Who said this?

[chuck34]

I ran across this quote today and thought it might be interesting to post here. So who said this and when?


Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle—workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit—why reducing taxes is the best way open to us to increase revenues.

[edv]

Sounds like Ronald Reagan in 1980.

But I suspect you are going to play a joke on us and reveal that somehow it was Obama!

[Tazio]

:s ailor: Bob Hope :confused:

[Rollo]

Sounds like Ronald Reagan in 1980.

But I suspect you are going to play a joke on us and reveal that somehow it was Obama!

Apparantly it was written by JFK in his Economic Report of the President, January 1963, however the article in which it has been referenced was written by Arthur Laffer in the Wall St Journal published August 2.
http://online.wsj.com/article/SB10001424052748703977004575393882112674598.html?m od=googlenews_wsj
It fits in nicely with a News Corporation newspaper who regularly publish heavily right leaning articles.

It should be noted though that Arthur Laffer was part of Reagan's "Economic Policy Advisory Board" which among other things created mass inequality among Americans and probably did it's bit to engineer the second biggest crash on economic markets of the 20th Century.

In practical terms, the theory is questionable and in practice doesn't work:
http://www.washingtonpost.com/wp-dyn/articles/A26402-2004Jun8.html
The fiscal shift in the Reagan years was staggering. In January 1981, when Reagan declared the federal budget to be "out of control," the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world's largest international creditor to the largest debtor nation.

To some economists, the impact was clear. Interest rates rose in the late 1980s and early 1990s, the economy slowed, then slipped into recession, and productivity barely advanced. Americans feared their nation had slipped into the shadows of Japan and Germany.

Whilst chuck34 may have come across a quote, it's one that might sound nice, but in practice doesn't work.

The cake IS a lie.

[janvanvurpa]

Apparantly it was written by JFK in his Economic Report of the President, January 1963, however the article in which it has been referenced was written by Arthur Laffer in the Wall St Journal published August 2.
http://online.wsj.com/article/SB10001424052748703977004575393882112674598.html?m od=googlenews_wsj
It fits in nicely with a News Corporation newspaper who regularly publish heavily right leaning articles.

It should be noted though that Arthur Laffer was part of Reagan's "Economic Policy Advisory Board" which among other things created mass inequality among Americans and probably did it's bit to engineer the second biggest crash on economic markets of the 20th Century.

In practical terms, the theory is questionable and in practice doesn't work:
http://www.washingtonpost.com/wp-dyn/articles/A26402-2004Jun8.html
The fiscal shift in the Reagan years was staggering. In January 1981, when Reagan declared the federal budget to be "out of control," the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world's largest international creditor to the largest debtor nation.

To some economists, the impact was clear. Interest rates rose in the late 1980s and early 1990s, the economy slowed, then slipped into recession, and productivity barely advanced. Americans feared their nation had slipped into the shadows of Japan and Germany.

Whilst chuck34 may have come across a quote, it's one that might sound nice, but in practice doesn't work.

The cake IS a lie.

OOooooooohhhh so obviously you're saying that you support the outlandish radical Communist program of Tax-and-spend, instead of the Republicans far more patriotic and profitable "barrow-and-spend-the-most-ever".(and pay the interest on the trillions in loans or bonds ot T notes sold, compounded for decades after decades and generations onward)

Well comrade Rollo your colors are clear....
Your attitude has been noted, comrade.

[Rollo]

It really doesn't matter which side of the political spectrum you sit, whether being fatally communist (and having no brains) or fatally capitalist (and having no heart), the truth is that no matter what the basic stance of the economy, if you spend more than you collect, you either draw down on savings or start accumulating debt; you even admit so:


and pay the interest on the trillions in loans or bonds on T notes sold, compounded for decades after decades and generations onward

What is the national debt of the US standing at now?

[janvanvurpa]

It really doesn't matter which side of the political spectrum you sit, whether being fatally communist (and having no brains) or fatally capitalist (and having no heart), the truth is that no matter what the basic stance of the economy, if you spend more than you collect, you either draw down on savings or start accumulating debt; you even admit so:



What is the national debt of the US standing at now?

Trillions! and there are many happy big Capitalists who know they'll make 200 to 400% pure profit on every dollar the paid for those loans they did.
All they have to do is sit and do nothing and let the magic of compound interest just ratchet up the bill and their profits....

[chuck34]

It should be noted though that Arthur Laffer was part of Reagan's "Economic Policy Advisory Board" which among other things created mass inequality among Americans and probably did it's bit to engineer the second biggest crash on economic markets of the 20th Century.

So Reagan "created mass inequality". Really? I didn't know that. So under Carter, everything was hunky-dory, and everyone was equal?


In practical terms, the theory is questionable and in practice doesn't work:
http://www.washingtonpost.com/wp-dyn/articles/A26402-2004Jun8.html
The fiscal shift in the Reagan years was staggering. In January 1981, when Reagan declared the federal budget to be "out of control," the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world's largest international creditor to the largest debtor nation.

When the President doesn't exclusively control the purse strings, sometimes you'll have a Congress that spends too much. But that doesn't mean that Laffer's theory is invalid. Laffer NEVER said that we should cut taxes and then spend MORE than ever. No! His theory (proven by the tax cuts of the '60's, 80's, and 00's) is that if you cut taxes, to a point, you will bring more money into the government. The fact that the Congress then went on to spend more than even those increased revenues, does nothing to disprove his theory.


To some economists, the impact was clear. Interest rates rose in the late 1980s and early 1990s, the economy slowed, then slipped into recession, and productivity barely advanced. Americans feared their nation had slipped into the shadows of Japan and Germany.

There are waaaaaay more factors involved in the above statement than tax rates. To try and link the loss of manufacturing in the US to decreased tax burdens is laughable at best.


Whilst chuck34 may have come across a quote, it's one that might sound nice, but in practice doesn't work.

You have done nothing to disprove Laffer's theory of lower taxes, to a point, will increase income to the government. Show me where that has not been the case. Debt is a seperate issue from revenue. And it is revenue which is being discussed here. If you want to discuss the dangers of debt I'm all for it, but that's another discussion with many more facets to discuss.

[chuck34]

the Republicans far more patriotic and profitable "barrow-and-spend-the-most-ever.

What party does the President belong to that "borrowed-and-spent-the-most-ever"? Just curious.

[chuck34]

It really doesn't matter which side of the political spectrum you sit, whether being fatally communist (and having no brains) or fatally capitalist (and having no heart), the truth is that no matter what the basic stance of the economy, if you spend more than you collect, you either draw down on savings or start accumulating debt; you even admit so:

I agree with that whole-heartily. But the quote, and theory, in question does not deal with the spending side of the equation. Can you honestly tell me that our current situation of spending more than we have will work out better if we raise taxes?

[Mark]

I agree with that whole-heartily. But the quote, and theory, in question does not deal with the spending side of the equation. Can you honestly tell me that our current situation of spending more than we have will work out better if we raise taxes?

If you can increase taxes without affecting growth or the ability of people to pay those taxes, then yes.

[gadjo_dilo]

What a deception! I thought this topic is about some famous latin quatations......

[anthonyvop]

If you can increase taxes without affecting growth or the ability of people to pay those taxes, then yes.

Isn't that impossible? Not to mention immoral?

[chuck34]

If you can increase taxes without affecting growth or the ability of people to pay those taxes, then yes.

Why would you do that? It has been proven many times (read the article) that raising taxes decreases revenue, and lowering taxes increases revenue. So what is the purpose of raising taxes?

And how can raising taxes NOT affect growth or the ability of people to pay?

[Rollo]

Why would you do that? It has been proven many times (read the article) that raising taxes decreases revenue, and lowering taxes increases revenue. So what is the purpose of raising taxes?

Has it been proven that raising taxes decreases revenue? Did Laffer do it?

http://en.wikipedia.org/wiki/Laffer_Curve
http://upload.wikimedia.org/wikipedia/commons/thumb/3/36/Laffer-Curve.svg/250px-Laffer-Curve.svg.png

Laffer's theory suggests that at 0% tax, zero revenue is collected. The rate of revenue collected raised, also rises at some point t, and then drops off to zero revenue at a tax rate of 100%.
The problems with the theory are twofold:

1. What point are we currently at? Are we actually at some point t*¹ to the right of t°? If so then there may be a point to be made. If we are currently at a point to the left which we'll label t², then as we increase tax rates towards t°, then according to Laffer's own theory, taxation revenues should increase.
But since Laffer himself couldn't prove or even guess through actual empirical where t°, t¹ or t² are, then the statement "as been proven many times (read the article) that raising taxes decreases revenue, and lowering taxes increases revenue" is materially false.
Unless you have links to some proper data, then you're reliance on supposed proof is totally unfounded.

2. The theory doesn't work in the real world anyway. The assumption that taxation revenues drops off to zero revenue at a tax rate of 100%, simply isn't true. China currently has marginal taxation rates which exceed 100%, and still experiences economic growth.

Obviously the purpose of raising taxes is to collect more in taxation revenues than the government spends.
The other option is to decrease government spending. I would suggest slashing Social Security, Medicare, Medicaid and the Department of Defence spending, because those are the biggest areas pulling the budget, and it is impossible to decrease the interest bill unless you first start running surpluses.

[Alexamateo]

Rollo how can a marginal tax rate exceed 100%?

You are saying that past certain income levels in China, they take everything above that and then a little bit more?

[anthonyvop]

Why would you do that? It has been proven many times (read the article) that raising taxes decreases revenue, and lowering taxes increases revenue. So what is the purpose of raising taxes?

And how can raising taxes NOT affect growth or the ability of people to pay?

Chuck,

You should know better. Never, ever bring up Logic and facts when debating with a Liberal. It just makes them angry like trying to teach a pig how to fly.

[janvanvurpa]

Has it been proven that raising taxes decreases revenue? Did Laffer do it?

http://en.wikipedia.org/wiki/Laffer_Curve
http://upload.wikimedia.org/wikipedia/commons/thumb/3/36/Laffer-Curve.svg/250px-Laffer-Curve.svg.png

Laffer's theory suggests that at 0% tax, zero revenue is collected. The rate of revenue collected raised, also rises at some point t, and then drops off to zero revenue at a tax rate of 100%.
The problems with the theory are twofold:

1. What point are we currently at? Are we actually at some point t*¹ to the right of t°? If so then there may be a point to be made. If we are currently at a point to the left which we'll label t², then as we increase tax rates towards t°, then according to Laffer's own theory, taxation revenues should increase.
But since Laffer himself couldn't prove or even guess through actual empirical where t°, t¹ or t² are, then the statement "as been proven many times (read the article) that raising taxes decreases revenue, and lowering taxes increases revenue" is materially false.
Unless you have links to some proper data, then you're reliance on supposed proof is totally unfounded.

Dare you suggest that Rush and hennity and GLAN BECK would lie to the American public???
How dare you!!!
Just where do you think these guys get the education in economic theory!??

So before you denigrate the great Americans who single handedly have educated a generation, you better think twice!!!

Remember the inflexible law: if you repeat an outrageous lie loud enough and long enough, it becomes a fact.


2. The theory doesn't work in the real world anyway. The assumption that taxation revenues drops off to zero revenue at a tax rate of 100%, simply isn't true. China currently has marginal taxation rates which exceed 100%, and still experiences economic growth.

OH so now the truth comes out!!! Referencing Communist China!!!
Oh Noes!!!
What's next? Dredging up NEP in Soviet Union in the 20s?



Obviously the purpose of raising taxes is to collect more in taxation revenues than the government spends.
The other option is to decrease government spending. I would suggest slashing Social Security, Medicare, Medicaid and the Department of Defence spending, because those are the biggest areas pulling the budget, and it is impossible to decrease the interest bill unless you first start running surpluses.

Why cloud the issue with logic and reasoning?

I'm sure all the Laffer curvitchniks studied economics for years, YEARS!
And all of those here and elsewhere referencing it and the several forums I peek in on---all of them all of a sudden having thread pop in in a matter of a day or so, is clear proof these boys have their fingers on the pulse of the AM Talk radio and are well......"informed".

Taxation is slavery.
An armed citizenry is a good citizenry.

Just how do you explain the continuous economic growth and increasing standard of living, indeed the rise to dominance of the American MIDDLE CLASS post WWII--3 decades of mostly rising standards---and taxes higher than later---a period of virtual stagnation for 30 years?

Yeah, 'splain that one!

[janvanvurpa]

Rollo how can a marginal tax rate exceed 100%?

You are saying that past certain income levels in China, they take everything and then a little bit more?

Sweden did it in the period from 1972-1976.
The great novelist Astrid lindgren got on TV with her tax declaration forms and the tax rates tables and sure enough her total added up to over 104%.
In the following days the same crew interviewed several others who also "owed' more than 100%. the slime ball Prime Minister Gunnar Palme suggested on TV that Lindgren should keep her nose out of politics....
This is the same palme who was later shot down on the street in Stockholm, obviously somebody had had enough of his nonsense.

But come on, the rate alone means nothing, it's the deductions and exemptions and all the same ways out as we have here like reducing tax liability by the amount of the interest on a mortage on property owned.


That's how while I paid a total of 32.7% on an wage which was the National average, the Finance Minister, the reptilian slugloid Gunnar Sträng paid only about 6.4% on an total income of around 6 million SEK----Good ol' Gunnar had bought a property in Gamla Stan for a huge sum+++financed for 50 years so lots of mortgage interest, and was having workers completely renovate it----again at stratospheric prices financed at who knows what.

Nobody pays the rates in the book.

[Bob Riebe]

An armed citizenry is a good citizenry.

Just how do you explain the continuous economic growth and increasing standard of living, indeed the rise to dominance of the American MIDDLE CLASS post WWII--3 decades of mostly rising standards---and taxes higher than later---a period of virtual stagnation for 30 years?

Yeah, 'splain that one!
Because companies like Chrysler, Ford, GM were employing more and more people with GM peaking at a little under 1/2 million in the seventies.
Now GM is less than 200,000, and that does not include the losses at Chrysler and Ford.
Fewer people working, oh yes, increase their taxes.
An asinine move but then the majority of millionaire legislators in Wash. are Dem. so they do not give damn. People like the living Kennedy's are trust fund babies, taxes do not touch them.
If John, who was a good friend of R. Nixon had survived, he would have bitch slapped Teddy.

[Alexamateo]

As far as tax rates go, I invoke Hauser's Law:

http://en.wikipedia.org/wiki/Hauser's_Law

Look a tax is nothing more than a price. Like any price, there is a point in which revenues are maximized. That is the only thing the laffer curve shows. As someone who quotes prices everyday, it is a constantly moving target, so who knows where we are on the scale.

My take on taxes is this: I have no problem with the progressive system we have. I would tax by quintiles, and the top marginal rate would be no more than 33%. Right now it's 35% so that's pretty close.

As far as letting the Bush tax cuts expire, rates would jump to 39% Is that enough to make a difference? Let's see.

I broker trees and shrubs to Landscape Contractors and Garden Centers. One of my customers specializes in high end residential, and I have literally sold $100,000 plus in plant material to a single residence earning me (for simplicity's sake) a $10,000 commission.

Autozone is located here and they did the CEO's house. I saw listed that he earned $1.2 million. The top tax rate is 35 % on anything over $372,951 for married filing jointly. That's 35% of $827,049 or $289,467 in taxes.
If it jumps to 39%, it will be $322,549 or $33,000 more.

In the long run, it's debatable if it makes that much difference, but in the short run, Due to price shock, he cuts the landscape budget, reducing materials cost by $20,000, meaning $2000 out of the $33,000 extra he paid in came from me. (Sorry, Honey, no new kitchen tile until next year.)

I really don't know that the 4% They are talking about now makes a huge difference in the long run. I do know it is higher than what I agree with philosophically. Also, I am not sure many in the middle and lower classes wanting the Bush tax credits to end in order to sock it to the rich are aware that the child tax credit would drop back to $500 instead of $1000, meaning that the average 2 child family would get $1000 less back in refunds.

[Rollo]

Just how do you explain the continuous economic growth and increasing standard of living, indeed the rise to dominance of the American MIDDLE CLASS post WWII--3 decades of mostly rising standards---and taxes higher than later---a period of virtual stagnation for 30 years?

Economic Growth is largely a result of labour inputs, capital inputs and improvements to technology, resulting in either improved efficiencies and/or new markets.

The post war increase was mainly due to a very big increase in the population relative to what was before it, immense new capital investments in both the government and private sectors, and sweeping technological improvements.

[janvanvurpa]

Economic Growth is largely a result of labour inputs, capital inputs and improvements to technology, resulting in either improved efficiencies and/or new markets.

The post war increase was mainly due to a very big increase in the population relative to what was before it, immense new capital investments in both the government and private sectors, and sweeping technological improvements.

Ah! There, a little better with emphasis.
capital expenditures!
INVESTMENTS in the future in other words.
In contrast to the pre-war years the governments of ALL the Western Democracies including the new democratic Federal Republic of Germany
all invested heavily in building and (in Europe) rebuilding ports, railways, airlines (gotta do something with all those factories and people that had been cranking out aircraft like machine gun shells piling up), hiways/roads, schools and universities, research (again for just within a few years had invented products and production systems and distribution for things only dreamed of 5-10 years before eg radar, synthetic rubber, synthetic drugs).

A point the Neanderthal "so-called "conservatives" vigorously avoid looking at is the role of more centralised planning and cooperation between Governments (local, county, State, National) and business and the educational sector together with infrastructure investments made possible by higher taxes, and how all of the West underwent a veritable metamorphosis and the standard of living shot upwards in the 30 years after the end of WWII for the huge majority of every country's population. HUGE improvements in healthcare, and education yielded sweeping improvements in productivity.
Until the madness of what is now the drum beat of "Nothing is more ineffcient than the government" and "why should I (who was educated in a public school, drives on public roads, over public bridges, protected by public fire and police departments, yakking over phone and sattelites finances with public grants and off-sets and deals, drinking water from a system built and run for generatiosn by the public, flushing their crap down sewage systems built and maintained by the public, eating food from around the world shipped thru ports built by the people, on hiways and railways built by the public or on over land given by the Government in the millions of acres and on and on) pay anything for schools--or libraries or parks for some other schmucks snot nosed kids?"

And so the re-investments slowed and all of a sudden the rise in the standard of living of all but a small minority stagnated, and for the majority, regressed, and hours worked (in USA anyway) rose, spouses entered the labor force, housing as a % of disposable income rose.

And the baton of the leader of the worlds economy was fumbled and then dropped to a place where Government/Business/Educational system co-operates and invests in the future (a little longer than 2-3 quarters ahead): The Eastern edge of Asia.

Short sightedness, narrow focus, and simple greed in two sectors of the population can take credit for that;: the so called "information poor" sectors which historically has voted "conservative" and small "crafts" type business owners who think just because they lay concrete of fix a car, or screw two pipes together that they know all about what the society and the country needs.

Or it could be that people have just become dumber as they have gotten reinforcement for their "me only" attitudes.

Oh not too sure about the "sweeping technological improvements" in the time frame '45-75... In industry there were a few subtle but important changes---one being the arrival of powered metal, titanium nitrided indexable bits for cutting tools for lathes and mills which gave a massive increase in tool life, feed rates, wear and therefore accuracy and repeatability. These little buggers about the size of a fingernail were the biggest revolution in that time period, and it was a big one. But they were adopted first in the most progressive industrial countries first and only later became the standard in the more conservative counties
http://www.productionmachining.com/cdn/cms/1208_Sandvik_WMX-Wiper-Insert.jpg

Those inserts in tool holders like these
http://www.axiantech.com/GROUP_01%20on%20Black.jpg

easily increased production of machined parts by 5 times...
And prior to 1975, the predecessor of CNC (Computer Numerical Control), NC machining was only just getting accepted, the enormous gains realised by CNC were a decade away...
So other than that I don't know what huge technological sweeping advances there were....

[Rollo]

So other than that I don't know what huge technological sweeping advances there were....

The transistor c.1947, the Integrated Circuit Board and the Printed Circuit Board? Practically everything electrical shrunk in size like you would not believe.

Even something as simple as radio which used to take up a teak piece of furniture in the living room, could be shrunk by 1970 into something smaller than one of the valves which went into it in the first place.

Typesetting, computerization of loads of stuff, relatively cheap air travel, television and then colour television, satellites, Automatic Teller Machines, the microwave oven, the pill, etc etc etc... technology is a major driver of economic growth.

[janvanvurpa]

The transistor c.1947, the Integrated Circuit Board and the Printed Circuit Board? Practically everything electrical shrunk in size like you would not believe.

Even something as simple as radio which used to take up a teak piece of furniture in the living room, could be shrunk by 1970 into something smaller than one of the valves which went into it in the first place.

Typesetting, computerization of loads of stuff, relatively cheap air travel, television and then colour television, satellites, Automatic Teller Machines, the microwave oven, the pill, etc etc etc... technology is a major driver of economic growth.


Rollo, I was around for almost all the 50s, I remember when "transistor radios came out (and ate batteries like you wouldn't believe) and I don't see the Transistor radio as major step in increasing the standard of living. Or TV.
Cheap air travel really was a mid/late 60s deal
ATMs were first used in 1972 according to Wiki and really weren't in widespread use for quite some time.
I think your timelines are off considerably and the net effect of much of what you list, like the rise of these computers we type on is highly debatable ie
computerised typesetting may have eased the job---of those few left--- after the rest were laid off, and like a lot of tech stuff speeded the rate of some jobs, but the records shows this has led to higher and higher profits, not increases in standards of living of the workers using the stuff...

[chuck34]

Has it been proven that raising taxes decreases revenue? Did Laffer do it?

Yes, did you read the WSJ article that you linked to?


http://en.wikipedia.org/wiki/Laffer_Curve
http://upload.wikimedia.org/wikipedia/commons/thumb/3/36/Laffer-Curve.svg/250px-Laffer-Curve.svg.png

Laffer's theory suggests that at 0% tax, zero revenue is collected. The rate of revenue collected raised, also rises at some point t, and then drops off to zero revenue at a tax rate of 100%.
The problems with the theory are twofold:

1. What point are we currently at? Are we actually at some point t*¹ to the right of t°? If so then there may be a point to be made. If we are currently at a point to the left which we'll label t², then as we increase tax rates towards t°, then according to Laffer's own theory, taxation revenues should increase.
But since Laffer himself couldn't prove or even guess through actual empirical where t°, t¹ or t² are, then the statement "as been proven many times (read the article) that raising taxes decreases revenue, and lowering taxes increases revenue" is materially false.
Unless you have links to some proper data, then you're reliance on supposed proof is totally unfounded.

Yes, we are either to the right of the t point or at least at it. When Bush cut taxes in '01-'03, revenues went UP. That means that prior to that we were on the right side of the curve. I would argue that we probably still are, but at the very least we are at it. What is being proposed now is to let those tax cuts expire. So that would necessarily put us back to the right side of the curve, and thus LOWERING revenues.


2. The theory doesn't work in the real world anyway. The assumption that taxation revenues drops off to zero revenue at a tax rate of 100%, simply isn't true. China currently has marginal taxation rates which exceed 100%, and still experiences economic growth.

So do you want to be taxed at 100%? Do you honestly think that is the best way to go? You brought up "mass inequality" before, do you think China or the US is worse for this?


Obviously the purpose of raising taxes is to collect more in taxation revenues than the government spends.

So I'll ask again, why do you want to raise taxes when evidence (Bush tax cuts of '01-'03) says that we are still to the right of the curve?


The other option is to decrease government spending. I would suggest slashing Social Security, Medicare, Medicaid and the Department of Defence spending, because those are the biggest areas pulling the budget, and it is impossible to decrease the interest bill unless you first start running surpluses.

I would agree with that. I'd also add the department of Education (State's responsibilities), the Department of Energy, the EPA, on and on.

[Rollo]

Yes, we are either to the right of the t point or at least at it. When Bush cut taxes in '01-'03, revenues went UP. That means that prior to that we were on the right side of the curve.

No it doesn't.

If revenues, profits and therefore taxes as a result are rising, it means that the economy generally is experiencing a period of boom. The DJIA peaked at 11722.90 on 19 Jun 2003.
If anything prudent taxation policy should be counter cyclical. That is, it should be more aggressive during periods of boom, and less so in downturns.

Revenues rising doesn't indicate anything with regards at what point t we are according to Laffer. In fact not even he could prove where we are relative to point t.



So I'll ask again, why do you want to raise taxes when evidence (Bush tax cuts of '01-'03) says that we are still to the right of the curve?

There are about 12 trillion reasons, with 44% of those reasons now being held by overseas countries, especially China.

[chuck34]

No it doesn't.

So prove the counter is true.


If revenues, profits and therefore taxes as a result are rising, it means that the economy generally is experiencing a period of boom. The DJIA peaked at 11722.90 on 19 Jun 2003.
If anything prudent taxation policy should be counter cyclical. That is, it should be more aggressive during periods of boom, and less so in downturns.

And why was the economy experiencing a period of boom? There was a recession in 2000-2001. What brought us out of that?


Revenues rising doesn't indicate anything with regards at what point t we are according to Laffer. In fact not even he could prove where we are relative to point t.

Sure it's hard to prove exactly where we are, but the evidence suggests that we are on the right of the t point.


There are about 12 trillion reasons, with 44% of those reasons now being held by overseas countries, especially China.

Again, you are talking about spending. On that you and I are on the same page. We need to cut spending.

[chuck34]

Here's a story on one of the factors involved in the Laffer Curve. The principle that the "Rich" will avoid taxes if they are too high. And from a Liberal Senator who espouses the benifits of higher taxes no less! HA!

http://www.bostonherald.com/track/inside_track/view.bg?articleid=1269698


Sen. John Kerry, who has repeatedly voted to raise taxes while in Congress, dodged a whopping six-figure state tax bill on his new multimillion-dollar yacht by mooring her in Newport, R.I.

Could the reason be that the Ocean State repealed its Boat Sales and Use Tax back in 1993, making the tiny state to the south a haven - like the Cayman Islands, Bermuda and Nassau - for tax-skirting luxury yacht owners?

Kerry saved approximately $437,500 in sales tax and an annual excise tax of about $70,000.

[Rollo]

So prove the counter is true.

Ok.
http://www.budget.gov.au/2007-08/bp1/html/bp1_bst7-01.htm

Australia introduced a Goods and Services Tax in the year 2000. With a small reduction in income tax, the additional consumption tax effectively caused a net overall tax increase in real terms.
So much so that in 2007, the net debt was lowered to zero.

An increase in the effective rate of taxation, led to an increase in revenues for the government collected by taxation, and therefore a discharge of debt.

QED.



And why was the economy experiencing a period of boom? There was a recession in 2000-2001. What brought us out of that?

Al-Qaeda.

Committing government spending to counter the threat of terrorism, boosted aggregate demand. Government spending as an injection into the economy, has a far greater influence over aggregate demand, than fiddling with tax rates will.



Again, you are talking about spending. On that you and I are on the same page. We need to cut spending.

No I'm not. I'm referring to the $12 trillion and rising in government debt.


Sure it's hard to prove exactly where we are, but the evidence suggests that we are on the right of the t point.

What evidence?!

"Receipts by Source. Retrieved from the Government Printing Office Access.". GPOAccess.gov.2009.
http://www.gpoaccess.gov/usbudget/fy10/sheets/hist02z1.xls

For the years 2001-2003 which acording to you "When Bush cut taxes in '01-'03, revenues went UP", they did not. They FALL in each of those years across the board. In fact there isn't even one single set of reciepts from tax which goes up.
Laffer's theory IS crap and official government data shows it to be crap.

[chuck34]

Ok.
http://www.budget.gov.au/2007-08/bp1/html/bp1_bst7-01.htm

Australia introduced a Goods and Services Tax in the year 2000. With a small reduction in income tax, the additional consumption tax effectively caused a net overall tax increase in real terms.
So much so that in 2007, the net debt was lowered to zero.

An increase in the effective rate of taxation, led to an increase in revenues for the government collected by taxation, and therefore a discharge of debt.

QED.

How does that disprove the point that a reduction in income taxes will result in higher tax revenue? Seems that the oposite is true.


Al-Qaeda.

Committing government spending to counter the threat of terrorism, boosted aggregate demand. Government spending as an injection into the economy, has a far greater influence over aggregate demand, than fiddling with tax rates will.

As a percentage of GDP, defense spending only went back to the '96 level by '03, and well below the 80's and before.

http://www.truthandpolitics.org/military-relative-size.php


No I'm not. I'm referring to the $12 trillion and rising in government debt.

But govenment debt is a two sided coin, revenue and SPENDING. If the revenue went up by that $12 trillion, but spending went up by $14 trillion, we'd still be in debt.


What evidence?!

"Receipts by Source. Retrieved from the Government Printing Office Access.". GPOAccess.gov.2009.
http://www.gpoaccess.gov/usbudget/fy10/sheets/hist02z1.xls

For the years 2001-2003 which acording to you "When Bush cut taxes in '01-'03, revenues went UP", they did not. They FALL in each of those years across the board. In fact there isn't even one single set of reciepts from tax which goes up.

The economy hadn't rebounded yet in '01-'03, and the cuts hadn't really taken effect yet. Look past that to the period '03-'06 when all the effects were really being seen.

http://www.cbo.gov/doc.cfm?index=8116&type=1
"Total federal revenues grew by about $625 billion, or 35 percent, between fiscal year 2003 and fiscal year 2006."
"Had revenues grown at the same rate as the overall economy between 2003 and 2006, federal receipts would have increased by only $373 billion."
"In the other direction, higher realizations of capital gains (including any effects associated with legislated reductions in tax rates) added 0.3 percentage points to the ratio of individual income tax revenues to GDP."
"Revenues from both corporate and individual income taxes have continued to grow faster than GDP."



Laffer's theory IS crap and official government data shows it to be crap.

My government data is better than your government data. :P

[Rollo]

"Had revenues grown at the same rate as the overall economy between 2003 and 2006, federal receipts would have increased by only $373 billion."
"In the other direction, higher realizations of capital gains (including any effects associated with legislated reductions in tax rates) added 0.3 percentage points to the ratio of individual income tax revenues to GDP."
"Revenues from both corporate and individual income taxes have continued to grow faster than GDP."

My government data is better than your government data. :P

Your government data states the reason why receipts went up: an increase in realizations of capital gains.

And to answer this:


How does that disprove the point that a reduction in income taxes will result in higher tax revenue? Seems that the oposite is true.

Reread the sentence:
With a small reduction in income tax, the additional consumption tax effectively caused a net overall tax increase in real terms.

Of course a "net overall tax increase" would lead to an increase in "net overall tax" receipts; and it did.

[chuck34]

Your government data states the reason why receipts went up: an increase in realizations of capital gains.

Yep a realization in captial gains was part of it. Why do you think capital gains went up? Could it be that the economy was stronger since people had more money in their pockets, and that increased corporate profits, then in-turn also raising stock prices?


And to answer this:
Reread the sentence:
With a small reduction in income tax, the additional consumption tax effectively caused a net overall tax increase in real terms.

Of course a "net overall tax increase" would lead to an increase in "net overall tax" receipts; and it did.

Yep you're right it was an overall tax increase. However had the consumption tax not been coupled with the decreased personal income tax then people would have had less money to spend. Therefore their consumption would have gone down.

Why is this so hard? If you take $1 out of my pocket. Then I don't buy that Coke at break. And many of my co-workers will make the same or simmilar decisions. That means the vending company doesn't have as much profit. So they have to make decisions like not giving their employees a raise. which means now they have less money, and the effect is amplified, and has a knock-on effect with other industries.

[Alexamateo]

Let's put this in perspective a little bit:

There's nothing wrong with Laffer's curve, as it's basically a price/demand curve as it relates to total revenue. It may not function well in the extremes (i.e. 100%), but really, how often do the extreme conditions exist? Also, a 100% marginal rate is almost never the effective rate.

That said, to me it's not that useful, because like Rollo said, Where is t*, on the curve? I don't think anyone can say with any accuracy in the broader economy as a whole. It would be useful in a situation with less variables, such as a local government trying to work out property tax rates, but I think the general economy has too many variables.

Now, when JFK said this in 1961, the top marginal rates were 91%. It's fairly safe to say that t* was on the right side of the graph. What happened when people approach that level of income? They spent more time trying to shelter, hide, defer income rather than reinvest it into the economy as a whole.

It's now 35% and if the Bush Tax cuts expire, it will go back to 39.6%. Honestly, other than a short term price shock I don't see it as having that much effect. Empirical evidence may suggest that's actually the apex of t*. It's a little higher than I agree with philosophically, but not that much out of line.

[Rollo]

Yep you're right it was an overall tax increase. However had the consumption tax not been coupled with the decreased personal income tax then people would have had less money to spend. Therefore their consumption would have gone down.

But the overall tax take would have still gone up because of a new tax.


Why is this so hard? If you take $1 out of my pocket. Then I don't buy that Coke at break. And many of my co-workers will make the same or simmilar decisions. That means the vending company doesn't have as much profit. So they have to make decisions like not giving their employees a raise. which means now they have less money, and the effect is amplified, and has a knock-on effect with other industries.

Your example relies on the premise of zero inflation, and a net leakage from the economy. Sadly, this isn't true for the real world. There is an overall net increase in dollar figures due to inflation, and if governments keep on running budget surpluses, then there isn't a net leakage from the economy either but a net injection.

[chuck34]

But the overall tax take would have still gone up because of a new tax.

Clearly. I'm not disputing that. But the fact the the consumer has more money in his pocket, thanks to the personal income tax cut, is the reason that this increases revenue. Had the consumer not had the extra money, consumption would have faltered, and the net taxes collected would have been lower.


Your example relies on the premise of zero inflation, and a net leakage from the economy. Sadly, this isn't true for the real world. There is an overall net increase in dollar figures due to inflation, and if governments keep on running budget surpluses, then there isn't a net leakage from the economy either but a net injection.

My example relies on zero inflation because in the short term inflation is zero. That is unless we are living in Zimbabwe, or pre-war Germany. Plus it seems many economists are talking about signs of deflation right now, not inflation. Same with leakage, I'm not an economist but the way I understand that, it's also more of a long-term issue.

I'm talking about the realities of what will happen on Jan. 1, 2011 when the Bush tax cuts expire and people actually (not theoretically) have less money in their pockets. Are you honestly telling me that you think that will be a good thing? Demand is down right now across the board. That is why all the Keynseianist out there are saying we need more "stimulus". So your answer to stimulate the economy is to take more money out of the consumer's hands and blow it on things like studying why pig sh!t stinks?

[Rollo]

Clearly. I'm not disputing that. But the fact the the consumer has more money in his pocket, thanks to the personal income tax cut, is the reason that this increases revenue. Had the consumer not had the extra money, consumption would have faltered, and the net taxes collected would have been lower.

By definition if the money is being spent on consumption rather than taxation, there is less money collected in taxation. It does increase revenue for firms, but not for the government.

Besides which, people's short term consumption doesn't really change according to how much they do or do not pay in taxes. Consumption is mainly determined by someone's real wealth, not their current real disposable income.



I'm talking about the realities of what will happen on Jan. 1, 2011 when the Bush tax cuts expire and people actually (not theoretically) have less money in their pockets. Are you honestly telling me that you think that will be a good thing?

Yes I am telling you that this is a good thing.

To fund "tax cuts" means that there is a shortfall in the government's accounts. This can either be achieved by drawing down government savings or the accumulation of debt.
The US Government Debt currently stands at $12 trillion, there will be some point in the future where the debt bubble will burst.

Have you already forgotten that the current "Global Financial Crisis" was/is essentially caused by and fueled by debt? People actually having less money in their pockets must surely be a good thing, especially when it's all on credit and wasn't theirs to begin with.


Demand is down right now across the board. That is why all the Keynseianist out there are saying we need more "stimulus". So your answer to stimulate the economy is to take more money out of the consumer's hands and blow it on things like studying why pig sh!t stinks?

I'd prefer to spend stimulus monies on great public works, so that you had something to show (ie infrastructure) for spending stimulus money. It's funny you should mention blowing money on "things like studying why pig sh!t stinks" because that was what the Stimpack of 2008 may as well have done.

[chuck34]

By definition if the money is being spent on consumption rather than taxation, there is less money collected in taxation. It does increase revenue for firms, but not for the government.

Besides which, people's short term consumption doesn't really change according to how much they do or do not pay in taxes. Consumption is mainly determined by someone's real wealth, not their current real disposable income.

That's the dumbest thing I've ever heard. By that logic there should be no limit on what the government takes. Why stop at 39%? Why not 90 or 100%? Can you just give me all your money? I promise I'll use it for "good" things.


Yes I am telling you that this is a good thing.

To fund "tax cuts" means that there is a shortfall in the government's accounts. This can either be achieved by drawing down government savings or the accumulation of debt.
The US Government Debt currently stands at $12 trillion, there will be some point in the future where the debt bubble will burst.

Again, you completely ignore the most obvious solution to "fund tax cuts".(which brings up something interesting, how does keeping tax rates where they currently are become a tax cut?) The best way to "fund tax cuts" is to cut spending! Why do you ignore this? Can't we all agree that government spends too much money, and quite a bit of it is on really stupid stuff?


Have you already forgotten that the current "Global Financial Crisis" was/is essentially caused by and fueled by debt? People actually having less money in their pockets must surely be a good thing, especially when it's all on credit and wasn't theirs to begin with.

What the hell are you talking about? You completely contridict yourself. If the current "Global Financial Crisis" was/is caused by debt, which I agree a large part of it was. How on earth is MORE debt a good thing?


I'd prefer to spend stimulus monies on great public works, so that you had something to show (ie infrastructure) for spending stimulus money. It's funny you should mention blowing money on "things like studying why pig sh!t stinks" because that was what the Stimpack of 2008 may as well have done.

Yes great pubic works would be ok, or at least better than the crap they spent "stimulus" on. However, things like the Hoover Dam and Golden Gate Bridge didn't really do much the last time those things were tried. I know that "studying pig sh!t" is what was in "Stimpack 2008", that's why I brought it up. Are you under the impression that "Stimpack 2008" worked? I'm sure not. It was a boondoggle from start to finish and an incredible waste of money.

[Rollo]

That's the dumbest thing I've ever heard.

Milton Friedman proposed the theory of the Permanent Income Hypothesis.
http://en.wikipedia.org/wiki/Permanent_income_hypothesis
If it sounds dumb to you then so be it.





Again, you completely ignore the most obvious solution to "fund tax cuts".(which brings up something interesting, how does keeping tax rates where they currently are become a tax cut?) The best way to "fund tax cuts" is to cut spending! Why do you ignore this?

Really? In this thread:

The other option is to decrease government spending. I would suggest slashing Social Security, Medicare, Medicaid and the Department of Defence spending, because those are the biggest areas pulling the budget, and it is impossible to decrease the interest bill unless you first start running surpluses.
If I've ignored something, then it seems strange that I would have already mentioned it previously.



What the hell are you talking about? You completely contridict yourself. If the current "Global Financial Crisis" was/is caused by debt, which I agree a large part of it was. How on earth is MORE debt a good thing?

You tell me. Haven't I stated and restated that the $12 trillion in debt is a very big problem?

If the government collects more in taxes then it spends, then it sinks debt. If it spends more than it collects then it raises debt.
If you intend to offer a tax cut, then government spending needs to be lowered by at least an equal if not lower amount than the revenue lost as a result of the tax cut.

Aggregate Demand though equals Consumption plus Investment Spending plus Government Spending and all three components have vastly different effects. It's just that Government Spending has the greatest single capacity to radically alter Aggregate Demand, by virtue of it being the biggest policy directed factor.

[chuck34]

Milton Friedman proposed the theory of the Permanent Income Hypothesis.
http://en.wikipedia.org/wiki/Permanent_income_hypothesis
If it sounds dumb to you then so be it.

OK, let's assume Friedman is right. Now, how much of your money can I have? Afterall it won't have any effect on you, right?


Really? In this thread:

If I've ignored something, then it seems strange that I would have already mentioned it previously.

Ok, but in your last few posts you have been arguing solely for increased taxation, not spending cuts. If you now want to cut spending great, I'm with you. Many agencies that have overgrown budgets that produce little to no results.


You tell me. Haven't I stated and restated that the $12 trillion in debt is a very big problem?

Yes, but your solution only appears to be raise taxes. And as has been demonstrated historically, and explained by Laffer's theory, raising taxes will NOT bring in more revenue to the government.


If the government collects more in taxes then it spends, then it sinks debt. If it spends more than it collects then it raises debt.
If you intend to offer a tax cut, then government spending needs to be lowered by at least an equal if not lower amount than the revenue lost as a result of the tax cut.

A) The point of this discussion is that lowering taxes, to a point, will INCREASE revenue, and the opposite as well. I'll grant you that we are probably at or near the t point. But why would you want to raise taxes at that point?
B) Yes! Lets LOWER spending.


Aggregate Demand though equals Consumption plus Investment Spending plus Government Spending and all three components have vastly different effects. It's just that Government Spending has the greatest single capacity to radically alter Aggregate Demand, by virtue of it being the biggest policy directed factor.

That's what FDR thought too. How'd that work out for him? Let's ask Henry Morgenthau, Treasury Secretary and archetect of the New Deal.

http://www.businessandmedia.org/articles/2008/20081104085447.aspx

We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong ... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises ... I say after eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!