The American Spectator

Bob| 3.26.09 @ 6:06PM

Philip -- what is wrong with you? I agree with everything you've said in this post. It's exactly what I've been saying for months now. Here's a chart that shows the problem in real terms:

http://www.heritage.org/Research/features/budgetchartbook/fed-rev-spend-2008-boc-S8-Mandatory-Spending-Has-Increased.html

Now, if we could get all of you off of the lie that tax cuts increase revenues, there may be a shot for fiscal conservatives. By the way, I found a better chart to explain that marginal rate tax decrease or increases have little effect on federal receipts:

http://www.heritage.org/Research/features/budgetchartbook/fed-rev-spend-2008-boc-T1-Income-Tax-Receipts-Stay-Constant.html

jr| 3.26.09 @ 6:32PM

The Repubs are a few years away from saying what should be done. They are still suffering from the past 8 years of spending. And I think nothing will dent the Dimocrats until we have a major setback, something that will awaken the sleeping kool-aiders back to reality. I believe that tax cuts increase revenue and if you were to use my personal life and cut my tax in half - I would certainly spend. If you allowed me to remove a healthy chunk of my 401 for a better and reasonable investment without taxing me, that would happen. Without that my 401 stays where it is hoping that the future will bring better returns.

Bob| 3.26.09 @ 7:07PM

jr -- you suffer from the flat earth syndrome. If you look out of your front door, you'd swear the earth was flat. But if you fly at 50,000 feet, you'd know you were wrong. That's the problem with your viewpoint. The macro numbers do not support your premise about tax cuts. First of all, when you reduce taxes, the government gets less money because of those reduced rates. Some people may invest and spend, but the macro numbers show that this does not offset the initial tax loss. Furthermore, as with Reagan an Bush, you end up with huge deficits. Here's the chart of deficits:

http://zfacts.com/p/318.html

People like Limbaugh and Hannity keep on repeating this lie because they don't know any better. I guess they never took economics in college. That's right -- they never went to college.

daboss| 3.26.09 @ 7:33PM

This tax cut debate is getting old. I have moved on. We will never find any strong evidence to convince the parties either way of who is right or wrong.

However, this I know is true – the current progressive system does not work. It allows politicians to social engineer.

Tax cuts are NOT a winning issue – even though I would be for them – especially in this political climate.
It’s time that republicans offered bold new solution – real and actual change – and abolish the IRS and replace it with a consumption tax. Imagine the competitive advantage we would have over the rest of the world … zero income tax, a zero corporate tax rate, zero capital gain, zero estate taxes. Investments would flock into this country along with manufacturing and service jobs.

There should be NO income tax – but a consumption tax. Everyone must pay it. Nothing is deducted. No FICA/Corporate/Income tax – no IRS – nothing. Just 17ish%. Then cut out the unconstitutional spending (pipe dream, I know) and then adjust the tax accordingly.

hoads| 3.27.09 @ 9:25AM

Surprisingly, the OECD has examined the effect of tax rates on economic growth--they have found that high corporate tax rates and progressive income tax rates do indeed impede economic growth.

http://www.olis.oecd.org/olis/2008doc.nsf/LinkTo/NT00005C32/$FILE/JT03252848.PDF

"Do tax structures affect aggregate economic growth?
Empirical evidence from a panel of OECD countries

This paper examines the relationship between tax structures and economic growth by entering indicators of the tax structure into a set of panel growth regressions for 21 OECD countries, in which both the accumulation of physical and human capital are accounted for. The results of the analysis suggest that income taxes are generally associated with lower economic growth than taxes on consumption and property. More precisely, the findings allow the establishment of a ranking of tax instruments with respect to their relationship to economic growth. Property taxes, and particularly recurrent taxes on immovable property, seem to be the most growth-friendly, followed by consumption taxes and then by personal income taxes. Corporate income taxes appear to have the most negative effect on GDP per capita. These findings suggest that a revenue-neutral growth-oriented tax reform would be to shift part of the revenue base towards recurrent property and consumption taxes and away from income taxes, especially corporate
taxes. There is also evidence of a negative relationship between the progressivity of personal income taxes and growth. All of the results are robust to a number of different specifications, including controlling for other determinants of economic growth and instrumenting tax indicators."

Bob| 3.27.09 @ 9:35AM

Hoads -- did you actually read this study? Let me quote from it:

"A number of studies have explored the link between the overall level of taxation or of public
expenditure and growth across countries, but no consensus about the existence of such a relationship has emerged from this literature. This is not surprising because the overall size of the public sector has two opposite effects: Higher taxes not only mean potentially higher distortions, but usually also higher levels of public expenditure, some of which will foster economic growth."

The study was on TAX STRUCTURES -- not taxation levels. Thus, it backs up what I have been saying that tax cuts are not stimulative to economic growth. Furthermore, if you've read my posts, I've advocated getting rid of corporate income taxes in favor of a consumption tax -- something this study also supports. This would make us more competitive for exports as well as capture taxes on imported goods and making corporations having off shore headquarters meaningless. Thus, it would increase jobs in the U.S.

Next time, please read the study before you assume you know what it says. Thanks for the link, however, as it is another piece of evidence supporting what I have been saying.

sasha2008| 3.27.09 @ 11:56AM

It is a fact- the USA cannot even make it within the top 25 countries in the world for education

Ignorance is Bliss!

hoads| 3.27.09 @ 12:10PM

You can parse "structure" and "rates" but, the study clearly defines that progressive income taxes have an inverse relationship to economic growth. Your reference to "higher taxes ...mean higher levels of public expenditure" does not infer that higher public expenditure is or should be desirable (because of its squeeze on private sector spending). Higher public expenditures can occur with or without economic growth (witness the present) but, it is economic growth that produces material wealth from which taxes are derived. The study specifically denotes that progressive income taxes have less economic stimulus effects than consumption taxes. To hang your hat on "tax cuts reduce tax revenues" one has to be operating within the goals of a political ideology versus economic theory.

The Kennedy Reagan and Bush tax cuts all resulted in higher tax revenues. No better evidence exists that tax cuts increase tax revenues (thus, economic growth), than Ireland's comeback from a flailing economy to a robust one over a 20 year period (84-04).
http://workforall.net/EN_Tax_policy_for_growth_and_jobs.html

One can also extend the same economic rationale for reducing corporate income taxes to the reduction of personal income taxes. It all boils down to economic fact that individuals spend their earnings more wisely and efficiently than government and that government policy can and does pre-empt this economic reality for its policy prescriptions at which point, tax rates and structures are driven by social and political intentions.

Bob| 3.27.09 @ 12:28PM

hoads -- please tell me you understand the difference between "structure" and "rates". This is NOT parsing. They specifically said in the study that there is NO evidence that tax rates affect economic stimulation. You need to learn how to read and comprehend.

Furthermore, as that study states, and as we know from our economic data, there is plenty of proof that tax cuts do not raise federal revenues. Try studying the topic instead of just believing.

By the way, the Kennedy, Reagan, and Bush tax cuts did not increase tax revenues more than any other period. In fact, tax revenues were raised more under the Clinton tax increases than any of those three administrations. Here is the data:

http://www.heritage.org/research/features/budgetchartbook/fed-rev-spend-2008-boc-R2-Federal-Government-Tax-Revenue.html

And this chart is from a conservative study group. Instead of spouting untrue rhetoric, please study the data. The Heritage Foundation has some great charts. Furthermore, these charts are done properly from an economics viewpoint.

hoads| 3.27.09 @ 1:00PM

>"They specifically said in the study that there is NO evidence that tax rates >affect economic stimulation."

There's nothing in this study that states the above.

>"Furthermore, as that study states, and as we know from our economic >data, there is plenty of proof that tax cuts do not raise federal revenues. "

Again, there's nothing in the study to support this statement.

The K,R,B tax cuts did indeed increase tax revenues. I did not claim they produced the historical highest tax revenues. Economic growth occurred under Clinton in spite of his tax raises because he inherited the stimulative effects of Reagan's supply side policies and presided over the largest increase in economic growth in our history as a result of the shift from a manufacturing to an information technology economy with the resulting technology/dot com bubble.

Bob| 3.27.09 @ 2:46PM

hoads, you really need to learn how to read. Let me quote again DIRECTLY from the study:

"A number of studies have explored the link between the overall level of taxation or of public
expenditure and growth across countries, but no consensus about the existence of such a relationship has emerged from this literature. This is not surprising because the overall size of the public sector has two opposite effects: Higher taxes not only mean potentially higher distortions, but usually also higher levels of public expenditure, some of which will foster economic growth."

In fact, this not only says that the level of taxation does not affect revenues, but it says that spending is stimulative. Please have someone explain this paragraph to you.

How can you possibly believe the K,R,B tax cuts increased revenues when revenues did not grow anymore under those administrations than any other? You need to stop listening to Rush/Hannity and start learning how to read real data for yourself. If you want a summary of Reaganomics, read this summary from one of Reagan's own chief economists:

http://www.econlib.org/library/Enc1/Reaganomics.html

By the way, Reagan received the benefit of significant changes in the fed funds rate plus a fairly dramatic increase in corporate productivity due to the expansion of mainframes and mini's. Supply side theories have been disproven in real life as have Keynesian theories. Again, you need to study economics.

hoads| 3.27.09 @ 5:11PM

> "A number of studies have explored the link between the overall level of taxation or of public..."

I've already commented on this in my prior post. It doesn't say what you are claiming it does.

Since you seemed to like your link to heritage, here's one for you:

http://www.heritage.org/Research/Taxes/wm182.cfm

And, you've ignored my other link above that provides evidence that reducing tax rates improves economic growth.

And then the dead giveaway that you are indeed the ideologue that you instead accuse me of being--I can always count on the libs to trot out "right winged radio", make facetious admonishments to "research" and the usual feigned indignation at the stupidity of someone who dares to challenge your expert opinion. It's all so boring and predictable.

Brooks| 3.27.09 @ 8:51PM

jr and Bob

Bob is right in his comment 3.26.09 @ 7:07PM. Even conservative economists who generally favor tax cuts concede that point. See my compilation of quotes at http://swordscrossed.org/diary/20081017/no-bush-tax-cuts-have-not-generated-higher-revenues

Bob, come join SwordsCrossed.

Bob| 3.28.09 @ 10:02AM

hoads -- Your other link concerning Ireland is not relevant. It is not the same situation we have in the U.S. Thus I did not comment on it. Furthermore, if you have some proof that tax cuts increase federal revenues, show me the underlying data that supports the contention. I've shown you a lot of data.

Regarding your reference, it was a memo/blog on the Heritage site -- not their data. The data does not reflect real dollars, i.e., inflation is not removed from the numbers. Furthermore, to prove the point that tax cuts increase revenue, you also have to show that tax increases decrease revenue. The fact is that revenue rises no matter whether you have tax increases or decreases. It is obvious you've had no training in economics. I could make the exact same argument as you regarding tax increases for any President. If you have any friends who have a degree in economics, show them the data and ask them the question. This is why people need to be educated in this country -- they will come to the wrong conclusions otherwise.