Higher Taxes, Lower Revenue

[2centsworth]

Consumer spending is not happening because of a couple of reasons.

People have less access to credit.
People are saving more and borrowing less anyways, somewhat forced into doing that by the fact that credit is tighter (and rightly so, IMO).

You are right, spenders have less money to spend.
Hence, I favor tax cuts for spenders i.e. Middle
Class.

We don't need to cut taxes when we have massive deficits. We borrow too much already, and that has to be scaled back.

spending stimulates growth.
We need a middle class tax cut. Also. FICA is a huge middle class tax.

[RandomGuy]

The much-vaunted Republican pledge not to raise any taxes is crumbling. Today 34 Senate Republicans voted to end the special tax breaks for ethanol.



According to no-tax-increase purists like Grover Norquist, this is tantamount to a tax increase.

The truth is, Republicans are divided between those who want to bring down the budget deficit and those who want to shrink government. Ending a special tax subsidy helps reduce the deficit but doesn’t necessarily shrink government. That’s why Norquist and his followers have insisted any such tax increase – including even the closing of tax loopholes – be directly linked to a corresponding tax cut.

In order to save face on today’s vote, Norquist says renegade Republicans will still be considered to have adhered to the pledge if they vote in favor of an amendment offered by Senator Jim DeMint to eliminate the estate tax. Talk about grasping at straws. DeMint’s amendment isn’t even up for a vote.

In short, the no-tax pledge is evaporating in the fresh air of reality.

What are anti-tax Republicans to do now?

For one, continue to distort the arguments of those who believe corporations and the rich should pay more taxes.

For example, in the lead op-ed piece in today’s Wall Street Journal, Cato Ins ute fellow Alan Reynolds claims a higher marginal tax on the super rich will bring in less revenue.

Reynolds uses my tax proposal from last February as his red herring. “Memo to Robert Reich,” he declares, “The income tax brought in less revenue when the highest rate was 70 percent to 91 percent [between 1950 and 1980] than it did when the highest rate was 28 percent.”

Reynolds bends the facts to make his case, picking and choosing among years.

In truth, the most important variable explaining the rise and fall of tax revenues as percent of GDP has been the business cycle, not the effective tax rate. In periods when the economy is growing briskly, tax revenues have risen as a percent of GDP, regardless of effective rates; in downturns, revenues have fallen.

Reynolds also distorts my proposal, implying that the bracket on which I call for a 70 percent tax is the same as in today’s tax code. Wrong. My proposed 70 percent rate would apply only to incomes over $15 million.

$15 million, Alan!

Under my proposal, incomes between $5 million and $15 million would be subjected to a 60 percent rate, and incomes between $500,000 and $5 million to a 50 percent rate.

Importantly, my proposal calls for a substantial rate reduction for families with incomes under $100,000. (Conveniently, Reynolds fails to mention this.)

Reynolds entirely ignores my central argument, which is that rather than depress economic growth, higher taxes on the rich correlate with higher growth. During almost three decades spanning 1951 to 1980, when the top rate was between 70 percent and 91 percent, average annual growth in the American economy was 3.7 percent.

Between 1983 and the start of the Great Recession, when the top rate dropped to between 35 percent and 39 percent, average growth was 3 percent.

How to explain this? Easy.

Since the early 1980s, a larger and larger share of total income has gone to the top (the richest 1 percent of Americans got 10 percent of total income in 1980, and get over 20 percent now). That’s left the vast middle class with insufficient purchasing power to boost the economy – without going deep into debt.

Lower tax rates on the rich — including lower capital gains rates — have exacerbated this regressive trend.

Finally, having misread the facts, distorted my proposal, and ignored my argument, Reynolds fails to rebut my conclusion that raising middle class purchasing power by lowering their tax rates while raising the rates at the top will help spur growth, to the benefit of all. Top earners will do better with a smaller share of a more rapidly- growing economy a larger share of a slower-growing one.

If I were a cynic, I’d say the Republican right is showing signs of desperation.

http://www.csmonitor.com/Business/Ro...the-rich-crowd

[RandomGuy]

You are right, spenders have less money to spend.
Hence, I favor tax cuts for spenders i.e. Middle
Class.

spending stimulates growth.
We need a middle class tax cut. Also. FICA is a huge middle class tax.

I don't mind as long as the revenues are made up somewhere else, i.e. higher marginal tax rates for the wealthy. More than made up for, in this case, because we need to bring overall debt to something a bit more sustainable.

[ElNono]

The problem is most manufacturing is elsewhere. Until we return t6o having a better manufacturing base, we will remain a weakened economy.

It's not just manufacturing. It's also services, which other countries do too now for a fraction of the cost. At the end of the day, people in other countries have much lower cost of living AND much lower standards of living.

It's either them eventually raising to the top, or us racing to the bottom...

[Wild Cobra]

This again about increasing the tax rates for the top.

Who does it affect? Chapter S businesses, movie stars, sports starts, etc. It's an income tax. The rich in general don't have an income tax that falls under taxable income. They have capital gains and dividends.

[Wild Cobra]

It's not just manufacturing. It's also services, which other countries do too now for a fraction of the cost. At the end of the day, people in other countries have much lower cost of living AND much lower standards of living.

It's either them eventually raising to the top, or us racing to the bottom...

Yep, we want more service jobs like McDonald's, Bellhops, Waitresses etc.

Why is it an us against them? Wealth is not a zero sum game. Take them down, we go down too.

Ever get a regular middle class wage job from another middle class worker? If we tax the out of the rich and siphon their money, who will higher us?

[ChumpDumper]

This again about increasing the tax rates for the top.

Who does it affect? Chapter S businesses, movie stars, sports starts, etc. It's an income tax. The rich in general don't have an income tax that falls under taxable income. They have capital gains and dividends.

1) Then what's the problem with raising them?

2) Which blog did you lift that from?

[ElNono]

Yep, we want more service jobs like McDonald's, Bellhops, Waitresses etc.

Why is it an us against them? Wealth is not a zero sum game. Take them down, we go down too.

No. I'm talking about specially qualified services, such as computer programming, IT services, and the like. Something the US economy thrived on back in the 90's.

And it's us against them because while wealth isn't a zero sum game, it also isn't this infinite pool that can just be twisted at will at any given time. Which is the reason everyone isn't wealthy, and there's actual compe ion for wealth.
Our current cost of living and living standards are simply not compe ive with other countries for a good chunk of jobs.

[boutons_deux]

"Wealth is not a zero sum game"

If you actually looked at the distribution of wealth and growthing inequality since St Ronnie got into office, wealth is pretty much a zero sum game, with the top taking nearly all the gains in wealth the past 30 years, while the non-top stagnated.

[RandomGuy]

This again about increasing the tax rates for the top.

Who does it affect? Chapter S businesses, movie stars, sports starts, etc. It's an income tax. The rich in general don't have an income tax that falls under taxable income. They have capital gains and dividends.

That made my eyes bleed.

Please don't ever prepare anybody elses taxes.

capital gains = income on this planet, and especially in the US tax code.

[Agloco]

From the Comments:

"You can't pay the Surgeon and the Janitor the same or your begging for disruption in the quality of healthcare services."

Rebuttal:

But you *can* encourage the surgeon to work just 10 or 20 hours per week so their income is just $80,000 per year instead of $200,000, so they have both the time and a financial reason to spend 20 seconds evaluating a non-branded alternative product that costs half as much as the one advertised on TV.

[ElNono]

This again about increasing the tax rates for the top.

Who does it affect? Chapter S businesses, movie stars, sports starts, etc. It's an income tax. The rich in general don't have an income tax that falls under taxable income. They have capital gains and dividends.

Then capital gains and dividends should be taxed appropriately.

Like i said earlier though, it's hard to tax these people when their accountants include people that wrote the tax code themselves. The real solution to this problem has little to do with percentages, IMO, but actually closing the loopholes that allow these people avoid taxes or shelter money out of country for sales in the US.

[Wild Cobra]

That made my eyes bleed.

Please don't ever prepare anybody elses taxes.

capital gains = income on this planet, and especially in the US tax code.

Is capital gains taxed at a marginal rate?

[RandomGuy]

Is capital gains taxed at a marginal rate?

Capital gains are not taxed at marginal rates.

They are also considered "income".

"all income no matter how derived" is taxable. The only thing that differs is how it is taxed, and at what rates.

I think that a dollar from capital gains makes you just as well off as a dollar of earned income, and should be taxed accordingly.

Preferential treatment is given to capital gains over earned income at the moment, and that distortion favors the rich who get most of their income that way.

(edit)
Some data:

Gross income in United States tax law is receipts and gains from all sources less cost of goods sold. Gross income is the starting point for determining Federal and state income tax of individuals, corporations, estates and trusts, whether resident or nonresident.[1]

"Except as otherwise provided" by law, Gross income means "all income from whatever source," and is not limited to cash received. However, tax regulations expand on this and say "all income from whatever source derived, unless excluded by law." The amount of income recognized is generally the value received or which the taxpayer has a right to receive. Certain types of income are specifically excluded from gross income.

The time at which gross income becomes taxable is determined under Federal tax rules, which differ in some cases from financial accounting rules.

http://en.wikipedia.org/wiki/Gross_income

(although my knowledge of the subject comes from the graduate level income tax class I took, it jibes with the wiki entry)

Defining "income" is a *very* important thing when it comes to taxes.

[2centsworth]

I don't mind as long as the revenues are made up somewhere else, i.e. higher marginal tax rates for the wealthy. More than made up for, in this case, because we need to bring overall debt to something a bit more sustainable.

I would argue that the tax cuts would lead
To an increase in long-term tax revenues, so the reason
You give for increasing income taxes on the
High income earner would be invalid. Nevertheless,
Since the wealthy tend to hoard, there should be
An incentive for them to invest. Now an improving
Economy would provide incentive to invest in jobs, but
I also believe slightly higher income tax rates
For the wealthy would help the municipal bond market.

My 2cents

[RandomGuy]

I would argue that the tax cuts would lead
To an increase in long-term tax revenues, so the reason
You give for increasing income taxes on the
High income earner would be invalid. Nevertheless,
Since the wealthy tend to hoard, there should be
An incentive for them to invest. Now an improving
Economy would provide incentive to invest in jobs, but
I also believe slightly higher income tax rates
For the wealthy would help the municipal bond market.

My 2cents

You can argue that, I guess. In the same manner you can argue that leaving apples on your front step will make unicorns happy.

Answer this question then:

How much does one dollar in tax cuts produce in extra revenue in 5 years? 10?

Quantify it.

The economists who attempted to guage the Bush tax cuts came up with the answer "almost nothing, and the amount that we had to borrow to finance this almost nothing outweighed the benefits in the long run".

Sorry. That bit of rhetoric is "feel good" with little to no data to support it.

There is some fairly solid support for taxing the rich, who generally pay 15%-20% or less on their earnings, and using that for big bad en lements for the poor who actually go out and spend it.

The money the poor spend tend to lead to a lot more jobs anyways, as that money circulates through the economy.

People like to think that the government, its employees, and so forth, aren't actually part of the economy. They are, and the money the government spends gets into the economy and ends up in businesses and the like already.

Lastly:
Yes, raising capital gains taxes on the rich will help the muni market. That market is actually protected pretty clearly by the cons ution.

[2centsworth]

You can argue that, I guess. In the same manner you can argue that leaving apples on your front step will make unicorns happy.

Answer this question then:

How much does one dollar in tax cuts produce in extra revenue in 5 years? 10?

Quantify it.

The economists who attempted to guage the Bush tax cuts came up with the answer "almost nothing, and the amount that we had to borrow to finance this almost nothing outweighed the benefits in the long run".

You are mixing apples and oranges. Having a well calculated sale at your business
Increases income in down markets. Thus, increasing the velocity of money.

Giving a business owner money has little affect on velocity.

The rhetoric and condesention is coming from you.


Sorry. That bit of rhetoric is "feel good" with little to no data to support it.

There is some fairly solid support for taxing the rich, who generally pay 15%-20% or less on their earnings, and using that for big bad en lements for the poor who actually go out and spend it.

The money the poor spend tend to lead to a lot more jobs anyways, as that money circulates through the economy.

People like to think that the government, its employees, and so forth, aren't actually part of the economy. They are, and the money the government spends gets into the economy and ends up in businesses and the like already.

Lastly:
Yes, raising capital gains taxes on the rich will help the muni market. That market is actually protected pretty clearly by the cons ution.[/QUOTE]

[RandomGuy]

You are mixing apples and oranges. Having a well calculated sale at your business
Increases income in down markets. Thus, increasing the velocity of money.

Giving a business owner money has little affect on velocity.

The rhetoric and condesention is coming from you.

I was merely pointing out that your argument was not based on information, merely ideological dogma.

Being able to "argue" something, and being able to support it reasonably with data are two seperate things.

Quite frankly, I am not entirely sure what you are trying to say here. It seems you are simply trying to repeat the "don't raise taxes on the rich" bit.

The "reason" for increasing taxes on the rich is so we don't have to borrow as much to pay for government.

Borrowing, in the long run, leads to higher tax rates.

If you want lower long term tax rates, you have to pay down the debt. That will require short-term hikes.

Cutting taxes at a time of low revenues, when you are already borrowing money, simply means you have to borrow even more.

Given the infrastructure deterioriation in this country, if we don't raise taxes to address the problem, that *will* lead to long term reductions in revenues, as our creaking infrastructure gets more and more expensive and costly to stick band-aids on. Expensive in terms of actual costs, and in terms of lost economic output.

"Tax cuts" are not the solution to our looming problems, not matter how many times someone says it.

[Borat Sagyidev]

http://www.usatoday.com/money/perfi/...10-taxes_N.htm

Tax bills in 2009 at lowest level since 1950


Amid complaints about high taxes and calls for a smaller government, Americans paid their lowest level of taxes last year since Harry Truman's presidency, a USA TODAY analysis of federal data found.
Some conservative political movements such as the "Tea Party" have criticized federal spending as being out of control. While spending is up, taxes have fallen to exceptionally low levels.

Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income

[2centsworth]

I was merely pointing out that your argument was not based on information, merely ideological dogma.

Being able to "argue" something, and being able to support it reasonably with data are two seperate things.

Quite frankly, I am not entirely sure what you are trying to say here. It seems you are simply trying to repeat the "don't raise taxes on the rich" bit.

The "reason" for increasing taxes on the rich is so we don't have to borrow as much to pay for government.

Borrowing, in the long run, leads to higher tax rates.

If you want lower long term tax rates, you have to pay down the debt. That will require short-term hikes.




Impossible for me to respond from my iPhone.
I'll try when I'm in front of a pc


Cutting taxes at a time of low revenues, when you are already borrowing money, simply means you have to borrow even more.

Given the infrastructure deterioriation in this country, if we don't raise taxes to address the problem, that *will* lead to long term reductions in revenues, as our creaking infrastructure gets more and more expensive and costly to stick band-aids on. Expensive in terms of actual costs, and in terms of lost economic output.

"Tax cuts" are not the solution to our looming problems, not matter how many times someone says it.

[Agloco]

http://www.usatoday.com/money/perfi/...10-taxes_N.htm

Tax bills in 2009 at lowest level since 1950


Amid complaints about high taxes and calls for a smaller government, Americans paid their lowest level of taxes last year since Harry Truman's presidency, a USA TODAY analysis of federal data found.
Some conservative political movements such as the "Tea Party" have criticized federal spending as being out of control. While spending is up, taxes have fallen to exceptionally low levels.

Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income

I'd like to see exactly who is paying less in taxes and a breakdown by income level. Anyone have quick access to that?

[ElNono]

There's no such thing as tax breaks that pay for themselves. We can go back years and years of data that shows that whenever you cut taxes, receipts decrease. What also needs to be understood is that unless you make up the difference in some other way, you'll be making up the difference by borrowing, which means you'll have to pay that back with interest. Meaning the tax cut perfomance over time will have to outdo not just the lost revenue year over year, but also the interest from having to borrow to make up for the difference. In the real world, this just doesn't happen.

I mean, if we're going to just gamble with borrowed money, it's probably just as good as any other gamble (stimulus, etc)

[Wild Cobra]

Capital gains are not taxed at marginal rates.

They are also considered "income".

So you agree that raising the marginal tax rate does not affect those making income from capital gains. Right?

[boutons_deux]

high taxes causes corporations to invest and spend their profits rather send the lower taxed profits to mgmt and investors.

very high taxes in the 50/60s didn't impede an explosion in national wealth and public infrastructure.

[boutons_deux]

The Myth of the Lower Marginal Tax Rates
Conservatives’ Go-To Growth Solution Doesn’t Hold Up



These numbers do not mean that higher rates necessarily lead to higher growth. But the central tenet of modern conservative economics is that a lower top marginal tax rate will result in more growth, and these numbers do show conclusively that history has not been kind to that theory.

http://www.americanprogress.org/issu...charticle.html