“What about JFK? He was a Democrat President who Cut Taxes for the top 1%”
Yes, to 77%. Last time I checked the idea was that if the Bush cuts expire the tax for the top income bracket would be 39.6%… that’s around half of what JFK cut it to.
@ Church - hopefully, no - because the GDP will rise. Then again, tax hikes increased revenue in the 90s, and didn’t break the recovery, so it might not be such a bad idea now either. Heck, TEFRA - point for point, one of the largest tax hikes the US has seen - didn’t exactly break the economy either, and there were probably a lot of pols predicting doom and gloom over it.
Mind you , percents or no tax cuts do seem to end up costing the treasury a good deal, at least according to http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf .
I don’t have the time to flesh this out fully, but a few observations:
Our middle class is shrinking. I suspect that the larger numbers of folks showing a decrease in the tax burden at lower incomes results from the greater gap between rich and poor. More Americans slipping into the low end. Loss of manufacturing jobs and all that. This is bad for the nation’s long term financial health.
To show that tax revenues are a more or less constant percentage of GDP does not suprise me. This concept was explored in poly sci classes in college and in income and estate classes in law school. There are probably a number of reasons for this.
Revenues in dollars rise and fall with the GDP, but that correlation does not account for tax rate changes.
It is possible that those with access to high end tax advice are able to adjust to changing tax rates. There is some theory that the 18-20% range is “acceptable”, and that income that could generate a greater GDP percentage of taxes is diverted or deferred into non-taxable income or assets once this tolerance is exceeded.
Adjustments and tax strategies are not necessarly implemented over night. A change in the rate may create a window for a higher percentage revenues until the ways to tamp it down are in place. Examining tables of actual revenues may show some lag in the expected result of rate changes.
It is also possible that a small increase in the tax rate could create more “real” revenue by not exceeding tolerability. Note the slight, but sustained uptick in the percentage of tax revenue to GDP during the Clinton years from 1993 on.
Church, I’ve read that post - I believe you have posted it before the Benson post too, haven’t you? - but I do not agree with all the points in it. That probably doesn’t surprise you much, I think. Here are my thoughts on the article.
Point one: the rich pay a large share of income taxes.
Well, the current US code is progressive, so yes, that is to be expected. This wasn’t just decided to be mean to the rich, by the way - their standard of life would likely be much less impacted by shouldering a large part of the total tax burden.
Is that premiset true? I’d say yes. Keep in mind that the difference in average income have grown significantly since the 80s. That means that under those rates - including the slightly higher ones in the 90s - the rich have been growing richer faster than everyone else. Therefore, the tax rate has not only not harmed them compared to everyone else, but has allowed them to outpace the middle and lower class. Even with a progressive tax code, the rich have been getting richer than the rest. Good for them - but a sign that, if anything, taxes on them are relatively low (or those on the middle/lower class relatively high). The rich, if history is any indication, will still be richer than the average guy - whether 5 or 6 times.
Point two - tax rates and tax revenues.
Indeed, the relationship between tax rate and revenues might not be completely straightforward. However, the author - and, I believe, you - makes one important omission. He talks about tax rate and mentions the rate for the highest bracket. Yet what has been happening to the tax rate for the lower earners? They pay taxes too. If their taxes rise - either due to the tax rate for their brackets rising or inflation/higher income pushing them into another bracket - this can also impact the overall revenue. Tax revenue as percentage of the GDP might not fluctuate all that much, but the tax code also impacts who pays how much.
Point three: Spending is currently causing the deficit
I look at the table, and it seems to suggest something different. While the anti-crisis programs of the 2009 budget (anything from the bailout to the stimulus to whatever smaller initiatives there are at present) have increased spending - although I think it would probably only be a temporary measure and will draw down in the following years, the graph also shows the significant impact of the falling revenue. Increased spending is responsible for the deficit, sure - but so is reduced revenue.
Point four: Tax revenue in the US has tripled since the 60s.
That should not surprise anyone, really - when the total amount of money in the economy (let’s say, for simplicity’s sake, it is represented by the GDP) grows, so does the money collected as taxes. According to one site I could locate some historical data from (http://www.measuringworth.com/usgdp/?q=hmit/gdp/), the real GDP (adjusted for inflation) has more than tripled. Oh, and I love how the graph text stated that the 2001 and 2003 cuts were (among other things)responsible for increased revenue… while the revenues grew much faster in the 1990s, and in fact the late 2000s struggled to reach the 2000 levels. If anything, the tax increases from the mid-80s and 90s do seem to have a visible effect on revenue - and did not have much of a negative effect on growth. Overall, I do agree that raising taxes too much will have a negative effect, but the question is - how much is too much? As the last two-three decades can teach us, the US has recovered out of major economic crises with higher maximum tax rate than what it has now.
SuperGriz over 13 years ago
Paradigm shift, anyone?
Charles Brobst Premium Member over 13 years ago
I’d be content with Reagan era tax cuts. Either the super rich feed us or we eat them. Now choose!
Motivemagus over 13 years ago
Let’s go up to the 75% rate under JFK, then.
4uk4ata over 13 years ago
“What about JFK? He was a Democrat President who Cut Taxes for the top 1%”
Yes, to 77%. Last time I checked the idea was that if the Bush cuts expire the tax for the top income bracket would be 39.6%… that’s around half of what JFK cut it to.
@ Church - hopefully, no - because the GDP will rise. Then again, tax hikes increased revenue in the 90s, and didn’t break the recovery, so it might not be such a bad idea now either. Heck, TEFRA - point for point, one of the largest tax hikes the US has seen - didn’t exactly break the economy either, and there were probably a lot of pols predicting doom and gloom over it.
Mind you , percents or no tax cuts do seem to end up costing the treasury a good deal, at least according to http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf .
charliekane over 13 years ago
OK Lib, I’ll bite.
I don’t have the time to flesh this out fully, but a few observations:
Our middle class is shrinking. I suspect that the larger numbers of folks showing a decrease in the tax burden at lower incomes results from the greater gap between rich and poor. More Americans slipping into the low end. Loss of manufacturing jobs and all that. This is bad for the nation’s long term financial health.
To show that tax revenues are a more or less constant percentage of GDP does not suprise me. This concept was explored in poly sci classes in college and in income and estate classes in law school. There are probably a number of reasons for this.
Revenues in dollars rise and fall with the GDP, but that correlation does not account for tax rate changes.
It is possible that those with access to high end tax advice are able to adjust to changing tax rates. There is some theory that the 18-20% range is “acceptable”, and that income that could generate a greater GDP percentage of taxes is diverted or deferred into non-taxable income or assets once this tolerance is exceeded.
Adjustments and tax strategies are not necessarly implemented over night. A change in the rate may create a window for a higher percentage revenues until the ways to tamp it down are in place. Examining tables of actual revenues may show some lag in the expected result of rate changes.
http://www.usgovernmentrevenue.com/numbers#usgs302
It is also possible that a small increase in the tax rate could create more “real” revenue by not exceeding tolerability. Note the slight, but sustained uptick in the percentage of tax revenue to GDP during the Clinton years from 1993 on.
http://www.heritage.org/BudgetChartbook/income-tax-receipts#
The CBO forecst lower deficits if the Bush tax cuts are allowed to expire.
http://www.politifact.com/truth-o-meter/statements/2010/jan/29/barack-obama/obama-inherited-deficits-bush-administration/
I think it is worth allowing the rate to revert to 39.6% for the highest incomes in an effort to reduce deficits in the short term.
Of course, that does not address the long term problem of outspending revenues.
With regard to the high end tax rates of 50 years ago, I think your point is well taken.
SuperGriz over 13 years ago
“churchillwasright said, 1 day ago
4UK4: Perhaps you missed my post on Lisa Benson a few days ago. I’d like to re-post it for you. Needless to say it received absolutely no rebuttals.”
Churchie, that’s because nobody cares.
charliekane seems to have confused you with Lib1. I’d be insulted if I were you.
charliekane over 13 years ago
Sorry, church.
That’s what I get for doing six things at once!
Probably not your cup of tea but where I’m commin’ from:
http://www.theatlantic.com/politics/archive/2009/09/closing-the-book-on-the-bush-legacy/26402/
(No “Tea Party” reference intended)
4uk4ata over 13 years ago
Church, I’ve read that post - I believe you have posted it before the Benson post too, haven’t you? - but I do not agree with all the points in it. That probably doesn’t surprise you much, I think. Here are my thoughts on the article.
Point one: the rich pay a large share of income taxes.
Well, the current US code is progressive, so yes, that is to be expected. This wasn’t just decided to be mean to the rich, by the way - their standard of life would likely be much less impacted by shouldering a large part of the total tax burden.
Is that premiset true? I’d say yes. Keep in mind that the difference in average income have grown significantly since the 80s. That means that under those rates - including the slightly higher ones in the 90s - the rich have been growing richer faster than everyone else. Therefore, the tax rate has not only not harmed them compared to everyone else, but has allowed them to outpace the middle and lower class. Even with a progressive tax code, the rich have been getting richer than the rest. Good for them - but a sign that, if anything, taxes on them are relatively low (or those on the middle/lower class relatively high). The rich, if history is any indication, will still be richer than the average guy - whether 5 or 6 times.
Point two - tax rates and tax revenues.
Indeed, the relationship between tax rate and revenues might not be completely straightforward. However, the author - and, I believe, you - makes one important omission. He talks about tax rate and mentions the rate for the highest bracket. Yet what has been happening to the tax rate for the lower earners? They pay taxes too. If their taxes rise - either due to the tax rate for their brackets rising or inflation/higher income pushing them into another bracket - this can also impact the overall revenue. Tax revenue as percentage of the GDP might not fluctuate all that much, but the tax code also impacts who pays how much.
Point three: Spending is currently causing the deficit
I look at the table, and it seems to suggest something different. While the anti-crisis programs of the 2009 budget (anything from the bailout to the stimulus to whatever smaller initiatives there are at present) have increased spending - although I think it would probably only be a temporary measure and will draw down in the following years, the graph also shows the significant impact of the falling revenue. Increased spending is responsible for the deficit, sure - but so is reduced revenue.
Point four: Tax revenue in the US has tripled since the 60s.
That should not surprise anyone, really - when the total amount of money in the economy (let’s say, for simplicity’s sake, it is represented by the GDP) grows, so does the money collected as taxes. According to one site I could locate some historical data from (http://www.measuringworth.com/usgdp/?q=hmit/gdp/), the real GDP (adjusted for inflation) has more than tripled. Oh, and I love how the graph text stated that the 2001 and 2003 cuts were (among other things)responsible for increased revenue… while the revenues grew much faster in the 1990s, and in fact the late 2000s struggled to reach the 2000 levels. If anything, the tax increases from the mid-80s and 90s do seem to have a visible effect on revenue - and did not have much of a negative effect on growth. Overall, I do agree that raising taxes too much will have a negative effect, but the question is - how much is too much? As the last two-three decades can teach us, the US has recovered out of major economic crises with higher maximum tax rate than what it has now.