Dow drops below 7K but why not spend an add'l $410 Billion?

[jerryzflies 0]

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Now, the larger question is - are tax cuts a good idea when they come during a time of massive deficits, no matter who is in office?
_________________________________________________
Times were worse in the early 80s and it was Reagan's tax cuts that brought about the greatest recovery since WW2.
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm

Reagan's cuts had to be reversed by GHW Bush because the deficit ballooned so much.

And, of course, following your logic GW Bush's tax cuts "brought about" the current economic shitstorm.

If you can't fix it with a hammer, the problem's electrical.

[Gawain 0]

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Now, the larger question is - are tax cuts a good idea when they come during a time of massive deficits, no matter who is in office?
_________________________________________________
Times were worse in the early 80s and it was Reagan's tax cuts that brought about the greatest recovery since WW2.
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm

Reagan's cuts had to be reversed by GHW Bush because the deficit ballooned so much.

Incorrect. It was a purely political miscalculation based on the then-democrat controlled Congress threatening to shut down the government if President GHW Bush vetoed the bill. He caved to their demands, tried to go on TV to apologize, and the rest of the country said, "Read my lips".

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And, of course, following your logic GW Bush's tax cuts "brought about" the current economic shitstorm.

Every time taxes have been cut, revenues invariably go up. President Clinton was able to balance the budget not because of his income tax increases (marginal either way), but because he cut the capital gains tax from 35-40% to 25%. Investments soared and the resulting tax revenue did as well.

So I try and I scream and I beg and I sigh
Just to prove I'm alive, and it's alright
'Cause tonight there's a way I'll make light of my treacherous life
Make light!

[DanG 1]

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Every time taxes have been cut, revenues invariably go up. President Clinton was able to balance the budget not because of his income tax increases (marginal either way), but because he cut the capital gains tax from 35-40% to 25%. Investments soared and the resulting tax revenue did as well.

Do you have a source for this? Not being snarky, I'd really like to see evidence of this. I know that the Laffer curve predicts a rise in tax revenue with a reduction in tax rate, I've just never seen anyone show that it works in the real world.

Thanks.

- Dan G

[Capt.Slog 0]

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"How does anyone justify some of these earmarks: $1.7 million for pig odor research in Iowa;

Funny he'd wonder about that, for a guy who spent a lot of time in Iowa. Maybe his memory is getting bad.

[Capt.Slog 0]

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Every time taxes have been cut, revenues invariably go up. President Clinton was able to balance the budget not because of his income tax increases (marginal either way), but because he cut the capital gains tax from 35-40% to 25%. Investments soared and the resulting tax revenue did as well.

Do you have a source for this? Not being snarky, I'd really like to see evidence of this. I know that the Laffer curve predicts a rise in tax revenue with a reduction in tax rate, I've just never seen anyone show that it works in the real world.

Thanks.

The Laffer curve doesn't show where maximum revenue occurs relative to current tax rates. No-one actually knows.

After correcting for inflation and population growth, revenues did NOT go up with the last round of tax cuts.

"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that."
Alan D. Viard, a former Bush White House economist later at the conservative American Enterprise Institute, 10/23/06

“It is very rare and very few economists believe that you can cut taxes and you will get the same amount of revenues.”
– Federal Reserve Chairman
Alan Greenspan
Testimony before House Budget Committee
September 8, 2004

“I don’t think that, as a general rule, that tax cuts pay for themselves.”
–Federal Reserve Chairman Ben Bernanke
Testimony before Joint Economic Committee
April 27, 2006

“As a general matter, most tax cuts do not pay for themselves.”
; OMB Director Nominee Rob Portman
Written Response to Questions Submitted
Prior to Senate Budget Committee
Nomination Hearing
May 10, 2006

“[There is] no credible evidence that tax
revenues ... rise in the face of lower tax rates.”
“[An economist claiming tax cuts pay for
themselves is like a] snake oil salesman who
is trying to sell a miracle cure.”
– Chairman of President Bush's Council of
Economic Advisers N. Gregory Mankiw
Introductory college economics textbook,
“Principles of Economics,” 1998

[jerryzflies 0]

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Every time taxes have been cut, revenues invariably go up. President Clinton was able to balance the budget not because of his income tax increases (marginal either way), but because he cut the capital gains tax from 35-40% to 25%. Investments soared and the resulting tax revenue did as well.

Do you have a source for this? Not being snarky, I'd really like to see evidence of this. I know that the Laffer curve predicts a rise in tax revenue with a reduction in tax rate, I've just never seen anyone show that it works in the real world.

Thanks.

"The 'Laffer Curve' idea that tax cuts would actually increase revenues turned out to deserve the ridicule with which sober economists had greeted it in 1981." James Tobin, Nobel Laureate (Economics).

See also

www.cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf

for a 2005 Congressional Budget Office analysis which concludes that tax cuts do not pay for themselves.

If you can't fix it with a hammer, the problem's electrical.

[Gawain 0]

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Every time taxes have been cut, revenues invariably go up. President Clinton was able to balance the budget not because of his income tax increases (marginal either way), but because he cut the capital gains tax from 35-40% to 25%. Investments soared and the resulting tax revenue did as well.

Do you have a source for this? Not being snarky, I'd really like to see evidence of this. I know that the Laffer curve predicts a rise in tax revenue with a reduction in tax rate, I've just never seen anyone show that it works in the real world.

Thanks.

There is definitely legitimate debate about my statement. So, snarkiness isn't all bad. Here's one report from the NY Times:
http://www.nytimes.com/2005/07/13/business/13deficit.html?_r=1

This is a partisan example, but shows a practical example of the Laffer Curve:
http://fwcon.wordpress.com/2008/03/01/why-some-tax-cuts-increase-revenue/

From the Joint Economic Committee:
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/fig-1.gif
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm

So I try and I scream and I beg and I sigh
Just to prove I'm alive, and it's alright
'Cause tonight there's a way I'll make light of my treacherous life
Make light!

[billvon 3,070]

>I know that the Laffer curve predicts a rise in tax revenue with a reduction in tax rate . . .

Not quite. The Laffer Curve says that there is an ideal point of taxation where the government generates the most revenue. Such a point certainly exists. Take the extremes. A 1% tax rate will result in very little government income, because economies can only generate so much activity, and 1% is a small percentage of that. A 99% tax rate will also generate little income because it will cripple an economy to the extent that there will be very little economic activity (employment, sales) to tax.

So there's an ideal point at which the government gets the most money out of a given economy.

This, of course, does not say anything about things like using that money for economic stimulus or whether cutting program X will improve the economy. It's just a measure of the 'burden' taxes place on an economy and where the maximums are.

The important questions are:

1) Where is that point? Are we above it or below it? As a rule, conservatives think we are above it. But as we've seen large economic growth during times of high taxation that's not very defensible.

2) Should the goal of fiscal (specifically taxation) policy be to generate as much revenue as possible?

3) How does a changing economy change the Laffer Curve? It would seem intuitive that during a depression the curve would peak at a lower level, but I have not seen any objective evidence of that.

[DanG 1]

Thanks. I appreciate that you admit the possibility of debate. It's refreshing given the increasingly partisan nature of this forum.

The NYT article makes it clear that the jump in revenue in 2005 may have had a number of other causes, not the least of which was the bubble that we all know burst last year. Even Bernanke is quoted as saying that there is not enough evidence to vindicate supply side theories.

I didn't watch the video. I understand the theory, I'm looking for real world proof.

The link from the JEC shows that the tax burden in total dollars is being shifted toward the top 5%. They then use this fact to jump to the conclusion that under lower tax rates people will philanthropically expose more of their wealth to tax liability, and that total tax revenue will rise. They also make the argument about increased investment and productivity, but fail to back it up with facts. What they fail to take into account it the fact that wealth gaps are rising faster than any other time in history. Even if the tax rates stayed exactly the same, as the rich got richer and the poor poorer, a chart such as the one they show would result.

The Laffer curve and supply-side economics are still unproven theories. The only thing proven about them is that reducing taxes on the wealthy gets them to support your party.

- Dan G