PA budget

[Undertoad]

It's more like an economic truism: at some point, higher tax rates lead to lower tax revenues.

Some people do not see a need to make all that money if they are going to turn over more than half of it. Other people simply go where the money can be made more easily, which is more possible than ever on our flat earth. The loss of this activity leads to less investment, in turn fewer jobs, and eventually even brain drain as smart people start to emigrate. Then there is less money to tax, and tax revenues fall.

To really get higher tax revenues, what you want is maximum economic growth. Clinton did not really raise taxes much to rid us of the Reagan/Bush deficits. Growing the economy solved the deficit as it floated all boats.

[SamIam]

Originally Posted by Undertoad

It's more like an economic truism: at some point, higher tax rates lead to lower tax revenues.

From that it should follow that lower tax rates should lead to higher tax revenues.

Which ain't happening here. Colorado dropped its tax rate from a high of 5% in 1999 to 4.6% from 2000 to present. Employers have not exactly been treating this as a new Colorado gold rush. According to data that just came out today, Colorado's unemployment is at a record high, a "seasonally adjusted" 9.1% The ACTUAL unemployment rate is 9.9% ! Recovery? What recovery?

[Undertoad]

Lower tax rates should lead to higher tax revenues "at some point". If an economy is not at that point it does not follow. If other taxes make the bulk of taxes, a drop in state tax will not have as big an impact. Also, we were talking about tax revenues and not unemployment. Were there changes in tax revenues?

[tw]

Originally Posted by Undertoad

Lower tax rates should lead to higher tax revenues "at some point".

That is the popular myth. The only thing that leads to higher revenue is balanced budgets. Lower tax rates - if that is supposed to increase economic activity - is to pass that law that requires everyone to replace their lawn every year. It causes massive economic health - in the short term. And worst economics destruction in the long term.

Any such money game that makes a better economy is also why economics takes revenge - without exception - many years later. Kennedy tax cuts were a perfect example.

Taxes must be the same percentage for all. Currently, the richest among us pay the least in taxes. The people who make most jobs - maybe in the $80,000 to $250,000 rage - see no tax cuts. The people who most feed off the wealth are paying the least under a myth of trickle down economics. That obvious myth back then is proven even by the worst recession in 70 years. When the greatest tax cuts literally destroyed a potential surplus, then look at all that wonderful economic health and wealth.

Spinning myths is easy among a population educated by soundbytes. Reagan told everyone he cut taxes. And then we look what he really did. By increasing social security taxes, he actually increased taxes. But those educated in sound bytes only believe the original myth. Because so many only believe the first thing they are told. And get angry when challenged with the truth.

George Jr's tax cut have only done massive harm to the American economy. But the lies and myths are rampant. For example, the tax rate on some rich and on corporations is 35%. What they forget to mention is what they are actually paying once all the spread sheet games and tax exemptions are added. Most major corporations are paying well less than 20%. A surprising number in the Fortune 500 were paying no taxes. Warren Buffet said his receptionist was paying higher taxes then he. But Limbaugh, Beck, etc did not discuss that. So an overwhelming majority did not hear it.

We have spread sheet games that only accountants and the people who created this mess could love. They even have us arguing nonsense here. When the rich only get richer - and this only happened twice in American history - then the country's economy goes crap. A wealthy and healthy America means job creators - which are not the rich people - are not being punished as they are today by MBA concepts of "the purpose of a company is its profits" - and other lies.

Taxes must be increased as necessary to cover the debts. As Buffet said, the only tax cut is one that reduces spending. Starting in 2000, the people who most destroyed America did the opposite.

Now they have all their victims fighting among themselves inspired by political rhetoric, myths, and soundbyte logic.

The most heavily taxed should be financial institutions that even lie about creating jobs. Wall Street does not create jobs - except their own.

Iacocca defined the problem in 1979. He could maximize Chrysler's profits by turning it into a financial firm. Those least productive companies earn the highest profits while paying some of the least taxes. Even most of GE's profits come from money games - not from producing anything. Which is why I tell every kid to never be an engineer. Always do what will most destroy America. Be an MBA. Harm America. But have the best income and easiest life. Screw America - because that is what the powers that be are doing to have everyone else fighting among themselves. And yes, I am being in your face serious. Don't be productive. The least productive people - ie my peers in school who were the worst students - are also the richest. They become stock brokers or some financial equivalent. They even get the best tax cuts.

[Fair&Balanced]

Originally Posted by Undertoad

It's more like an economic truism: at some point, higher tax rates lead to lower tax revenues.

Some people do not see a need to make all that money if they are going to turn over more than half of it. Other people simply go where the money can be made more easily, which is more possible than ever on our flat earth. The loss of this activity leads to less investment, in turn fewer jobs, and eventually even brain drain as smart people start to emigrate. Then there is less money to tax, and tax revenues fall.

To really get higher tax revenues, what you want is maximum economic growth. Clinton did not really raise taxes much to rid us of the Reagan/Bush deficits. Growing the economy solved the deficit as it floated all boats.

Both GHW Bush and Clinton raised the marginal tax rate on the top bracket. Bush took it to from 28% to 32% and Clinton raised that to 39%.

A huge part of the current debt is due to G Bush lowering it back to 35%, resulting in a loss of nearly $1 trillion in revenue over the course of his term.

By making it permanent, as the Republicans are proposing, the only result of the significant cuts in spending they are proposing will be to offset the continued lost revenue if the top tax rate remains the same.

Yes, spending cuts are a necessary component of the equation, but you cant balance the budget simply by cutting spending in the manner which is being proposed, which will not "grow the economy" but simply burden the middle class and working poor, many of whom are already living from paycheck to paycheck or worse.

Economic growth requires both investing by the govt (in both people and programs that incentivize growth, like R&D, education, etc to make the US more competitive once again) AND raising taxes on the top wage earners (restoring the Clinton era rate) and eliminating excessive corporate tax breaks.

Bush I got it, Clinton got it, Bush II did not, nor does the current Republican majority in the House.

And lastly, as to the notion that raising taxes on the rich by a few percentage points will act as a disincentive to aspire to more wealth, I never met anyone who doesnt want to make more money, even if it results in marginally higher taxes.

There is a reason why every advanced economy in the world has a system of progressive taxation, where the wealthiest pay a marginally higher rate......it works.

[Spexxvet]

Originally Posted by Undertoad

Having sat across the table with an SBA representative, I can assure you this is fantasy.

But surely you "get" the sentiment that I expressed.

You bring up an interesting dichotomy, though. Granting you funds would increase taxes, and that makes them bad. Not granting you funds makes them bad, too, because you would like government help to start a business. Damned either way.

Originally Posted by Flint

Be that as it may, I'll be goddamned if Spex and his ilk are going to give away MY table scraps.

So it's not about the facts, it's about me.

I'm asking that everyone feels some pain. The commoners who are losing their jobs, or having their income frozen or reduced are feeling pain. They shouldn't pay any more. Now that the market is back to 12,000, the rich are not feeling any pain, and they should.

[Flint]

Originally Posted by Spexxvet

Now that the market is back to 12,000, the rich are not feeling any pain, and they should.

But "the rich" have worked hard to put themsleves ina position to be able to weather economic ups and downs. That is the point of acquiring wealth--to reduce the risk you are exposed to. What you are suggesting is to impose an artificial condition. In effect, to "undo" what they have done for themsleves.

My point is that you don't just "get" rich. If it hasn't been handed to you, nobody should be able to take it away.

[Fair&Balanced]

Originally Posted by Flint

But "the rich" have worked hard to put themsleves ina position to be able to weather economic ups and downs. That is the point of acquiring wealth--to reduce the risk you are exposed to. What you are suggesting is to impose an artificial condition. In effect, to "undo" what they have done for themsleves.

Progressive taxation, where the wealthier pay a marginally higher rate may be an "artificial condition" in theory. But in practice, it is the only systems of taxation that has proven to be able to fund the cost of government, which is why it has popular support.

It is not the wealthy complaining they pay too much in taxes. It is a relatively small segment of society with libertarian principles who want a "fair tax" system that have never been successfully applied anywhere in the world.

[Spexxvet]

Originally Posted by Flint

But "the rich" have worked hard to put themsleves ina position to be able to weather economic ups and downs. That is the point of acquiring wealth--to reduce the risk you are exposed to. What you are suggesting is to impose an artificial condition. In effect, to "undo" what they have done for themsleves.

My point is that you don't just "get" rich. If it hasn't been handed to you, nobody should be able to take it away.

Have you worked hard? Have you made the best decisions you could to put yourself in a position to attain wealth? My guess is that you put out as much effort as most "rich" people. Yet in the current climate, you will feel much more pain than the "rich" guy. You should not be left living paycheck to paycheck at a just-above-sustenance level when a guy who only works as hard as you and has reaped the benefits of our government gets to drive a Ferrari and summer on the Riviera.

[Spexxvet]

Flint, my raw household income puts me in the 28% tax bracket. My effective tax rate for 2010 was 6.53%. I have a 401(k), a mortgage and 3 kids - 1 in college. I live paycheck to paycheck, with lots of debt. I don't have the resources to manipulate my tax liability. Do you think that someone who does have the resources to manipulate the system pays the same tax rate that you do? Does he pay his share? No. Is that fair? It seems to me that the middle class is footing the bill for the rich, not the other way around.

[Undertoad]

F&B. Your sources are always cherry-picking. Let's take your chart:



And extend it further back in history:



And now here's a chart of post-war tax receipts as a percentage of GNP:



Even when the top rate is set at 90%, the actual revenue collected out of the system is the SAME.

[SamIam]

Originally Posted by Undertoad

Lower tax rates should lead to higher tax revenues "at some point". If an economy is not at that point it does not follow. If other taxes make the bulk of taxes, a drop in state tax will not have as big an impact. Also, we were talking about tax revenues and not unemployment. Were there changes in tax revenues?

The inter-active budget I was using for Colorado showed tax revenues falling every time I cut taxes and climbing every time I raised them. But I think your statement is an over-simplification. Many other factors are going to effect tax revenues.

[Spexxvet]

Originally Posted by Undertoad

Even when the top rate is set at 90%, the actual revenue collected out of the system is the SAME.

Can you show a chart of actual dollars, rather than as a percent of GDP? Adjusted for inflation, please.

[Undertoad]

Percentage of GNP IS adjusted for inflation by definition, and is a more accurate depiction than actual dollars.

[glatt]

The country has doubled in population in that time frame, so even if you do adjust for inflation, you also need to adjust for there being twice as many people paying in to the tax system. You need to express it as a percentage of GDP otherwise you'll see the line going up as the country (and government) have grown. UT is right, Spex.