001' and 2003'
Results - Recession ended at the beginning of 2002, and the economy continued improving in all phases, and we experienced the longest period of sustained economic growth in US history, until the housing market crash of 2007.

Barack Obama - Inherited horrible economy.... as bad or worse than Carter's ended up being
Action taken - Based on his proposed policies, it appears he will raise taxes substancially... especially on the wealthy and big business.
Results - If history is any indicator, see "Jimmy Carter".

It's simple people...

Bad economy = Lowering taxes = increased revenue
Good economy = Raising taxes = increased revenue

I wish someone could please explain to me, why the current administration is choosing to ignore history?

.

 

[gopman]

What I don't understand, is why economists like Paul Krugman don't seem to get it. It's really not that difficult to grasp.
.

Because Paul Krugman is a partisan hack and nothing more. He won the Nobel Prize for his contribution to international trade theory- specifically he realized how economies of scale impact trade. It was high quality work and it deserved the award. The reason it didn't come sooner, to be honest, was probably that the Nobel Committee was uncomfortable honoring someone who had more or less abandoned serious academics for partisan politics. Nothing he writes in his NYT column resembles legitimate economics. He is a Democrat party shill and it pisses me off when people use his Nobel as a qualifier for anything he writes.

 

[Conservative]

Great post conservative.

What I don't understand, is why economists like Paul Krugman don't seem to get it. It's really not that difficult to grasp.

The effect that raising or lowering tax rates will have on government revenue and the overall economy, isn't that hard determine. It's simple... there's a right time to raise taxes, and a right time to lower them. The History is crystal clear. Just look at the last 40 or 50 years of the governments tax policy, and it tells you all you need to know.

A president shouldn't be held responsible for, or given credit for, the shape of the economy they inherited when they took office. What they are responsible for, is how they deal with the conditions they were handed. We've had 6 presidents over the last 40 years, and all of them were faced with having to make a decision on tax rates, based on the country's economic condition.

The good news is, 4 of them got it right... The bad news is, 2 of them got it wrong.

Jimmy Carter - When he entered office in 1977, he inherited a pretty crappy economy. Unemployment was high, inflation was high, interest rates were high, and things weren't getting any better.
Action taken - Substantially raised income taxes, especially on upper incomes and big business.
Results - The economy got even worse.

Ronald Reagan - Inherited worse recession since the great depression.
Action Taken - Cut income taxes across the board in 81' and 86'
Results - Full economic recovery and many years of sustained prosperity.

George HW Bush - Inherited a good economy.
Action Taken - Small increase in taxes
Results - The economy remained good and was reasonably steady, with only a few short instances of decline. The economy was good and on the rise when he left office.

Bill Clinton - Inherited a good economy.
Action Taken - Slow and steady increase in taxes.
Results - The economy was great. It continued to grow 7 1/2 of his 8 years in office, thanks in large part to the tech boom in America. He also eliminated the federal budget deficit.

George W Bush - Inherited a mildly declining economy and a recession (caused by the collapse of tech stocks and Enron scandal), which quickly turned worse after the attacks of 9/11.
Action Taken - Cut income taxes across the board in 2001' and 2003'
Results - Recession ended at the beginning of 2002, and the economy continued improving in all phases, and we experienced the longest period of sustained economic growth in US history, until the housing market crash of 2007.

Barack Obama - Inherited horrible economy.... as bad or worse than Carter's ended up being
Action taken - Based on his proposed policies, it appears he will raise taxes substancially... especially on the wealthy and big business.
Results - If history is any indicator, see "Jimmy Carter".

It's simple people...

Bad economy = Lowering taxes = increased revenue
Good economy = Raising taxes = increased revenue

I wish someone could please explain to me, why the current administration is choosing to ignore history?

.

I call it Obama/Pelosi/Reid arrogance and the strong desire for power. Giving people more of their money means less need for that govt. help these people offer.