|
|
On August 12 2012 08:17 JonnyBNoHo wrote:
Yes deferrals are primarily for capital gains but the affect income that can be restructured as well (namely dividends). Lowering the tax rates does provide a short-term boost but not much of a long-term drag since future unearned income will be more willingly converted into realized income. There's also an efficiency argument here since it is not in the economy's best interest for poor investments to persist in order to avoid taxes.
High rates also make tax-exempt income and tax-equity more attractive and redirects investment into those areas (subsidy).
Certain forms of equity are also double-taxed which encourages the use of debt - which isn't in the public's interest either.
Depends on how it's done. Cutting taxes over and over again over a period of time will have large drag, simply because future unearned income will NOT be more willingly converted into realized income, due to anticipation of future tax cuts. This will lower government revenue over the long run, and increase the number of poor investments held.
...actually, simply cutting tax rates on the correct side of the Laffer curve will, in the long run, just decrease government revenue.
On August 12 2012 08:24 Leporello wrote:
Look at the graphs and numbers. Reagan's tax cuts gave our government less revenue and was the biggest kick-starter to our national debt in our nation's history. But I guess if you could acknowledge that fact, you wouldn't be a Republican.
The wrong side of the Laffer curve is estimated to be a top marginal tax rate of about 70%. Top marginal tax rates under Eisenhower to Kennedy of, say, 90%, actively decreased government revenue. The tax rates after that particular cut? Almost certainly not.
|
On August 12 2012 07:25 Savio wrote:Show nested quote +On August 12 2012 07:10 Souma wrote:On August 12 2012 06:56 Savio wrote:On August 12 2012 06:32 acker wrote:On August 12 2012 06:29 Savio wrote:
So basically they said, "Romney hasn't given specifics on his plan so we assumed of his 2 promises (cut taxes and be revenue neutral) that he would break the tax cut promise and then we thought up a reasonable way he might do it, then we announced that his plan raises taxes on the middle class" They did not think up a reasonable way to do it. They took the most extreme way possible to maintain progressivity and the plan was still regressive. They even assumed growth effects per ROMNEY'S economics advisor. Romney hasn't given specifics on which loopholes that he's close. Therefore, the TPC chose the loopholes that would make his plan the most progressive. Any other loophole combination, given his pledges, makes the analysis that much more regressive. Why is this so hard to understand? If Romney wants the TPC to choose different assumptions, he just has to break pledges for deficit neutrality or tax preference for savings and investment. Per http://online.wsj.com/article/SB10000872396390443792604577574910276629448.html:"The class warriors at the Tax Policy Center add all of this up and issue the headline-grabbing opinion that it is "mathematically impossible" to reduce tax rates and close loopholes in a way that raises the same amount of revenue. They do so in part by arbitrarily claiming that Mr. Romney would never eliminate certain loopholes (such as for municipal bond interest), though the candidate has said no such thing. Based on this invention, they then postulate that Mr. Romney would have to do something he also doesn't propose—which is raise taxes on those earning less than $200,000. In the Obama campaign's political alchemy, this becomes "Romney Hood" and a $2,000 tax increase. The Tax Policy Center also ignores the history of tax cutting. Every major marginal rate income tax cut of the last 50 years—1964, 1981, 1986 and 2003—was followed by an unexpectedly large increase in tax revenues, a surge in taxes paid by the rich, and a more progressive tax code—i.e., the share of taxes paid by the richest 1% rose.
Actually they're wrong. With the introduction of the Bush Tax Cuts we experienced a DECREASE in tax revenue as a percentage of GDP than the thirty-year average preceding it. So while maybe in the past that was the case, it is not the case today. It's one of the reasons our deficit grew and why we want to raise the taxes again. Legit question: Can someone tell me what's wrong with keeping the tax rates as they are right now but closing the loopholes for the wealthy? ummm...thats the whole point they are making. Tax cuts lead to growth of GDP. So you can see an increase in " Tax Revenues" as THEY said even if you see a decrease in " tax revenue as a percentage of GDP" as YOU said. Both of which are good things BTW.
American GDP has been growing steadily for the better part of the last 50 years. It has grown while taxes were raised and reduced. Saying tax cuts cause GDP growth is dishonest. Correlation does not equal causation. By your logic raising taxes also increases GDP which in turn further increases tax revenue.
And for those who talk about how great the Ryan plan is, the critical part of his plan that would allow reduce deficits are totally unspecified. He claims that tax loophole magic sauce will allow his plan to be fiscally responsible, yet every independent analysis of the plan says that its impossible.
Likewise in his plan, the tax cuts in it are disproportionately given to those with higher income.
Ryan needs to tell the American people what loopholes he will close to get his plan revenue neutral, otherwise this is a plan that massively increases deficits.
|
On August 12 2012 08:56 acker wrote:Show nested quote +On August 12 2012 08:17 JonnyBNoHo wrote:
Yes deferrals are primarily for capital gains but the affect income that can be restructured as well (namely dividends). Lowering the tax rates does provide a short-term boost but not much of a long-term drag since future unearned income will be more willingly converted into realized income. There's also an efficiency argument here since it is not in the economy's best interest for poor investments to persist in order to avoid taxes.
High rates also make tax-exempt income and tax-equity more attractive and redirects investment into those areas (subsidy).
Certain forms of equity are also double-taxed which encourages the use of debt - which isn't in the public's interest either.
Depends on how it's done. Cutting taxes over and over again over a period of time will have large drag, simply because future unearned income will NOT be more willingly converted into realized income, due to anticipation of future tax cuts. This will lower government revenue over the long run, and increase the number of poor investments held. ...actually, simply cutting tax rates on the correct side of the Laffer curve will, in the long run, just decrease government revenue. Show nested quote +On August 12 2012 08:24 Leporello wrote:
Look at the graphs and numbers. Reagan's tax cuts gave our government less revenue and was the biggest kick-starter to our national debt in our nation's history. But I guess if you could acknowledge that fact, you wouldn't be a Republican. The wrong side of the Laffer curve is estimated to be a top marginal tax rate of about 70%. Top marginal tax rates under Eisenhower to Kennedy of, say, 90%, actively decreased government revenue. The tax rates after that particular cut? Almost certainly not.
70% seems absurdly high.
|
On August 12 2012 09:26 JonnyBNoHo wrote:
70% seems absurdly high.
Looking this up for yourself really isn't that difficult.
There's been a ridiculous number of studies done on just how elastic the Laffer curve is over the past thirty years or so. The mid range for peer-reviewed studies is around 70% for the top marginal tax rate.
|
On August 12 2012 09:18 BuddhaMonk wrote:Show nested quote +On August 12 2012 07:25 Savio wrote:On August 12 2012 07:10 Souma wrote:On August 12 2012 06:56 Savio wrote:On August 12 2012 06:32 acker wrote:On August 12 2012 06:29 Savio wrote:
So basically they said, "Romney hasn't given specifics on his plan so we assumed of his 2 promises (cut taxes and be revenue neutral) that he would break the tax cut promise and then we thought up a reasonable way he might do it, then we announced that his plan raises taxes on the middle class" They did not think up a reasonable way to do it. They took the most extreme way possible to maintain progressivity and the plan was still regressive. They even assumed growth effects per ROMNEY'S economics advisor. Romney hasn't given specifics on which loopholes that he's close. Therefore, the TPC chose the loopholes that would make his plan the most progressive. Any other loophole combination, given his pledges, makes the analysis that much more regressive. Why is this so hard to understand? If Romney wants the TPC to choose different assumptions, he just has to break pledges for deficit neutrality or tax preference for savings and investment. Per http://online.wsj.com/article/SB10000872396390443792604577574910276629448.html:"The class warriors at the Tax Policy Center add all of this up and issue the headline-grabbing opinion that it is "mathematically impossible" to reduce tax rates and close loopholes in a way that raises the same amount of revenue. They do so in part by arbitrarily claiming that Mr. Romney would never eliminate certain loopholes (such as for municipal bond interest), though the candidate has said no such thing. Based on this invention, they then postulate that Mr. Romney would have to do something he also doesn't propose—which is raise taxes on those earning less than $200,000. In the Obama campaign's political alchemy, this becomes "Romney Hood" and a $2,000 tax increase. The Tax Policy Center also ignores the history of tax cutting. Every major marginal rate income tax cut of the last 50 years—1964, 1981, 1986 and 2003—was followed by an unexpectedly large increase in tax revenues, a surge in taxes paid by the rich, and a more progressive tax code—i.e., the share of taxes paid by the richest 1% rose.
Actually they're wrong. With the introduction of the Bush Tax Cuts we experienced a DECREASE in tax revenue as a percentage of GDP than the thirty-year average preceding it. So while maybe in the past that was the case, it is not the case today. It's one of the reasons our deficit grew and why we want to raise the taxes again. Legit question: Can someone tell me what's wrong with keeping the tax rates as they are right now but closing the loopholes for the wealthy? ummm...thats the whole point they are making. Tax cuts lead to growth of GDP. So you can see an increase in " Tax Revenues" as THEY said even if you see a decrease in " tax revenue as a percentage of GDP" as YOU said. Both of which are good things BTW. American GDP has been growing steadily for the better part of the last 50 years. It has grown while taxes were raised and reduced. Saying tax cuts cause GDP growth is dishonest. Correlation does not equal causation. By your logic raising taxes also increases GDP which in turn further increases tax revenue. And for those who talk about how great the Ryan plan is, the critical part of his plan that would allow reduce deficits are totally unspecified. He claims that tax loophole magic sauce will allow his plan to be fiscally responsible, yet every independent analysis of the plan says that its impossible. Likewise in his plan, the tax cuts in it are disproportionately given to those with higher income. Ryan needs to tell the American people what loopholes he will close to get his plan revenue neutral, otherwise this is a plan that massively increases deficits.
No, your post is so ignorant that it shows a reckless disregard for facts.
Taxes have only increased three times since World War II, twice to pay for wars, so no, our growth has been sustained largely by tax cuts.
![[image loading]](http://upload.wikimedia.org/wikipedia/commons/thumb/e/e5/MarginalIncomeTax.svg/585px-MarginalIncomeTax.svg.png)
The question you should be asking is will cutting tax rates boost growth like Republicans say it will? Most people are skeptical and I think they're right. The Laffer curve argument doesn't carry water like it used to and I don't think taxes are a huge impediment to jump-starting the economy. But it's wrong to say taxes have no effect at all.
|
On August 12 2012 09:34 coverpunch wrote:Show nested quote +On August 12 2012 09:18 BuddhaMonk wrote:On August 12 2012 07:25 Savio wrote:On August 12 2012 07:10 Souma wrote:On August 12 2012 06:56 Savio wrote:On August 12 2012 06:32 acker wrote:On August 12 2012 06:29 Savio wrote:
So basically they said, "Romney hasn't given specifics on his plan so we assumed of his 2 promises (cut taxes and be revenue neutral) that he would break the tax cut promise and then we thought up a reasonable way he might do it, then we announced that his plan raises taxes on the middle class" They did not think up a reasonable way to do it. They took the most extreme way possible to maintain progressivity and the plan was still regressive. They even assumed growth effects per ROMNEY'S economics advisor. Romney hasn't given specifics on which loopholes that he's close. Therefore, the TPC chose the loopholes that would make his plan the most progressive. Any other loophole combination, given his pledges, makes the analysis that much more regressive. Why is this so hard to understand? If Romney wants the TPC to choose different assumptions, he just has to break pledges for deficit neutrality or tax preference for savings and investment. Per http://online.wsj.com/article/SB10000872396390443792604577574910276629448.html:"The class warriors at the Tax Policy Center add all of this up and issue the headline-grabbing opinion that it is "mathematically impossible" to reduce tax rates and close loopholes in a way that raises the same amount of revenue. They do so in part by arbitrarily claiming that Mr. Romney would never eliminate certain loopholes (such as for municipal bond interest), though the candidate has said no such thing. Based on this invention, they then postulate that Mr. Romney would have to do something he also doesn't propose—which is raise taxes on those earning less than $200,000. In the Obama campaign's political alchemy, this becomes "Romney Hood" and a $2,000 tax increase. The Tax Policy Center also ignores the history of tax cutting. Every major marginal rate income tax cut of the last 50 years—1964, 1981, 1986 and 2003—was followed by an unexpectedly large increase in tax revenues, a surge in taxes paid by the rich, and a more progressive tax code—i.e., the share of taxes paid by the richest 1% rose.
Actually they're wrong. With the introduction of the Bush Tax Cuts we experienced a DECREASE in tax revenue as a percentage of GDP than the thirty-year average preceding it. So while maybe in the past that was the case, it is not the case today. It's one of the reasons our deficit grew and why we want to raise the taxes again. Legit question: Can someone tell me what's wrong with keeping the tax rates as they are right now but closing the loopholes for the wealthy? ummm...thats the whole point they are making. Tax cuts lead to growth of GDP. So you can see an increase in " Tax Revenues" as THEY said even if you see a decrease in " tax revenue as a percentage of GDP" as YOU said. Both of which are good things BTW. American GDP has been growing steadily for the better part of the last 50 years. It has grown while taxes were raised and reduced. Saying tax cuts cause GDP growth is dishonest. Correlation does not equal causation. By your logic raising taxes also increases GDP which in turn further increases tax revenue. And for those who talk about how great the Ryan plan is, the critical part of his plan that would allow reduce deficits are totally unspecified. He claims that tax loophole magic sauce will allow his plan to be fiscally responsible, yet every independent analysis of the plan says that its impossible. Likewise in his plan, the tax cuts in it are disproportionately given to those with higher income. Ryan needs to tell the American people what loopholes he will close to get his plan revenue neutral, otherwise this is a plan that massively increases deficits. No, your post is so ignorant that it shows a reckless disregard for facts. Taxes have only increased three times since World War II, twice to pay for wars, so no, our growth has been sustained largely by tax cuts. The question you should be asking is will cutting tax rates boost growth like Republicans say it will? Most people are skeptical and I think they're right. The Laffer curve argument doesn't carry water like it used to and I don't think taxes are a huge impediment to jump-starting the economy. But it's wrong to say taxes have no effect at all.
Well a large portion of government taxes were suppose to go away the government was never suppose to have the income it has. See that jump in about 1910-1920 that is income tax which was suppose to go away after WW1 ended. The government is a waste machine raising taxes do nothing but waste more money. If we give the taxes back to anyone rich, poor, middle class. It will be spent better than the government will. I would prefer the government be swamped so much in debt that they are forced to balance the budget than give them one more penny of any Americans money.
The government as it stands is killing its own people by no fault of there own all the money they have ever asked for has been given and still they throw it away. Social Security is gone right now my children's children's SS taxes have already been spent and counting every second with a program that was designed well enough to MAKE money. The question should not be is cutting taxes ok the question should be how does the government get away with highway robbery with every bill it passes.
|
On August 12 2012 09:34 coverpunch wrote:Show nested quote +On August 12 2012 09:18 BuddhaMonk wrote:On August 12 2012 07:25 Savio wrote:On August 12 2012 07:10 Souma wrote:On August 12 2012 06:56 Savio wrote:On August 12 2012 06:32 acker wrote:On August 12 2012 06:29 Savio wrote:
So basically they said, "Romney hasn't given specifics on his plan so we assumed of his 2 promises (cut taxes and be revenue neutral) that he would break the tax cut promise and then we thought up a reasonable way he might do it, then we announced that his plan raises taxes on the middle class" They did not think up a reasonable way to do it. They took the most extreme way possible to maintain progressivity and the plan was still regressive. They even assumed growth effects per ROMNEY'S economics advisor. Romney hasn't given specifics on which loopholes that he's close. Therefore, the TPC chose the loopholes that would make his plan the most progressive. Any other loophole combination, given his pledges, makes the analysis that much more regressive. Why is this so hard to understand? If Romney wants the TPC to choose different assumptions, he just has to break pledges for deficit neutrality or tax preference for savings and investment. Per http://online.wsj.com/article/SB10000872396390443792604577574910276629448.html:"The class warriors at the Tax Policy Center add all of this up and issue the headline-grabbing opinion that it is "mathematically impossible" to reduce tax rates and close loopholes in a way that raises the same amount of revenue. They do so in part by arbitrarily claiming that Mr. Romney would never eliminate certain loopholes (such as for municipal bond interest), though the candidate has said no such thing. Based on this invention, they then postulate that Mr. Romney would have to do something he also doesn't propose—which is raise taxes on those earning less than $200,000. In the Obama campaign's political alchemy, this becomes "Romney Hood" and a $2,000 tax increase. The Tax Policy Center also ignores the history of tax cutting. Every major marginal rate income tax cut of the last 50 years—1964, 1981, 1986 and 2003—was followed by an unexpectedly large increase in tax revenues, a surge in taxes paid by the rich, and a more progressive tax code—i.e., the share of taxes paid by the richest 1% rose.
Actually they're wrong. With the introduction of the Bush Tax Cuts we experienced a DECREASE in tax revenue as a percentage of GDP than the thirty-year average preceding it. So while maybe in the past that was the case, it is not the case today. It's one of the reasons our deficit grew and why we want to raise the taxes again. Legit question: Can someone tell me what's wrong with keeping the tax rates as they are right now but closing the loopholes for the wealthy? ummm...thats the whole point they are making. Tax cuts lead to growth of GDP. So you can see an increase in " Tax Revenues" as THEY said even if you see a decrease in " tax revenue as a percentage of GDP" as YOU said. Both of which are good things BTW. American GDP has been growing steadily for the better part of the last 50 years. It has grown while taxes were raised and reduced. Saying tax cuts cause GDP growth is dishonest. Correlation does not equal causation. By your logic raising taxes also increases GDP which in turn further increases tax revenue. And for those who talk about how great the Ryan plan is, the critical part of his plan that would allow reduce deficits are totally unspecified. He claims that tax loophole magic sauce will allow his plan to be fiscally responsible, yet every independent analysis of the plan says that its impossible. Likewise in his plan, the tax cuts in it are disproportionately given to those with higher income. Ryan needs to tell the American people what loopholes he will close to get his plan revenue neutral, otherwise this is a plan that massively increases deficits. No, your post is so ignorant that it shows a reckless disregard for facts. Taxes have only increased three times since World War II, twice to pay for wars, so no, our growth has been sustained largely by tax cuts. The question you should be asking is will cutting tax rates boost growth like Republicans say it will? Most people are skeptical and I think they're right. The Laffer curve argument doesn't carry water like it used to and I don't think taxes are a huge impediment to jump-starting the economy. But it's wrong to say taxes have no effect at all.
The point I was making is the same others have made here is that tax cuts or raises are not the primary factor GDP growth. Your statement that "growth has been sustained largely by tax cuts" is false. You concede that during the times when taxes were raised GDP has continued to grow - how does that square with your assertion that it's tax cuts that grows GDP?
|
On August 12 2012 09:31 acker wrote:Looking this up for yourself really isn't that difficult. There's been a ridiculous number of studies done on just how elastic the Laffer curve is over the past thirty years or so. The mid range for peer-reviewed studies is around 70% for the top marginal tax rate.
Can you cite a source? I'd love to see the context. Are we leaving corp rates at 35% so we can use it as a shelter? Where are our brackets? Does a significant amount of income actually touch the 70% rate?
And the Laffer curve just maximizes revenue, correct? So while we may be maximizing government revenue at 70% (assuming that's correct) we aren't maximizing economic output...
Edit: I did find a paper titled "Estimating the Laffer curve and policy implications." (Yu Hsing) Which pegged an optimal rate between 32.67% and 35.21% (federal only) but that deals with average, not marginal rates.
|
On August 12 2012 10:08 BuddhaMonk wrote:Show nested quote +On August 12 2012 09:34 coverpunch wrote:On August 12 2012 09:18 BuddhaMonk wrote:On August 12 2012 07:25 Savio wrote:On August 12 2012 07:10 Souma wrote:On August 12 2012 06:56 Savio wrote:On August 12 2012 06:32 acker wrote:On August 12 2012 06:29 Savio wrote:
So basically they said, "Romney hasn't given specifics on his plan so we assumed of his 2 promises (cut taxes and be revenue neutral) that he would break the tax cut promise and then we thought up a reasonable way he might do it, then we announced that his plan raises taxes on the middle class" They did not think up a reasonable way to do it. They took the most extreme way possible to maintain progressivity and the plan was still regressive. They even assumed growth effects per ROMNEY'S economics advisor. Romney hasn't given specifics on which loopholes that he's close. Therefore, the TPC chose the loopholes that would make his plan the most progressive. Any other loophole combination, given his pledges, makes the analysis that much more regressive. Why is this so hard to understand? If Romney wants the TPC to choose different assumptions, he just has to break pledges for deficit neutrality or tax preference for savings and investment. Per http://online.wsj.com/article/SB10000872396390443792604577574910276629448.html:"The class warriors at the Tax Policy Center add all of this up and issue the headline-grabbing opinion that it is "mathematically impossible" to reduce tax rates and close loopholes in a way that raises the same amount of revenue. They do so in part by arbitrarily claiming that Mr. Romney would never eliminate certain loopholes (such as for municipal bond interest), though the candidate has said no such thing. Based on this invention, they then postulate that Mr. Romney would have to do something he also doesn't propose—which is raise taxes on those earning less than $200,000. In the Obama campaign's political alchemy, this becomes "Romney Hood" and a $2,000 tax increase. The Tax Policy Center also ignores the history of tax cutting. Every major marginal rate income tax cut of the last 50 years—1964, 1981, 1986 and 2003—was followed by an unexpectedly large increase in tax revenues, a surge in taxes paid by the rich, and a more progressive tax code—i.e., the share of taxes paid by the richest 1% rose.
Actually they're wrong. With the introduction of the Bush Tax Cuts we experienced a DECREASE in tax revenue as a percentage of GDP than the thirty-year average preceding it. So while maybe in the past that was the case, it is not the case today. It's one of the reasons our deficit grew and why we want to raise the taxes again. Legit question: Can someone tell me what's wrong with keeping the tax rates as they are right now but closing the loopholes for the wealthy? ummm...thats the whole point they are making. Tax cuts lead to growth of GDP. So you can see an increase in " Tax Revenues" as THEY said even if you see a decrease in " tax revenue as a percentage of GDP" as YOU said. Both of which are good things BTW. American GDP has been growing steadily for the better part of the last 50 years. It has grown while taxes were raised and reduced. Saying tax cuts cause GDP growth is dishonest. Correlation does not equal causation. By your logic raising taxes also increases GDP which in turn further increases tax revenue. And for those who talk about how great the Ryan plan is, the critical part of his plan that would allow reduce deficits are totally unspecified. He claims that tax loophole magic sauce will allow his plan to be fiscally responsible, yet every independent analysis of the plan says that its impossible. Likewise in his plan, the tax cuts in it are disproportionately given to those with higher income. Ryan needs to tell the American people what loopholes he will close to get his plan revenue neutral, otherwise this is a plan that massively increases deficits. No, your post is so ignorant that it shows a reckless disregard for facts. Taxes have only increased three times since World War II, twice to pay for wars, so no, our growth has been sustained largely by tax cuts. The question you should be asking is will cutting tax rates boost growth like Republicans say it will? Most people are skeptical and I think they're right. The Laffer curve argument doesn't carry water like it used to and I don't think taxes are a huge impediment to jump-starting the economy. But it's wrong to say taxes have no effect at all. The point I was making is the same others have made here is that tax cuts or raises are not the primary factor GDP growth. Your statement that "growth has been sustained largely by tax cuts" is false. You concede that during the times when taxes were raised GDP has continued to grow - how does that square with your assertion that it's tax cuts that grows GDP?
Well let's look at the data:
![[image loading]](http://research.stlouisfed.org/fred2/data/GDPC1_Max_630_378.png)
You should notice that the growth of the curve gets higher as taxes are cut. So taxes have SOME effect on the economy. Is it the sole driver of growth? Of course not, and it's a straw man to say anyone has asserted that. The most important thing is that there's common sense to this - if taxes are reduced, then people have more disposable income to invest or consume, which is how the economy grows. People can get more disposable income in other ways but reducing taxes is the something the government can control. It can't miracle new technology or anoint successful companies.
What I'm objecting to in your argument is the implication in your statement that the economy has grown at a constant 7% rate since World War II regardless of the tax rate. That's simply not true.
I'll reiterate - if your argument is that cutting taxes doesn't fix our economic problems and won't have a big enough effect to offset the needs for tax revenue, then we can have that discussion. I'm skeptical of Romney's plan myself since people have shown ever since Bush's $600 stimulus to not necessarily use it on investments or consumptions but to pay their debts, so we have a kind of problem that tax cuts won't fix (the revenue neutrality and predictions of growth are way too optimistic). But you're trying to say that taxes won't make any difference at all and that's categorically untrue.
|
On August 12 2012 10:27 coverpunch wrote:
The most important thing is that there's common sense to this - if taxes are reduced, then people have more disposable income to invest or consume, which is how the economy grows. People can get more disposable income in other ways but reducing taxes is the something the government can control. It can't miracle new technology or anoint successful companies.
You call it common sense, but it only creates a very short term effect while hurting the future. Taxing stuff doesn't just make the money disappear. Instead, it goes to the government who then spends that money on other things. The money that the government spends puts a lot of people to work, both directly (government employees) and indirectly (doctors/nurses/receptionists/administrators who help medicare/medicaid people or entire corporate structures of private companies who have contracts with the government). Then those people all get paid and they have money to spend. Part of that money goes back into the government system as taxes and part of it goes into other businesses and people and the cycle continues.
GDP is really a measure of how well the money is flowing. If the money is constantly flowing around in and out of people's pockets, then the GDP will be high. Taxes legally force outflows. If the tax money is spent even remotely wisely by the government, it creates personal inflows. And yeah, I know our government doesn't exactly spend wisely (handing out money all over the world, paying debt to foreign debtors), but still most of the tax revenue goes back into US citizens pockets in one way or another.
So what happens as you reduce taxes? Initially, people have extra money to spend as you noted, and the extra money gets spent in a more efficient way and everything seems good (GDP goes up). However, this process has reduced the forced outflows other than basic living expenses. For someone making millions of dollars in a year, basic living expenses account for only a small fraction of his expeditures. That means that the millionaire (I use the word "millionaire", but it could actually be anyone whose income exceeds his expenses) can sit on his money. We call this "savings". While we generally think savings are a good thing because it protects a person's future, it does hurt GDP (money isn't being spent). The only way the millionaire will put that money back into the economy is if he sees an opportunity to make a return on his money (investment). Hopefully, for the sake of the economy, he makes a bad investment and loses his excess money and it goes back into the system. However, many investments are good ones, and they serve the purpose of pooling even more money in a single person's hands and out of the economic flow.
In a lower tax situation, the money slowly gets concentrated into fewer peoples hands. And while those people might want to invest that money, there's no opportunity for investment because the market's ability to buy is slowly crippled since the money is more and more concentrated. That equals one dead economy (hello recession!).
If you want a healthy economy, I'm quite convinced that you need to brutalize the very rich with taxes and keep moderate taxes for the middle class. Then just hand that money out to the poor to cover basic living expenses... you can do it through subsidized/free housing, food stamps, and free health insurance rather than actually handing out money. Or you can do it through massive public works/infrastructure projects to create jobs and consumers which increases demand and opens up opportunities for investment and allows the skilled rich to continue to be very rich despite the taxes while the less skilled rich fall back into the middle class. When you have all of this, you have massive flows of money (massive GDP) and you also have a high tax rate to take advantage of that high GDP. In turn, the government might actually be able to balance a budget or even ::gasp:: get a surplus (which should be the goal while we have such a massive deficit).
Unfortunately, this will likely never happen. Since the tax hikes would only be as permanent as whoever is in office, there'd always be uncertainty. If someone did come in and raise taxes, the rich would sit on their money and complain about how it destroyed the economy (while they destroy the economy by sitting on their money). They'd then put all the blame on the president and support the opponent's cadidacy who promises to lower taxes. Since they only have to wait it out for 4 years, this long term plan would never get the traction it needed. Instead, we keep getting candidates promising quick fixes (yaya tax cuts for the rich) which continues the cycle of long term economic problems for the US.
|
On August 12 2012 03:28 TheFrankOne wrote:Show nested quote +On August 12 2012 03:04 Savio wrote:On August 12 2012 02:17 koreasilver wrote:On August 12 2012 02:12 Rassy wrote:How is mit romney not an auto vote for every working american? The guy achieved so much in his corporate career. Obama never achieved annything in that area, he is a politician. America now has the change to finally vote for a candidate with real talents to manage and turn around difficult situations , but instead they all seem to dislike him because he worked so hard and efficient that he is rich. Isnt becomming rich the american dream? How can you not vote for romney?  Because you'll pay more taxes under Romney? Already been debunked. http://online.wsj.com/article/SB10000872396390443792604577574910276629448.html They ignore Romney's promise to maintain all current incentives for Savings/Investment which is what makes it impossible to do without favoring the wealthy. They also treat deficit neutral-tax cuts as equivalent to deficit-financed tax cuts for stimulative effect. Tax cuts that are revenue neutral will probably not have a significant impact on growth because its mostly shuffling money around. (Yes there is a net gain but it's small, and takes time as equilibrium adjusts) They also ignore how unreasonable the claim of "instant 4% GDP growth" is, which really throws a wrench in all the numbers. There's also a lot wrong with their historical claims and analogies but we will ignore that.
Read the link. It could add $100 trillion a year and still rightly not be part of Obamacare.
|
Cayman Islands24199 Posts
a hidden factor is how the investment class (people controlling capital decisionmaking in an economy) now is politically conscious about their own ability to change the tax rate by allocating capital to places with less of a tax burden, and even try to change the rate politically.
|
On August 12 2012 10:27 coverpunch wrote:Show nested quote +On August 12 2012 10:08 BuddhaMonk wrote:On August 12 2012 09:34 coverpunch wrote:On August 12 2012 09:18 BuddhaMonk wrote:On August 12 2012 07:25 Savio wrote:On August 12 2012 07:10 Souma wrote:On August 12 2012 06:56 Savio wrote:On August 12 2012 06:32 acker wrote:On August 12 2012 06:29 Savio wrote:
So basically they said, "Romney hasn't given specifics on his plan so we assumed of his 2 promises (cut taxes and be revenue neutral) that he would break the tax cut promise and then we thought up a reasonable way he might do it, then we announced that his plan raises taxes on the middle class" They did not think up a reasonable way to do it. They took the most extreme way possible to maintain progressivity and the plan was still regressive. They even assumed growth effects per ROMNEY'S economics advisor. Romney hasn't given specifics on which loopholes that he's close. Therefore, the TPC chose the loopholes that would make his plan the most progressive. Any other loophole combination, given his pledges, makes the analysis that much more regressive. Why is this so hard to understand? If Romney wants the TPC to choose different assumptions, he just has to break pledges for deficit neutrality or tax preference for savings and investment. Per http://online.wsj.com/article/SB10000872396390443792604577574910276629448.html:"The class warriors at the Tax Policy Center add all of this up and issue the headline-grabbing opinion that it is "mathematically impossible" to reduce tax rates and close loopholes in a way that raises the same amount of revenue. They do so in part by arbitrarily claiming that Mr. Romney would never eliminate certain loopholes (such as for municipal bond interest), though the candidate has said no such thing. Based on this invention, they then postulate that Mr. Romney would have to do something he also doesn't propose—which is raise taxes on those earning less than $200,000. In the Obama campaign's political alchemy, this becomes "Romney Hood" and a $2,000 tax increase. The Tax Policy Center also ignores the history of tax cutting. Every major marginal rate income tax cut of the last 50 years—1964, 1981, 1986 and 2003—was followed by an unexpectedly large increase in tax revenues, a surge in taxes paid by the rich, and a more progressive tax code—i.e., the share of taxes paid by the richest 1% rose.
Actually they're wrong. With the introduction of the Bush Tax Cuts we experienced a DECREASE in tax revenue as a percentage of GDP than the thirty-year average preceding it. So while maybe in the past that was the case, it is not the case today. It's one of the reasons our deficit grew and why we want to raise the taxes again. Legit question: Can someone tell me what's wrong with keeping the tax rates as they are right now but closing the loopholes for the wealthy? ummm...thats the whole point they are making. Tax cuts lead to growth of GDP. So you can see an increase in " Tax Revenues" as THEY said even if you see a decrease in " tax revenue as a percentage of GDP" as YOU said. Both of which are good things BTW. American GDP has been growing steadily for the better part of the last 50 years. It has grown while taxes were raised and reduced. Saying tax cuts cause GDP growth is dishonest. Correlation does not equal causation. By your logic raising taxes also increases GDP which in turn further increases tax revenue. And for those who talk about how great the Ryan plan is, the critical part of his plan that would allow reduce deficits are totally unspecified. He claims that tax loophole magic sauce will allow his plan to be fiscally responsible, yet every independent analysis of the plan says that its impossible. Likewise in his plan, the tax cuts in it are disproportionately given to those with higher income. Ryan needs to tell the American people what loopholes he will close to get his plan revenue neutral, otherwise this is a plan that massively increases deficits. No, your post is so ignorant that it shows a reckless disregard for facts. Taxes have only increased three times since World War II, twice to pay for wars, so no, our growth has been sustained largely by tax cuts. The question you should be asking is will cutting tax rates boost growth like Republicans say it will? Most people are skeptical and I think they're right. The Laffer curve argument doesn't carry water like it used to and I don't think taxes are a huge impediment to jump-starting the economy. But it's wrong to say taxes have no effect at all. The point I was making is the same others have made here is that tax cuts or raises are not the primary factor GDP growth. Your statement that "growth has been sustained largely by tax cuts" is false. You concede that during the times when taxes were raised GDP has continued to grow - how does that square with your assertion that it's tax cuts that grows GDP? Well let's look at the data: You should notice that the growth of the curve gets higher as taxes are cut. So taxes have SOME effect on the economy. Is it the sole driver of growth? Of course not, and it's a straw man to say anyone has asserted that. The most important thing is that there's common sense to this - if taxes are reduced, then people have more disposable income to invest or consume, which is how the economy grows. People can get more disposable income in other ways but reducing taxes is the something the government can control. It can't miracle new technology or anoint successful companies. What I'm objecting to in your argument is the implication in your statement that the economy has grown at a constant 7% rate since World War II regardless of the tax rate. That's simply not true. I'll reiterate - if your argument is that cutting taxes doesn't fix our economic problems and won't have a big enough effect to offset the needs for tax revenue, then we can have that discussion. I'm skeptical of Romney's plan myself since people have shown ever since Bush's $600 stimulus to not necessarily use it on investments or consumptions but to pay their debts, so we have a kind of problem that tax cuts won't fix (the revenue neutrality and predictions of growth are way too optimistic). But you're trying to say that taxes won't make any difference at all and that's categorically untrue.
The growth of GDP, i.e. the percentage change, doesn't get higher. The graph of GDP is always exponential for whatever country you look at, because it's driven by population growth, inflation, and increasing productivity, which tends to increase exponentially. Nothing to do with tax rate.
Here's GDP growth vs top marginal tax rates.
![[image loading]](http://filipspagnoli.files.wordpress.com/2010/02/top-marginal-tax-rates-and-gdp-growth.jpg)
|
On August 12 2012 10:15 JonnyBNoHo wrote:Show nested quote +On August 12 2012 09:31 acker wrote:On August 12 2012 09:26 JonnyBNoHo wrote:
70% seems absurdly high. Looking this up for yourself really isn't that difficult. There's been a ridiculous number of studies done on just how elastic the Laffer curve is over the past thirty years or so. The mid range for peer-reviewed studies is around 70% for the top marginal tax rate. Can you cite a source? I'd love to see the context. Are we leaving corp rates at 35% so we can use it as a shelter? Where are our brackets? Does a significant amount of income actually touch the 70% rate? And the Laffer curve just maximizes revenue, correct? So while we may be maximizing government revenue at 70% (assuming that's correct) we aren't maximizing economic output... Edit: I did find a paper titled "Estimating the Laffer curve and policy implications." (Yu Hsing) Which pegged an optimal rate between 32.67% and 35.21% (federal only) but that deals with average, not marginal rates.
This paper says that the midrange of studies puts it at 70: http://www.dictionaryofeconomics.com/article?id=pde2008_L000015
Here's Ezra Klein asking a bunch of economists and pundits: http://voices.washingtonpost.com/ezra-klein/2010/08/where_does_the_laffer_curve_be.html
This study puts it around 50%-60% (see figures): http://www.nber.org/papers/w15343.pdf?new_window=1
|
Show nested quote +On August 12 2012 11:53 RenSC2 wrote:On August 12 2012 10:27 coverpunch wrote:
The most important thing is that there's common sense to this - if taxes are reduced, then people have more disposable income to invest or consume, which is how the economy grows. People can get more disposable income in other ways but reducing taxes is the something the government can control. It can't miracle new technology or anoint successful companies.
You call it common sense, but it only creates a very short term effect while hurting the future. Taxing stuff doesn't just make the money disappear. Instead, it goes to the government who then spends that money on other things. The money that the government spends puts a lot of people to work, both directly (government employees) and indirectly (doctors/nurses/receptionists/administrators who help medicare/medicaid people or entire corporate structures of private companies who have contracts with the government). Then those people all get paid and they have money to spend. Part of that money goes back into the government system as taxes and part of it goes into other businesses and people and the cycle continues. GDP is really a measure of how well the money is flowing. If the money is constantly flowing around in and out of people's pockets, then the GDP will be high. Taxes legally force outflows. If the tax money is spent even remotely wisely by the government, it creates personal inflows. And yeah, I know our government doesn't exactly spend wisely (handing out money all over the world, paying debt to foreign debtors), but still most of the tax revenue goes back into US citizens pockets in one way or another. So what happens as you reduce taxes? Initially, people have extra money to spend as you noted, and the extra money gets spent in a more efficient way and everything seems good (GDP goes up). However, this process has reduced the forced outflows other than basic living expenses. For someone making millions of dollars in a year, basic living expenses account for only a small fraction of his expeditures. That means that the millionaire (I use the word "millionaire", but it could actually be anyone whose income exceeds his expenses) can sit on his money. We call this "savings". While we generally think savings are a good thing because it protects a person's future, it does hurt GDP (money isn't being spent). The only way the millionaire will put that money back into the economy is if he sees an opportunity to make a return on his money (investment). Hopefully, for the sake of the economy, he makes a bad investment and loses his excess money and it goes back into the system. However, many investments are good ones, and they serve the purpose of pooling even more money in a single person's hands and out of the economic flow. In a lower tax situation, the money slowly gets concentrated into fewer peoples hands. And while those people might want to invest that money, there's no opportunity for investment because the market's ability to buy is slowly crippled since the money is more and more concentrated. That equals one dead economy (hello recession!). If you want a healthy economy, I'm quite convinced that you need to brutalize the very rich with taxes and keep moderate taxes for the middle class. Then just hand that money out to the poor to cover basic living expenses... you can do it through subsidized/free housing, food stamps, and free health insurance rather than actually handing out money. Or you can do it through massive public works/infrastructure projects to create jobs and consumers which increases demand and opens up opportunities for investment and allows the skilled rich to continue to be very rich despite the taxes while the less skilled rich fall back into the middle class. When you have all of this, you have massive flows of money (massive GDP) and you also have a high tax rate to take advantage of that high GDP. In turn, the government might actually be able to balance a budget or even ::gasp:: get a surplus (which should be the goal while we have such a massive deficit). Unfortunately, this will likely never happen. Since the tax hikes would only be as permanent as whoever is in office, there'd always be uncertainty. If someone did come in and raise taxes, the rich would sit on their money and complain about how it destroyed the economy (while they destroy the economy by sitting on their money). They'd then put all the blame on the president and support the opponent's cadidacy who promises to lower taxes. Since they only have to wait it out for 4 years, this long term plan would never get the traction it needed. Instead, we keep getting candidates promising quick fixes (yaya tax cuts for the rich) which continues the cycle of long term economic problems for the US.
Bad investments do not help the economy. You may get a short term boost from the spending but you're just shooting yourself in the foot in the end.
Same with government spending. You aren't doing yourself any favors in the long run by blowing money on whatever - it needs to be spent on things people really need / want.
|
On August 12 2012 13:05 paralleluniverse wrote:Show nested quote +On August 12 2012 10:15 JonnyBNoHo wrote:On August 12 2012 09:31 acker wrote:On August 12 2012 09:26 JonnyBNoHo wrote:
70% seems absurdly high. Looking this up for yourself really isn't that difficult. There's been a ridiculous number of studies done on just how elastic the Laffer curve is over the past thirty years or so. The mid range for peer-reviewed studies is around 70% for the top marginal tax rate. Can you cite a source? I'd love to see the context. Are we leaving corp rates at 35% so we can use it as a shelter? Where are our brackets? Does a significant amount of income actually touch the 70% rate? And the Laffer curve just maximizes revenue, correct? So while we may be maximizing government revenue at 70% (assuming that's correct) we aren't maximizing economic output... Edit: I did find a paper titled "Estimating the Laffer curve and policy implications." (Yu Hsing) Which pegged an optimal rate between 32.67% and 35.21% (federal only) but that deals with average, not marginal rates. This paper says that the midrange of studies puts it at 70: http://www.dictionaryofeconomics.com/article?id=pde2008_L000015Here's Ezra Klein asking a bunch of economists and pundits: http://voices.washingtonpost.com/ezra-klein/2010/08/where_does_the_laffer_curve_be.htmlThis study puts it around 50%-60% (see figures): http://www.nber.org/papers/w15343.pdf?new_window=1
Thanks, the second link was really helpful. Appreciate it.
|
god economics is so boring
|
On August 12 2012 12:48 oneofthem wrote:
a hidden factor is how the investment class (people controlling capital decisionmaking in an economy) now is politically conscious about their own ability to change the tax rate by allocating capital to places with less of a tax burden, and even try to change the rate politically.
Yes, neoliberalization is entirely about the emergence of the class consciousness of finance capital.
you get a global situation in which states compete to create a "favorable business climate" to attract investment at the expense of the well-being of their people.
|
On August 12 2012 11:53 RenSC2 wrote:Show nested quote +On August 12 2012 10:27 coverpunch wrote:
The most important thing is that there's common sense to this - if taxes are reduced, then people have more disposable income to invest or consume, which is how the economy grows. People can get more disposable income in other ways but reducing taxes is the something the government can control. It can't miracle new technology or anoint successful companies.
You call it common sense, but it only creates a very short term effect while hurting the future. Taxing stuff doesn't just make the money disappear. Instead, it goes to the government who then spends that money on other things. The money that the government spends puts a lot of people to work, both directly (government employees) and indirectly (doctors/nurses/receptionists/administrators who help medicare/medicaid people or entire corporate structures of private companies who have contracts with the government). Then those people all get paid and they have money to spend. Part of that money goes back into the government system as taxes and part of it goes into other businesses and people and the cycle continues. GDP is really a measure of how well the money is flowing. If the money is constantly flowing around in and out of people's pockets, then the GDP will be high. Taxes legally force outflows. If the tax money is spent even remotely wisely by the government, it creates personal inflows. And yeah, I know our government doesn't exactly spend wisely (handing out money all over the world, paying debt to foreign debtors), but still most of the tax revenue goes back into US citizens pockets in one way or another. So what happens as you reduce taxes? Initially, people have extra money to spend as you noted, and the extra money gets spent in a more efficient way and everything seems good (GDP goes up). However, this process has reduced the forced outflows other than basic living expenses. For someone making millions of dollars in a year, basic living expenses account for only a small fraction of his expeditures. That means that the millionaire (I use the word "millionaire", but it could actually be anyone whose income exceeds his expenses) can sit on his money. We call this "savings". While we generally think savings are a good thing because it protects a person's future, it does hurt GDP (money isn't being spent). The only way the millionaire will put that money back into the economy is if he sees an opportunity to make a return on his money (investment). Hopefully, for the sake of the economy, he makes a bad investment and loses his excess money and it goes back into the system. However, many investments are good ones, and they serve the purpose of pooling even more money in a single person's hands and out of the economic flow. In a lower tax situation, the money slowly gets concentrated into fewer peoples hands. And while those people might want to invest that money, there's no opportunity for investment because the market's ability to buy is slowly crippled since the money is more and more concentrated. That equals one dead economy (hello recession!). If you want a healthy economy, I'm quite convinced that you need to brutalize the very rich with taxes and keep moderate taxes for the middle class. Then just hand that money out to the poor to cover basic living expenses... you can do it through subsidized/free housing, food stamps, and free health insurance rather than actually handing out money. Or you can do it through massive public works/infrastructure projects to create jobs and consumers which increases demand and opens up opportunities for investment and allows the skilled rich to continue to be very rich despite the taxes while the less skilled rich fall back into the middle class. When you have all of this, you have massive flows of money (massive GDP) and you also have a high tax rate to take advantage of that high GDP. In turn, the government might actually be able to balance a budget or even ::gasp:: get a surplus (which should be the goal while we have such a massive deficit). Unfortunately, this will likely never happen. Since the tax hikes would only be as permanent as whoever is in office, there'd always be uncertainty. If someone did come in and raise taxes, the rich would sit on their money and complain about how it destroyed the economy (while they destroy the economy by sitting on their money). They'd then put all the blame on the president and support the opponent's cadidacy who promises to lower taxes. Since they only have to wait it out for 4 years, this long term plan would never get the traction it needed. Instead, we keep getting candidates promising quick fixes (yaya tax cuts for the rich) which continues the cycle of long term economic problems for the US.
So you basically admitted the goernment spends money badly but you are willing to raise taxes so long as the numbers look better? And you also blame people for sitting in their money when it is not fiscally wise what kind of backwards logic is this? You ask that people invest more, pay more, and accept more risk for the sake of the rest of us for no reason. There is literally no reason. If the US budget was balanced and taxes were low money would move much easier.
|
Just a note that many people seem to be forgetting... lowering the tax rate while closing loopholes is likely to cause a net increase in total tax revenue. The corporate tax rate may be 35%, but that's sure as hell not what those large multi-nationals are paying. There are some that pay as low as 10% due to loopholes and work-arounds.
|
|
|
|
|
|
EPT
