Tax Cuts (1 Viewer)

[Awesome!]

Are tax cuts a bad thing, or a good thing for the economy?

 

[Kandahar]

As with most economic issues, it depends entirely on the circumstances.

 

[taxedout]

Put it this way, taking money away can't be good for the economy.

Taxing your way to prosperity. What a bizzare idea

 

[taxedout]

Put it this way, taking money away can't be good for the economy.

Taxing your way to prosperity. What a bizzare idea

 

[Kandahar]

Put it this way, taking money away can't be good for the economy.

Taxing your way to prosperity. What a bizzare idea

Some taxes are necessary for prosperity. You can't have a prosperous society without public investment in things like infrastructure, the rule of law, education, and (to a limited degree) medical care.

Getting rid of excessive government spending and balancing the budget is what we need to do right now. THEN we can worry about cutting taxes/spending even more.

 

[FallingPianos]

Are tax cuts a bad thing, or a good thing for the economy?

short answer: it depends.

 

[TurtleDude]

like the gun control issue-one side has several sound arguments while the other side has to put their eggs in one basket. For those who are in favor of rolling back the Bush tax cuts, their only argument is increased revenue claims which may or may not be true since tax increases could retard the economy

for people who support more tax cuts (I am one of them) we can point to the fact that tax revenues have increased. We also have the additional arguments that the tax burden is too high on many people and raising taxes only gives more incentive for more spending.

we need a system where any who supports higher taxes has to pay these taxes. I tire of people demanding reinstatement of the death tax at a million dollars or jacking up the top brackets. If the death confiscation tax is such a good idea (and its usually justified by the class warriors on the grounds that its unfair for people to inherit stuff they didn't earn) then ALL estates should be taxed, not just a small group. secondly if income taxes are raised-it should be at the base, not the top rate and EVERYONE should be affected.

 

[Iriemon]

Tax cuts are bad when they result in revenues falling below the level of expenditures, resulting in debt.

That is what has happened with the Bush tax cuts. Revenues fell by hundreds of billions and are still hundreds of billions below where they would had taxes not been cut. Revenues have grow 19% from 2,025B FY00 to 2,406B in FY06, compared to an economy which has grown 33% thru the first half of FY06 (GDP data for FY06 is not in yet) - in other words, revenues have barely been half of GDP. Had revenues kept up with GDP, they would have been $2,668B (plus however much GDP grew during the last half of FY06) -- the $260+ shortfall more than makes up for the "deficit" of about $250 in FY06 ("deficit" in the way the Bush admin have used the term (which includes SS surplus taxes as revenues).

Supply side conservatives argue that the economy grows more with lower taxes which is supposed to result in higher revenues. Which is why you didn't hear Bush and the Republicans talking about slashing spending in 2000 or 2004 (aside from the obvious reason of political consequence). Arguably, when the govt borrows money and spends it, you would expect some economic stimulus. However, the affects appear insignificant, and there has been no measurable correlation between lower taxes and higher GDP growth historically or currently.

This data is derived from the US Dept of Commerce Bureau of Economic Analysis GDP data from http://bea.gov/bea/dn/home/gdp.htm. I'll post the back up if someone wants to see it.

Average annual real growth in the 50s = 4.15%.
Average annual real growth in the 60s = 4.44%.
Average annual real growth in the 70s = 3.26%.
Average annual real growth during Reagan & Bush1: 3.0%
Average annual real growth during Clinton: 3.71%
Average annual real growth during Bush2 (thru 2005): 2.56%

In the 50s, the top marginal rate was 90%, in the 60s it was cut to 70% where it was in the 70s. In the 80s the tax rates were slashed eventually to 28%, raised to 31% in '91.

In '93 under Clinton, the top rates were raised to 39%, and slashed again by Bush.

Historically, tax cuts have not resulted in stronger GDP growth. Even if you take out the first three years of GDP growth under Bush and just count his two best years in FY04 and 05, real GDP growth under Bush was only 3.87%; hardly a significant increase in economic growth that would grow revenues to a point were they make up for the lost revenue base caused by lower tax rates.

However, the tax cuts have resulted in significantly decreased revenues. And of course, if spending is not cut or is increased, the Govt runs deficits. which is why the debt has grown $7.5 billion since 1981, and almost $3 trillion since the Bush Admin took over.

http://www.publicdebt.treas.gov/opd/opdpenny.htm

As a result of that debt, the interest expense last year was $405 billion, a 15% increase over FY05. That is the amount of money lost to the Govt each year because of the accumulated debt.

http://www.publicdebt.treas.gov/opd/opdint.htm

So yes, cutting taxes below the level needed to fund expenditures, in other words, cutting taxes when you don't cut spending, is a bad thing, IMO. The result of this practice by the Repulbicans over the past 25 years is costing us $400 billion a year today; and obligation which is growing rapidly and will continue to burden our country far into the future.

 

[Dezaad]

for people who support more tax cuts (I am one of them) we can point to the fact that tax revenues have increased.

By now, most economists doubt that tax cuts pay for themselves by stimulating the economy so much that revenues grow rapidly. A new Congressional Research Service report, for example, finds that the stimulus effects of the Bush tax cuts have faded, and the negative effect of added debt service has grown. In the first 10 years, those additional debt-service costs can add 25 percent in lost revenues to the original tax-cut revenue losses. So in the long term, tax cuts add to the deficit.

As for the future of the economy, the Federal Reserve's monetary policy may well be more important than fiscal policy. Mr. Kasriel notes that, despite a big tax increase in 1993, the economy boomed in the second half of the 1990s. The pro-tax cutters "cherry-pick" their data, he says. Kasriel worries that slim growth today in the nation's money supply (the fuel for the economy) will weaken the economy further.

http://www.csmonitor.com/2006/1023/p17s01-cogn.html

 

[TurtleDude]

By now, most economists doubt that tax cuts pay for themselves by stimulating the economy so much that revenues grow rapidly. A new Congressional Research Service report, for example, finds that the stimulus effects of the Bush tax cuts have faded, and the negative effect of added debt service has grown. In the first 10 years, those additional debt-service costs can add 25 percent in lost revenues to the original tax-cut revenue losses. So in the long term, tax cuts add to the deficit.

As for the future of the economy, the Federal Reserve's monetary policy may well be more important than fiscal policy. Mr. Kasriel notes that, despite a big tax increase in 1993, the economy boomed in the second half of the 1990s. The pro-tax cutters "cherry-pick" their data, he says. Kasriel worries that slim growth today in the nation's money supply (the fuel for the economy) will weaken the economy further.

http://www.csmonitor.com/2006/1023/p17s01-cogn.html

most economists? the ones who work for publicly funded universities or the ones who actually work in the real world?

even so, as I noted, none of the tax hike jihadists can argue the other points we make

 

[nkgupta80]

most economists? the ones who work for publicly funded universities or the ones who actually work in the real world?

even so, as I noted, none of the tax hike jihadists can argue the other points we make

a lot of economists in these universities, usually made it in the real world, and then decide to teach. Either that, or their expertise is continually used by the "real world" even while they are professors. All policies implemented in the real world were developed by these professors/intellectuals/thinkers at one point.

As for tax cuts, it solely depends on the situation of the economy, and what the priorities are. Stimulating growth in the economy may not be the best route in the short run, if the soceity needs a well-planned program for developing infrastructure, for example. A raise in taxes has the same type of argument.

 

[Iriemon]

most economists? the ones who work for publicly funded universities or the ones who actually work in the real world?

even so, as I noted, none of the tax hike jihadists can argue the other points we make

Naw, it's great the government is borrowing 1/2 trillion more each year, so that wealthy don't have to pay more taxes.

The pass the buck generation.

 

[TurtleDude]

a lot of economists in these universities, usually made it in the real world, and then decide to teach. Either that, or their expertise is continually used by the "real world" even while they are professors. All policies implemented in the real world were developed by these professors/intellectuals/thinkers at one point.

As for tax cuts, it solely depends on the situation of the economy, and what the priorities are. Stimulating growth in the economy may not be the best route in the short run, if the soceity needs a well-planned program for developing infrastructure, for example. A raise in taxes has the same type of argument.

really? do you have any proof of that? I can tell you most law professors spent 1-4 years in the real world and then retreated back to academia

 

[TurtleDude]

Naw, it's great the government is borrowing 1/2 trillion more each year, so that wealthy don't have to pay more taxes.

The pass the buck generation.

so its your position as long as the government continues to spend and spend, the rich have a duty to pay more and more taxes and get nothing in return since almost all the increased spending goes to middle and lower classes

 

[Iriemon]

so its your position as long as the government continues to spend and spend, the rich have a duty to pay more and more taxes and get nothing in return since almost all the increased spending goes to middle and lower classes

What is the basis for your contention that "almost all the increased spending goes to middle and lower classes"?

But yep. If the Govt doesn't cut spending, that is my contention. We should pay for what our Govt spends.

So it's your position that as long as the government continues to spend and spend, we should just borrow more and more and make the next generation deal with the consequences of the huge debt from what *our* government spends?

 

[TurtleDude]

What is the basis for your contention that "almost all the increased spending goes to middle and lower classes"?

But yep. If the Govt doesn't cut spending, that is my contention. We should pay for what our Govt spends.

So it's your position that as long as the government continues to spend and spend, we should just borrow more and more and make the next generation deal with the consequences of the huge debt from what *our* government spends?

The rich carry most of the tax burden but cannot out vote those who don't carry the tax burden

so as long as a majority wants more and more government spending, the minority who has to fund this spending have no way to stop from being looted.

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years"

attributed to Alexander Tytler

 

[Goobieman]

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years"

To a liberal, that's better than cutting spending.

 

[Iriemon]

The rich carry most of the tax burden but cannot out vote those who don't carry the tax burden

so as long as a majority wants more and more government spending, the minority who has to fund this spending have no way to stop from being looted.

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years"

attributed to Alexander Tytler

I had thought it was Franklin. But I don't disagree in theory. So what is the option? Just keep on borrowing? You think that's better?

 

[TurtleDude]

I had thought it was Franklin. But I don't disagree in theory. So what is the option? Just keep on borrowing? You think that's better?

well when sweden kept plucking the golden geese-many of them left sweden (the entire swedish davis cup team back in the glory days-not one lived in sweden). when that happens, the standard of living for the looters decreases.

I favor a tax plan where everyone has to pay more when taxes are raised. it stops this nonsense. And yes, I would rather have the whole system go bankrupt than the constant attacks on the producers by the looters

SYAL

 

[Iriemon]

well when sweden kept plucking the golden geese-many of them left sweden (the entire swedish davis cup team back in the glory days-not one lived in sweden). when that happens, the standard of living for the looters decreases.

I favor a tax plan where everyone has to pay more when taxes are raised. it stops this nonsense. And yes, I would rather have the whole system go bankrupt than the constant attacks on the producers by the looters

SYAL

I figured.

 

[Kandahar]

well when sweden kept plucking the golden geese-many of them left sweden (the entire swedish davis cup team back in the glory days-not one lived in sweden). when that happens, the standard of living for the looters decreases.

Sweden really gets a bad name...it is not a welfare state like most of the rest of Western Europe, it's an investment state. Its economy functions much better than, say, France or Germany. Sweden INVESTS in its population (education, job training, preventative health care) rather than wasting money on handouts.

There was a time when Sweden was like this, but unlike most of Europe, Sweden has reformed its economy. It is by no means run by "looters."

I favor a tax plan where everyone has to pay more when taxes are raised. it stops this nonsense.

I agree that the tax code should be flatter, but it shouldn't be completely flat. The very poor simply can't afford to pay a lot of taxes. But two tax brackets - 0% and X% - would work quite well.

And yes, I would rather have the whole system go bankrupt than the constant attacks on the producers by the looters

I can assure you that if the United States goes bankrupt and defaults on its debt, it will be the biggest attack on producers by looters that you can possibly imagine.

 

[TurtleDude]

Sweden really gets a bad name...it is not a welfare state like most of the rest of Western Europe, it's an investment state. Its economy functions much better than, say, France or Germany. Sweden INVESTS in its population (education, job training, preventative health care) rather than wasting money on handouts.

There was a time when Sweden was like this, but unlike most of Europe, Sweden has reformed its economy. It is by no means run by "looters."

If you are a tennis fan you know the era I was speaking of.

I agree that the tax code should be flatter, but it shouldn't be completely flat. The very poor simply can't afford to pay a lot of taxes. But two tax brackets - 0% and X% - would work quite well.

better than what we have today. I would propose those in the 0% not be able to vote in elections that impact on the tax rate of the other group

I can assure you that if the United States goes bankrupt and defaults on its debt, it will be the biggest attack on producers by looters that you can possibly imagine.

perhaps but it beats a system where the many vote themselves the wealth of those who carry most of the burden

 

[Awesome!]

like the gun control issue-one side has several sound arguments while the other side has to put their eggs in one basket. For those who are in favor of rolling back the Bush tax cuts, their only argument is increased revenue claims which may or may not be true since tax increases could retard the economy

for people who support more tax cuts (I am one of them) we can point to the fact that tax revenues have increased. We also have the additional arguments that the tax burden is too high on many people and raising taxes only gives more incentive for more spending.

we need a system where any who supports higher taxes has to pay these taxes. I tire of people demanding reinstatement of the death tax at a million dollars or jacking up the top brackets. If the death confiscation tax is such a good idea (and its usually justified by the class warriors on the grounds that its unfair for people to inherit stuff they didn't earn) then ALL estates should be taxed, not just a small group. secondly if income taxes are raised-it should be at the base, not the top rate and EVERYONE should be affected.

Right, I feel that re-distribution is all the other side has to offer. I am convinced about that 100%. Like you comment in the other post, these real world part-timer professors etc. go back to the abstract because a real world budget is tough. I got the finance officer on my a## all the time to keep the value adds, but to cut costs as much as possible. I'm assuming the government doesn't have this mindset, because they have the money always pouring in, so improvement, creativity etc. isn't there. Also, from a personal perspective, if uncle sam could hook me up with 3-5%, staight up tax cut, no strings attached, my wife and i could expedite our down payment on a house.

 

[nkgupta80]

really? do you have any proof of that? I can tell you most law professors spent 1-4 years in the real world and then retreated back to academia

well i know most of the econ professors in my university are pretty damn successful in the real world (made their money, they're expertise is prized), and they seem to support the idea that tax cuts OR tax hikes are purely dependent on the situation.

There exist BOTH bad and good professors...