Bush tax cut analysis

[August]

Originally Posted by gimpy117

oh no, I pay them, I just have to file a tax return to get a refund. But i only get income refunds. If what you are saying was true, i would have and extra 900 in my account right now.

also steve, I was not talking about taxing the rich for a "HA! sucks to you" sort of approach, Im talking about how our government is in a money crunch, and the bush tax cuts helped put us there. We need that extra revenue. It will be an unpopular move for sure, But it's not unprecedented.

IMHO the government is in a money crunch because it has wasted and continues to waste enormous amounts of it. It's very difficult to sell a solution that involves giving them even more money.

All you'll accomplish is to set the bar higher and we'll be back here in a few years debating having to give them even more money to get them out of their latest boondoggles.

[tater]

If you pay positive income taxes on $5000 income you're doing it wrong—assuming you are not a dependent.

The tax cuts have pretty much nothing to do with the government's money problems. The problem is they spend too much, period. There is no other problem.

Revenues are fine as a % of GDP WRT modern norms with the top marginal rate down to 35 (all the other tax changes don't mean squat, since unless you pay in the top bracket you don't pull even a single "fair share" (some folks in the top of the 2d quintile might actually pay a "fair share" assuming they are single).

Since revenues remain fairly constant WRT GDP regardless of small changes (or even large changes) in marginal tax rates, clearly raising taxes doesn't help raise more money. Why is open to discussion, but the idea that it stifles growth makes plenty of sense in that context. The converse, that lowering rates seems to enhance growth enough to have the "cost" of the lower rates offset seems also to be true. Obviously outside of some range this might fall apart, economics is not remotely predictable (sorry to any economists out there that think they have some sort of science—they don't. (yeah, I'm a physics snob... tough )

[gimpy117]

Originally Posted by tater

If you pay positive income taxes on $5000 income you're doing it wrong—assuming you are not a dependent.

oh no im a Dependant, I basically work to try to pay for as much school as i can

[Aramike]

Im talking about how our government is in a money crunch, and the bush tax cuts helped put us there. We need that extra revenue. It will be an unpopular move for sure, But it's not unprecedented.

What about the approach of cutting spending?

[mookiemookie]

Originally Posted by August

IMHO the government is in a money crunch because it has wasted and continues to waste enormous amounts of it. It's very difficult to sell a solution that involves giving them even more money.

All you'll accomplish is to set the bar higher and we'll be back here in a few years debating having to give them even more money to get them out of their latest boondoggles.

Actually what it boils down to is increasing our debt for no appreciable return. It's been empiracally proven that the Bush tax cuts, or tax cuts for the rich in general (i.e. Trickle down economics) do not spur growth, no matter what metric you want to use. You can debate theory and what should or ought to happen all you like, but when it comes down to measurable and data driven analysis, it just doesn't fly. Tax cuts for the rich are spending in exactly the same way as entitlements for the poor are.

[August]

Originally Posted by mookiemookie

Tax cuts for the rich are spending in exactly the same way as entitlements for the poor are.

Y'know you seem to think that taxes are something the government owns instead of something the government takes from the rightful owners. It's a subtle but important ideological difference.

Now the Dems can call it tax cuts all they want but the bottom line is they're advocating a tax increase and everybody knows it.

So we'll see what the voters think of that idea come November.

[tater]

Originally Posted by mookiemookie

Actually what it boils down to is increasing our debt for no appreciable return. It's been empiracally proven that the Bush tax cuts, or tax cuts for the rich in general (i.e. Trickle down economics) do not spur growth, no matter what metric you want to use. You can debate theory and what should or ought to happen all you like, but when it comes down to measurable and data driven analysis, it just doesn't fly. Tax cuts for the rich are spending in exactly the same way as entitlements for the poor are.

Tax cuts are NEVER "spending." Spending if writing a check.

The government should be FORCED to spend only what it takes in with any programs not specifically mentioned in the Constitution at the end of the line (and first to go).

Tax revenues are constant regardless of rate changes. What is the mechanism? It can only be growth at some level, particularly as the labor force contracts.

We should pick limited things for the feds to do, then pay for them. Everything else should get scrapped. Retirement for all is not a "right." Stop that first.

[Sailor Steve]

Originally Posted by gimpy117

oh no, I pay them, I just have to file a tax return to get a refund. But i only get income refunds. If what you are saying was true, i would have and extra 900 in my account right now. which would really help because I could use that cash right about now for school.

Yes, it's true - if you work taxes are taken out. And if you make less than a certain amount you end up getting it all back - after the government has earned some interest on it.

also steve, I was not talking about taxing the rich for a "HA! sucks to you" sort of approach, Im talking about how our government is in a money crunch, and the bush tax cuts helped put us there. We need that extra revenue. It will be an unpopular move for sure, But it's not unprecedented.

As has been pointed out, the government is not in trouble because of Bush's tax cuts, or because of Reagan's, or because of Kennedy's back in 1963. The government is in trouble because congress regularly (read always, every single year) spends more money than they take in, the same kind of practice that will get you or me thrown in jail.

Here's an example: The government proudly boasts that they have created 10,000 new jobs. Only problem - they are jobs with the government. Sure, they pay taxes on what they make, but the money to pay them comes from taxes. It's this simple - every single government job is also welfare. A great many of those jobs are necessary, but many more of them aren't. Congressmen are paid $174,000 per year. Whether they actually earn that is a subject for another discussion, but my point is that they don't sell anything or create the corporate wealth that you complain about. They are paid from your taxes! As is every staff member they hire. Here in Utah our wonderfully conservative senator Orrin Hatch was paid that same $174,000 last year. But his staff was paid an additional two million dollars. That all came from taxes. Multiply that by 535, and you get over a billion dollars of your tax money every year just to pay the congressional staff workers.

Did you know that during the Constitutional Debates Benjamin Franklin proposed that Congress not be paid at all?

[edit] I just did a quick check, and it gets worse. Did you know that Speaker Of The House Nancy Patricia D'elassandro Pelosi's salary expenditures for last year totaled over one million dollars? To be fair, that includes her own $223,500 salary. I'm not including perks that come from outside sources, because that isn't your tax money. But the numbers listed are.

And you trust the government more than you trust the 'evil rich'? At least they stole theirs fair and square.
http://www.legistorm.com/salaries.html

[Aramike]

Originally Posted by mookiemookie

Actually what it boils down to is increasing our debt for no appreciable return. It's been empiracally proven that the Bush tax cuts, or tax cuts for the rich in general (i.e. Trickle down economics) do not spur growth, no matter what metric you want to use. You can debate theory and what should or ought to happen all you like, but when it comes down to measurable and data driven analysis, it just doesn't fly. Tax cuts for the rich are spending in exactly the same way as entitlements for the poor are.

It depends on what you qualify as "rich".

The Bush tax cuts was indeed a large cut for the rich, but they were also large cuts for those business owners seeking growth.

You're right - trickle down economics is a myth, but that's not why tax cuts work in the first place. An excellent article: http://www.businessandmedia.org/comm...om20060111.asp

A market economy is based on voluntary exchange. I cannot force you to buy something that I produce, and you cannot force me to produce something for you. The only way you can get rich in a market economy is to produce something that others want and are willing to pay for. Since there are not a lot of rich people, you are more likely to get rich producing something for the poor and middle class that they will want and at a cost that they can and are willing to pay.

The marginal tax rate is the one that affects your incentive to do this. It tells you how much of the next dollar the government will take and how much of the next dollar you get to keep. Lowering the marginal tax rates creates a greater incentive for people to find a way to produce things for the poor. This is what happens in any market economy, be it the United States or Estonia (which is growing rapidly after reducing its top marginal tax rates). It also makes it easier for people who are poor to become rich, thus increasing their willingness to work hard and risk their assets to produce what others will want.

If the government taxes away 90 percent of each additional dollar you earn, there will be little incentive for you to risk your life's earnings in a new venture that has an uncertain payoff, and it will be very difficult for you to move from poverty to wealth. On the other hand, if you get to keep 75 percent of each dollar that you earn, you will have an incentive to risk your capital, work hard, and produce goods and services that others want at a cost they can afford.

[mookiemookie]

Originally Posted by Aramike

It depends on what you qualify as "rich".

The Bush tax cuts was indeed a large cut for the rich, but they were also large cuts for those business owners seeking growth.

You're right - trickle down economics is a myth, but that's not why tax cuts work in the first place. An excellent article: http://www.businessandmedia.org/comm...om20060111.asp

[/FONT]

The article's central premise highlights the fatal flaw of trickle down, supply side, Laffer curve, whatever you want to call it economics. Lower tax rates are not as much of an incentive to work more as the author thinks. People will continue to work and earn money, regardless of the general level of taxes. Look at an effective 100% tax rate under Soviet Russia - by the author's line of thinking, nobody would work. But they did. When our top marginal tax rates were 90% in the 1950s we saw a big economic boom.

The Laffer curve also fails on the lower end of the tax rate spectrum. If you're keeping more of what you earn (i.e. paying a lower tax rate) the effect of lower taxes is not going to have the same effect as it would if you're a high earner (i.e. high taxpayer). You're giving up tax revenues and not getting much in return for it.

Plus, if you're working a full time 9-5 schmuck office job, you're going to continue to work your 9-5 schmuck office job regardless of the tax rates because you need to put food on the table. Most people are fairly inelastic in their work habits.

I've said it before - no one in their right mind is going to give up extra income because the government is going to tax a portion of it. I'd love to make enough to have the problem of dealing with 35% or 39.5% top marginal tax rates.

[August]

Originally Posted by mookiemookie

Look at an effective 100% tax rate under Soviet Russia - by the author's line of thinking, nobody would work. But they did.

They only worked because it meant a one way trip to Siberia for them and their family and possibly a bullet if they didn't do what they were told. Is that the kind of work incentive the Progressives really want to institute?

[mookiemookie]

Originally Posted by August

They only worked because it meant a one way trip to Siberia for them and their family and possibly a bullet if they didn't do what they were told. Is that the kind of work incentive the Progressives really want to institute?

Yes. You figured out our plan.

[AVGWarhawk]

Originally Posted by mookiemookie

Yes. You figured out our plan.

Have to agree with August on that one. Permafrost...is not your friend.

[August]

Originally Posted by mookiemookie

I've said it before - no one in their right mind is going to give up extra income because the government is going to tax a portion of it. I'd love to make enough to have the problem of dealing with 35% or 39.5% top marginal tax rates.

That's assuming you can still make a profit on the remainder. Not all business overhead is deductible. 4.5% could therefore easily be the difference between a profitable and unprofitable venture.

Besides people have a right to equal treatment under the law. Graduated tax rates are inherently contrary to that right.

[mookiemookie]

Originally Posted by August

Besides people have a right to equal treatment under the law. Graduated tax rates are inherently contrary to that right.

I doubt you'd find any court in the nation that would agree that being rich is a suspect classification. No fundamental right to life liberty or pursuit of happiness is being denied. A progressive tax system also pases the rational basis review.