gbear Posted June 9, 2004 Share Posted June 9, 2004 ON this board, it seems to be held as truth that lowering the taxes will increase the government revenue. http://www.extremeskins.com/forums/showthread.php?s=&threadid=50575&perpage=15&display=&highlight=laffer%20curve&pagenumber=3 I challenged this assumption before as false. IN the 80's there was a huge change (for the lower) in the cost of energy which caused our economy to grow fast enough that our tax cuts did not adversely effect the total revenues taken in by taxes. However, with our most recent tax cuts, our revenue has declined. I was told they just hadn't taken effect yet and to wait for the third quarter numbers (calendar not fiscal)of 2003. Well, they are out now. Guess what, our revenue dropped again. www.irs.gov/pub/irs-soi/03tcl8fy/xls Our total revenue for the third calendar quarter is down 3% from the same quarter the year before. I only thought of this because of the folowing quote in an online chat today: -------------------- Howard, Pa.: Is it true that revenue for the government went up, because of the tax cuts, but spending in the same period outpaced the income? Steven Pearlstein: Its complicated because you have to factor out other things that may have been causing revenues to go up and down. People have tried and, because this is such a contentious issue, the debate on that still rages. But I think most objective analysis does not support the widely-held conservative view that cutting taxes actually increases revenues. Sorry. http://www.washingtonpost.com/wp-dyn/articles/A25254-2004Jun8.html ------------------------ edit irs link not working: go here and click on the 7th link down for a breakdown by quarter http://www.irs.gov/taxstats/article/0,,id=97168,00.html Link to comment Share on other sites More sharing options...
Riggo-toni Posted June 9, 2004 Share Posted June 9, 2004 Okay,so how do you explain the fact that federal revenues increased from $475B in at the beginning of the 80s to $1trillion at the end? Furthermore, we are talking about a curve here, which means that I don't follow the thoughts of someone like Kemp, for example, who automatically assumes all tax cuts bring higher revenues. On the other hand, every single time the capital gains tax has been cut, revenues from capital gains have increased significantly. Remember the latter half of Clinton's presidency when revenues kept outpacing projections. The surplus revenues were entirely from capital gains taxes AFTER congress forced a sharp capital gains tax down his throat. Finally, I have no objections to revenues dropping. I'd love to starve our bloated excessive gov't back to reasonable size. But that's a whole 'nother debate.... Link to comment Share on other sites More sharing options...
gbear Posted June 9, 2004 Author Share Posted June 9, 2004 Riggo-toni The revenues grew because our economy grew. The point the believers in the lafer curve try to make is that cutting taxes will cause such a growth in businesses that the government will end up taking in more money. As evidence, they usually point to the 80's and Reagan (as you did). What this ignores are that there were some other hugely beneficial things to our economy. The largest factor I've heard referenced was oil prices. When the price of a major input to our economy dropped, profits sored, and our economy took off. Tax cuts no doubt helped...but the point is that tax cuts alone would not have generated more revenue than what was lost by the lower rate. It is a curve, and it's an intuitive. The problem comes in assessing where we are on the curve. It seems dogma to those on the right that we are on the side where we are overtaxed if the goal is increasing revenue. My point is that does not seem to be true. As for Capital Gains tax being cut, I asked that question when the Bush tax cut was passed. Why cut the taxes we did rather than the capital gains tax? The answer I got on this board was "we don't care as long as he is cutting taxes." The Capital Gains tax is an interesting one to think abut cutting. I'm not sure I have a reason why this helps so much except that it stiumlates investment at a higher marginal rate than other tax cuts. It's definitely one to research. I haven't looked at incidences of capital gains tax cuts and hikes vs. revenue or what other factors have occured at the same time(yet). As for starving the beast...I think it may end up being a political necesity at some point, but there is a part of me that cringes at fiscal irresponcibility. It's like saying we can get rid of parts of the government by spending SOOOO MUCH ofour childrens' money that they won't possibly be able to keep having these programs. Of course, ask yourself which is likely to get cut first in any state: funds for repairing roads or social security. My problem with this approach is the collateral damage to programs I view as necessary. Link to comment Share on other sites More sharing options...
Kilmer17 Posted June 9, 2004 Share Posted June 9, 2004 and our economy grew because?????????????? Link to comment Share on other sites More sharing options...
gbear Posted June 9, 2004 Author Share Posted June 9, 2004 Kilmer, the point is not whether the economy grew. I'm questioing the assumption made frequently on here that reducing taxes causes the economy to grow enough that a lower percentage of he new economy will be greater than the higher percentage of the old economy. That's the Lafer curve conclussion reached so often on theis board. Are you looking for a complete list of why the economy grew along with weights for importance? If only it were so easy to quantify... Link to comment Share on other sites More sharing options...
Kilmer17 Posted June 9, 2004 Share Posted June 9, 2004 that a lower percentage of he new economy will be greater than the higher percentage of the old economy sorry man, you lost me. Is this logic wrong though? We lowered taxes as a result, our economy grew. as a result, our revenue taken in from those loewr taxes was more than what it was under the old tax structure. Link to comment Share on other sites More sharing options...
luckydevil Posted June 9, 2004 Share Posted June 9, 2004 When talking about the 80's and Reagan Supply-siders tend to rely on data that consider only income tax rates, which were indeed cut, and leave aside all other taxes, which were increased. The notion that cutting taxes will increase government revenue is tenuous at best. Link to comment Share on other sites More sharing options...
gbear Posted June 9, 2004 Author Share Posted June 9, 2004 Kilmer, that is my point. You're statement is wrong. A smaller percentage of the new bigger economy < larger percentage of old economy. That's the point of my link to the irs web page. Our tax revenue decreased after the Bush tax cuts. When I pointed this out the first time, I was told just wait for the third calendar quarter (then our economy was doing well). Well, I waited. We still took in 3% less revenue. Link to comment Share on other sites More sharing options...
Kilmer17 Posted June 9, 2004 Share Posted June 9, 2004 You're speaking of percentages. Im talking about actual dollars. So yes, it is a smaller percentage of the new economy. But it's more money. Isnt that the important thing? If I have 100 dollars. And I made 30 of that on x. that's 30 percent. Next year I have 200 dollars. Of which I made 50 on x. Thats more money, but a lower percentage. I'd still rather have the second scenario. Link to comment Share on other sites More sharing options...
gbear Posted June 9, 2004 Author Share Posted June 9, 2004 Kilmer, The link is in dollars not percentages. We took in less $ in the third quarter of 2003 than the third quarter of 2002. Link to comment Share on other sites More sharing options...
chomerics Posted June 9, 2004 Share Posted June 9, 2004 Originally posted by luckydevil When talking about the 80's and Reagan Supply-siders tend to rely on data that consider only income tax rates, which were indeed cut, and leave aside all other taxes, which were increased. The notion that cutting taxes will increase government revenue is tenuous at best. Bingo, we've got bingo. Supply side economics doesn't work. In fact, it increases the debt at such a substantial rate, the only rational fall back plan is to raise taxes. It hurts the consumer in the end. A big misnomer which Lucky brought up is that Reagan cut income tax, but he RAISED other taxes, which needed to be done to balance out the mad spending spree we were on in the 80's. We've been in a supply side system two times in the past 20 years and in each time, we INCREASED government spending so dramatically, it masked the fact that supply side economics doesn't work. Link to comment Share on other sites More sharing options...
Thiebear Posted June 9, 2004 Share Posted June 9, 2004 *Whatever* Watch t.v. and unlike Saddam the people lining the streets volunteered to sit in 90 degree heat.... Reagan was the voice of america. We were not going to take it anymore, we were not going to appease. Put Kerry's face on Mondale and you couldnt tell the difference in speach. Ron gave the military a serious increase in pay: I was in for 3 years during that timeframe and really appreciate it. If your running into a recession you lower taxes and promote spending..... History has proven this... Link to comment Share on other sites More sharing options...
chomerics Posted June 9, 2004 Share Posted June 9, 2004 Originally posted by Kilmer17 We lowered taxes as a result, our economy grew. true as a result, our revenue taken in from those loewr taxes was more than what it was under the old tax structure. False. It was less, hence gbears post. We're not talking %'s here, we're talking about dollars. That's a neat little trick economists use to hide deficiencies in their theories. They switch from %'s to dollars at whim depending on which side of the fence they want to argue from. Supply side theory states that you cut taxes no matter what. The corresponding increase in revenue will be so large, because the economy will grow so much, that you will have more tax revenues (based on dollars, not %'s) than what you started with. It is a false theory and it has been proven false twice in the past 20 years. It's a tax leverage tool used by ultra wealthy to switch the tax burden from the rich to the poor. Link to comment Share on other sites More sharing options...
Ancalagon the Black Posted June 9, 2004 Share Posted June 9, 2004 Thiebear, not sure of the relevance of your post (except that last sentence, which seems to attempt to draw a tenuous link). Supply siders are increasingly like Marxists--clinging to their theories despite the available evidence. At best, they rely on post hoc, ergo propter hoc arguments. Few serious economists doubt that the Laffer curve represents reality, but the vast majority agree that we are to the left side of the curve, not the right. Link to comment Share on other sites More sharing options...
chomerics Posted June 9, 2004 Share Posted June 9, 2004 Originally posted by Thiebear *Whatever* Watch t.v. and unlike Saddam the people lining the streets volunteered to sit in 90 degree heat.... Reagan was the voice of america. We were not going to take it anymore, we were not going to appease. Put Kerry's face on Mondale and you couldnt tell the difference in speach. Ron gave the military a serious increase in pay: I was in for 3 years during that timeframe and really appreciate it. What does this have to do with Supply Side Economics???? Off on a tangent again. If your running into a recession you lower taxes and promote spending..... History has proven this... Absolutely correct, the first good thing I've heard you say in a week. Bush's timing couldn't have been more perfect, and his reasoning couldn't have been more wrong. Do you remember the graphs he used last election? How he was going to pay for the tax cut by the increase in government revenues based on 8 years of record growth?!? I was completely against the tax cut when he pushed for it during the campaign because it was backwards theory he was using. It wouldn't work. "Fortunately" for us, we started the recession right as his tax cuts got pushed through Congress. It helped keep us off the bottom, along with Greenspan keeping interest rates at an all time low. It's amazing how much money get's dumped back into the economy when the interest rate drops just 1/2 of a point. Greenspan is a great economist and he knows this. He helped us out of the recession just as much as Bush's tax cuts. For the first time, in my life time, everything workled as it should, it makes the world a better place Link to comment Share on other sites More sharing options...
Thiebear Posted June 9, 2004 Share Posted June 9, 2004 Chomerics: Go back and look at the election campaign: He predicted the recession and said so DURING the Campaign so.... we started the recession right as his tax cuts got pushed through Congress. It helped keep us off the bottom He was smarter than you give him credit. AND THAT IS PROVABLE! Link to comment Share on other sites More sharing options...
Ancalagon the Black Posted June 9, 2004 Share Posted June 9, 2004 Thiebear, Why are you turning this into a Bush thread? It's about the Laffer curve specifically and supply-side economics generally. Tax cuts are a fiscal stimulus during a recession. That's not the issue here. Chomerics is actually agreeing with you on that point. Link to comment Share on other sites More sharing options...
chomerics Posted June 9, 2004 Share Posted June 9, 2004 Originally posted by Thiebear Chomerics: Go back and look at the election campaign: He predicted the recession and said so DURING the Campaign so.... WHAT?!?!? He said we were going into a recession?!? Where the hell were you on the moon??? He DID NOT say we were going into a recession, he in fact said the opposite!!! This is why I didn't vote for him in the last election. I didn't want a supply side economy!!! He was smarter than you give him credit. AND THAT IS PROVABLE! NO, he was VERY LUCKY!!! Bear, this whole post is utter BS. I remember his graphs showing the increase in revenue and how we would continue on a record pace for the next ten years. This was his justification for the tax cut to begin with, it was wrong then and he did NOT say we were going to go into a recession so he would cut taxes. This is a FACT, not some revisionist history you like to present. Link to comment Share on other sites More sharing options...
chomerics Posted June 9, 2004 Share Posted June 9, 2004 Originally posted by Ancalagon the Black Thiebear, Why are you turning this into a Bush thread? It's about the Laffer curve specifically and supply-side economics generally. Tax cuts are a fiscal stimulus during a recession. That's not the issue here. Chomerics is actually agreeing with you on that point. AtB, I couldn't let that post slide, I had to jump on him for it . . . but yes, I myself was suprised, I did agree with Bear. Link to comment Share on other sites More sharing options...
Thiebear Posted June 9, 2004 Share Posted June 9, 2004 ATB look back one page: I have to reply to a direct comment, its at the bottom of the page and very direct... I am just replying to another thread that tries to taint the image of a Great Man that ran this country on the day he is being brought to D.C. and *THE people* are going to see him. Its the same as if Clinton in 32 years from now was having the same thing...... Debate all you want. But not now. Behave and suck it up. I take it personally because he was a hero of mine while I was in the military that you bring up about Kerry all of the time...... Give me a week and like always I'll give you, your word... I normally learn from it no matter if I agree or not... Leave this one alone for now.... please. please. Link to comment Share on other sites More sharing options...
@DCGoldPants Posted June 9, 2004 Share Posted June 9, 2004 alright folks, lets drop the Kerry/Bush stuff and get back to the topic please. Link to comment Share on other sites More sharing options...
Ancalagon the Black Posted June 10, 2004 Share Posted June 10, 2004 Thiebear, I understand your admiration for Reagan, and I share in that to a degree. But he is not the subject of this thread. This is purely an economic thread (or was for the first several posts), and let's keep it that way rather than personalizing it by involving figures that strike emotional chords within us. Your first post (not the one that responded to chomerics' post) evinces your belief that this thread is devoted to attacking Reagan. It isn't. It's not about Reagan. If anything, it's about Arthur Laffer, Marty Feldstein, and the economists who developed supply-side theory (and the people who subscribe to that theory today). If we can keep the issue on the purely economic level, I think that we'll have avoided the emotionally charged debates that I believe you also wish to eschew. Link to comment Share on other sites More sharing options...
Thiebear Posted June 10, 2004 Share Posted June 10, 2004 Link to comment Share on other sites More sharing options...
chomerics Posted June 10, 2004 Share Posted June 10, 2004 Originally posted by Rock-Bufford alright folks, lets drop the Kerry/Bush stuff and get back to the topic please. I agree, Supply Side sucks a$$. ATB look back one page: I have to reply to a direct comment, its at the bottom of the page and very direct... I am just replying to another thread that tries to taint the image of a Great Man that ran this country on the day he is being brought to D.C. and *THE people* are going to see him. Bear I hope your not referring to me. If you are I don't know what you're talking about. Its the same as if Clinton in 32 years from now was having the same thing...... Debate all you want. But not now. Behave and suck it up. I take it personally because he was a hero of mine while I was in the military that you bring up about Kerry all of the time...... Give me a week and like always I'll give you, your word... I normally learn from it no matter if I agree or not... Leave this one alone for now.... please. please. Bear, I don't think there are many people who didn't respect Reagan. I understand your feelings for the man and your beliefs, and I personally didn't want to turn it into a Bush/Kerry debate. I want to get some real supply siders here so I can hash it out with them and put all this Supply Side BS to rest finally. Art and Cskin, this means you Link to comment Share on other sites More sharing options...
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