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.
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.