What the graph shows quite clearly is that spending accelerated a bit while revenue dropped quite drastically.
yup. A trend that was then not so much doubled down on as
tripled down on under the current administration.
What you see is that revenue and spending rose more or less together for decades ... until first the Reagan tax cuts and then the Bush tax cuts, both of which created large gaps between spending and revenue, i.e. monster deficits.
not really - the 1970's, for example, show two drops in revenue below GDP. There was also a small fall in the 60's, a fall in the mid-50's and a drop in the late 40's. Revenue consistently has moved independently of rates.
However, at
no time did we see a tax reduction that cut reveneu in
half but only produced 1%
growth; as you suggested in your model. The Bush Tax Cuts were
much smaller than the Reagan Tax cuts; and yet revenue fell off
greater in the 2001 and 2009 time periods.
Because revenue is not a direct reflection of rates. Revenue drops with Recessions, it fails to come back in anemic growth, and it is choked in times of large government expansion.
So letting the Bush tax cuts expire would be a minimal change in your opinion? Why then does the right act as though a minimal rise in taxes would bring about armageddon?
I couldn't speak about armaggeddon or 'the right's claims in that regard. I will say that we are in the middle of an economic period where we are bouncing along the bottom rather than recovering from the Recession. Raising tax rates will reduce the incentive for productive behavior and increase the incentive to spend time, resources, and effort pursuing tax-avoidance behaviors at the exact worse time. Even Keynes said it was stupid to raise taxes
while the economy was suffering. SO I would say that I see little likelihood that merely raising the rates will generate much more revenue, and I see a strong likelihood that increasing the rates will have a dampening effect on growth.
As I've mentioned to you before, that chart is incredibly misleading. It looks like revenue as a percentage of GDP is more or less level, due to the tiny scale employed, whereas in fact it has varied by as much as 4% of GDP, which represents a huge number.
ye-ess... that is precisely what
I said. Revenues fluctuate wildly (from 28% to 91% is an increase of over 300%, after all), but
revenue remains relatively stable indicating that rates do not have a strong direct effect on revenue.
US GDP is about $15 trillion/yr. So a drop of 4% equals about $600 billion ... or about half of our current deficit.
Yes, and as I demonstrated to you, that drop is driven by low growth and government expansion. Taxing a smaller portion of a smaller pie means less in taxes.
As of 2008, economists estimate that the Bush tax cuts cost about $1.7 trillion in revenue.
As of 2010, according to the CBO, using a
static scoring model (which is to say, one that is ridiculously optimistic about the taxes that would be collected) the two year extension of the Bush Tax Cuts cost a grand total of
$544.3 Billion; or $272.15 a year. Out of that $272 Bn, only $40 Bn is attributable to families making $250K a year or more - the vast majority of the "cost" of the Bush Tax Cuts are due to the
middle class tax cuts.
If you want to "recapture" all that revenue, alright. But run honestly and admit that you wish to hike taxes on the middle class.
Ah, a Heritage Foundation chart.... Pardon me if I take their projections with a pound of salt.
Ah, the old ad-sourcinem. In fact, the part that is projected is the part that
doesn't demonstrate the government-up-revenue-down effect.
What it does show, however, is that the Clinton tax hikes, combined with bipartisan spending cuts, resolved our deficit problem rather quickly
Partially - Clinton
cut rates in the second administration and saw a spurt in
growth which increased revenues. But yes, reducing the comparative size of government combined with solid growth did indeed have powerfully positive impacts on revenue, and came close to solving the deficit - our national debt still went up every year because we were using the social security overruns to finance other spending.
And it can again, if one party can get it through it's thick ****ing head that we can't address our monumental debt problem through spending cuts alone.
I think you'll find that most Republicans are open to the notion of effective rate increases. I am, for example. But so far Republicans have been tricked not once but twice by Democrats pretty-promising to cut spending if only we agree to raise taxes. Nothing doing
That's a rather simplistic view. Government workers pay taxes like everyone else.
Which represents government giving itself money, rather than collecting any. If I give my teenage son an allowance of $800 a month, but charge him $200 a month rent, am I left wealthier?
If the government is too small to manage the country then revenues will suffer. If it's too big then revenues will suffer.
precisely which is why we need to start looking at bringing it down from its' current too-large status of 24% of GDP to something more like the end of the Clinton administration when it was 18% of GDP. I don't recall suffering from anarchy in 2000.
Nonsense. Significant cuts in taxes freed up billions in liquidity that many people used to invest in real estate.
this is not fully correct - those cuts came in the middle of a recession, when capital was reduced.
Captial gains tax changes instituted by both Clinton and Bush also played a significant part.
that
is correct, but you forget that those reductions contributed not just to an increase in investment in real estate, but an increase in investment in
everything, from small businesses, to internet social media, to stocks, to bonds.
The Great Depression--Coolidge cut taxes on the wealthy
Harding cutting taxes and reducing spending when he did actually pulled us out of the Recession whose market collapse was about the same as the 1929 one, and gave us the roaring twenties, effectively creating the modern American Middle Class. What caused the Great Depression was first Hoover and then FDR's meddling. Here's a hint: Hoover
raised taxes on the wealthy.
Savings and Loan Crisis--Reagan cut taxes on the wealthy
and pulled us out of the Stagflation of the 70's, and gave us an incredible economic boom. When the S&L crises hit, we faced the severest one-day drop in the stock market ever and then.... recovered!
Mortgage Security Crisis--Bush cut taxes on the wealthy
I like how for all of these, the Presidents involved cut taxes on EVERYONE, but you only feel the need to bring up the wealthy. As though America's middle class didn't purchase more housing than it could afford.
The Laffer Curve simply says that taxes can be to high OR too low. Guess where we are on the curve now, with revenue at a 50-year low?
Well that is the current debate - but the fact of the Curve's wide acceptance makes your claim that generally economists do not believe that a tax cut can pay for itself to be false.
