538: The GOP Tax Cuts Are Even More Unpopular Than Past Tax Hikes

JasperL · Dec 14, 2017

MTAtech said:
From an economic standpoint, the conservative argument is that 'taxes are making people/businesses go Galt. If we just lower taxes, people will work more and produce more.' The overall argument is that the current tax-rates are above the marginal utility curve and lowering rates would draw more revenue. Unfortunately, for this argument, rates are no where near the rate that discourages economic activity.

Or we could put the issue in terms of substitution and income effects. As work becomes less profitable with higher tax rates, people substitute less costly leisure - aka "Go Galt." But that discussion ignores the income effect, which is people work to attain a desired standard of living and higher taxes require MORE work to attain that desired standard.

Bottom line is I recognize that taxes very likely reduce overall economic growth, but the effect is small and overwhelmed by other factors in the economy, such as interest rates, demand, the world economy, commodity prices such as for energy and raw materials, technological improvements, productivity gains, population growth, labor costs, etc. The GOP outlook pretends that tax rates are about the only thing that matters and if you lower them, it's magic. It's just false, and every economist knows it.

ashurbanipal · Dec 14, 2017

AlbqOwl said:
It benefited most of us. We all saw more take home pay in our paychecks. Remember that President Reagan inherited the worst economy we had seen to that point since the great depression. Double digit interest rates. Double digit inflation. Stagnant growth. High unemployment. He did sign a tax increase his first year in office that only worsened things. The tax cuts of 1983, however, boosted the economy to the point that we all started seeing improvement. And the reform package of 1986 kept it going.

These are rather different claims than you made at first. This is also a rather facile view of the recession of the early 80's. Some points that bear on the subject at hand:

1. The recession was a global one, and was not wholly, or even mostly, caused by U.S. policy--especially U.S. tax policy. The oil shocks, deflationary monetary policy from the fed, financial deregulation, and instability in Asia and Europe all contributed.

2. Nor did U.S. tax policy lift us out of the recession. The biggest cuts became active in the summer of 1981, when it appeared that the U.S. was climbing out of recession. But by the summer of 1982, we were back in it again, despite all that money not being paid in taxes. Who wasn't paying it? Well, everyone to some extent--but the vast majority of the benefit went to the wealthy and uber-wealthy. Which is exactly what the tax bill currently under negotiation in Congress will do once again. In the meantime, the cuts of 1980 also added to the national debt, which had trippled by the time Reagan left office. Politicians learned that they could expect big donations from wealthy donors so long as they agreed to work for the interests of those donors. While this was not the start of corporate/government collusion, such collusion was greatly accelerated at that time. This was also the start of the reopening of the wealth and income gap.

The problem with income and wealth inequality, in a nutshell, is that it destroys any sense of common purpose among the members of a society. If person A works as hard as person B, but person B, through political or other connections, gets a huge slice of the pie while A gets mere crumbs, A will start to wonder why he's working for a system that only benefits B. Over time, it will destroy the fabric of society, and will ultimately spell our doom if we don't reverse course.

AlbqOwl · Dec 14, 2017

Critter7r said:
And could just as easily correlate the reduction of interest rates starting in '82 (wholly within control of the Fed) allowed credit to be more readily available. Followed by showing that at about that time, consumer credit debts started to increase. Now, the tax reductions may have increased consumer confidence somewhat, making the assumption of consumer credit more palpable, but a couple hundred extra bucks a year in Joe Average's pocket isn't what kick started the economy.

Tax cuts didn't do anything to mitigate the double digit interest rates or double digit inflation. And mitigating the interest rates and inflation could have very well gotten rid of the stagnant growth and high unemployment without tax cuts.

Interest rates were still high double digits in 1982. Mortgage rates as I recall were in the 18% range.

JasperL · Dec 14, 2017

ashurbanipal said:
These are rather different claims than you at first made. This is also a rather facile view of the recession of the early 80's. Some points that bear on the subject at hand:

1. The recession was a global one, and was not wholly, or even mostly, caused by U.S. policy--especially U.S. tax policy. The oil shocks, deflationary monetary policy from the fed, financial deregulation, and instability in Asia and Europe all contributed.

2. Nor did U.S. tax policy lift us out of the recession. The biggest cuts became active in the summer of 1981, when it appeared that the U.S. was climbing out of recession. But by the summer of 1982, we were back in it again, despite all that money not being paid in taxes. Who wasn't paying it? Well, everyone to some extent--but the vast majority of the benefit went to the wealthy and uber-wealthy. Which is exactly what the tax bill currently under negotiation in Congress will do once again. In the meantime, the cuts of 1980 also added to the national debt, which had trippled by the time Reagan left office. Politicians learned that they could expect big donations from wealthy donors so long as they agreed to work for the interests of those donors. While this was not the start of corporate/government collusion, such collusion was greatly accelerated at that time. This was also the start of the reopening of the wealth and income gap.

The problem with income and wealth inequality, in a nutshell, is that it destroys any sense of common purpose among the members of a society. If person A works as hard as person B, but person B, through political or other connections, gets a huge slice of the pie while A gets mere crumbs, A will start to wonder why he's working for a system that only benefits B. Over time, it will destroy the fabric of society, and will ultimately spell our doom if we don't reverse course.

And a long time ago I read an article written by and for the "elites" and the argument was pretty pragmatic. Essentially it was an argument for globalization/"free trade", but the author recognized that it would produce a lot of losers in the working class as manufacturing was offshored to lowest common denominator locations - China at that time. He was arguing for some version of a guaranteed minimum income, or a type of EITC - straight up wealth transfers. And it wasn't because the author cared about working people, but because he recognized that ultimately the only way to sustain the more efficient and profitable system was to distribute the gains to everyone, including those who lost out because our manufacturing core has been hollowed out, and the only way to do that was redistribution of wealth.

First of all, the paper was a recognition that there is no such thing as "free markets" and that the distribution of wealth in a capitalist system depends on the rules of the game, set by government, and that the rules being implemented WOULD primarily benefit the 'wealthy' at the expense of the working class. Second, the paper was a recognition that there had to be some formal mechanism to 'correct' or ameliorate those effects or ultimately voters would demand the end of that system.

It amazes me how little attention this gets among right wingers. There are many examples in history, and across the globe, including our own history in the aftermath of the Great Depression. In this past election, we had a Democrat running as an economic liberal, and an avowed socialist damn near won that nomination, and Trump ran as a populist, promising to blow up 'free trade', raise taxes on the wealthy, not cut a dime from Medicare, Medicaid and SS, but to provide universal healthcare! Of course he lied, but the point is the voters, in both parties, are essentially are demanding a bigger piece of the pie for....workers.

JasperL · Dec 14, 2017

AlbqOwl said:
Interest rates were still high double digits in 1982. Mortgage rates as I recall were in the 18% range.

Homes and Loans: Prime Lending Rate History

You're right, and that's the point, really. The Fed (Volcker) deliberately threw the economy into a major recession in the early 1980s to kill off inflation, and the 1980s boom followed the Fed lowering interest rates. So there was a lot going on besides the Reagan tax cuts, which functioned as just run of the mill Keynesian stimulus, at least in large part. Lower taxes, INCREASE spending, and put the tab on the deficits and debt.

AlbqOwl · Dec 14, 2017

ashurbanipal said:
These are rather different claims than you made at first. This is also a rather facile view of the recession of the early 80's. Some points that bear on the subject at hand:

1. The recession was a global one, and was not wholly, or even mostly, caused by U.S. policy--especially U.S. tax policy. The oil shocks, deflationary monetary policy from the fed, financial deregulation, and instability in Asia and Europe all contributed.

2. Nor did U.S. tax policy lift us out of the recession. The biggest cuts became active in the summer of 1981, when it appeared that the U.S. was climbing out of recession. But by the summer of 1982, we were back in it again, despite all that money not being paid in taxes. Who wasn't paying it? Well, everyone to some extent--but the vast majority of the benefit went to the wealthy and uber-wealthy. Which is exactly what the tax bill currently under negotiation in Congress will do once again. In the meantime, the cuts of 1980 also added to the national debt, which had trippled by the time Reagan left office. Politicians learned that they could expect big donations from wealthy donors so long as they agreed to work for the interests of those donors. While this was not the start of corporate/government collusion, such collusion was greatly accelerated at that time. This was also the start of the reopening of the wealth and income gap.

The problem with income and wealth inequality, in a nutshell, is that it destroys any sense of common purpose among the members of a society. If person A works as hard as person B, but person B, through political or other connections, gets a huge slice of the pie while A gets mere crumbs, A will start to wonder why he's working for a system that only benefits B. Over time, it will destroy the fabric of society, and will ultimately spell our doom if we don't reverse course.

The Kemp-Roth Economic Recovery Act of 1981 was phased in over 3 years so any effects were mostly in business incentives which the current tax reform package will also address. But because it did reduce some taxes without providing sufficient economic stimulus it swelled the deficit, forced interest rates higher, and triggered the second dip of the Carter/Reagan double dip recession. Most of the the 1981 policy was scrapped in 1982 with the largest tax increase in post war history. When that only made things worse it was Reagan's tax cuts of 1983--real tax cuts--was where it started turning around and getting better.

ashurbanipal · Dec 14, 2017

JasperL said:
And a long time ago I read an article written by and for the "elites" and the argument was pretty pragmatic. Essentially it was an argument for globalization/"free trade", but the author recognized that it would produce a lot of losers in the working class as manufacturing was offshored to lowest common denominator locations - China at that time. He was arguing for some version of a guaranteed minimum income, or a type of EITC - straight up wealth transfers. And it wasn't because the author cared about working people, but because he recognized that ultimately the only way to sustain the more efficient and profitable system was to distribute the gains to everyone, including those who lost out because our manufacturing core has been hollowed out, and the only way to do that was redistribution of wealth.

First of all, the paper was a recognition that there is no such thing as "free markets" and that the distribution of wealth in a capitalist system depends on the rules of the game, set by government, and that the rules being implemented WOULD primarily benefit the 'wealthy' at the expense of the working class. Second, the paper was a recognition that there had to be some formal mechanism to 'correct' or ameliorate those effects or ultimately voters would demand the end of that system.

It amazes me how little attention this gets among right wingers. There are many examples in history, and across the globe, including our own history in the aftermath of the Great Depression. In this past election, we had a Democrat running as an economic liberal, and an avowed socialist damn near won that nomination, and Trump ran as a populist, promising to blow up 'free trade', raise taxes on the wealthy, not cut a dime from Medicare, Medicaid and SS, but to provide universal healthcare! Of course he lied, but the point is the voters, in both parties, are essentially are demanding a bigger piece of the pie for....workers.

Yeah, there's a ton of economic and political theory on this topic from all sides, but it all boils down to the same few basic facts:

1. There is no such thing as a market floating around in the universe somewhere into which governments somehow intrude to everyone's detriment. Governments make markets and make and enforce the rules of that market.

2. The wealthy always seek greater advantage, and the way they usually go about it is by capturing government to control the market to their own ends.

3. When that creates a large enough gap in wealth, there is civil unrest, and ultimately, revolution.

4. And despite the fact that this cycle repeats over and over and over and over again throughout history (though a few nations have managed to avoid it altogether), we keep on doing it.

JasperL · Dec 14, 2017

AlbqOwl said:
The Kemp-Roth Economic Recovery Act of 1981 was phased in over 3 years so any effects were mostly in business incentives which the current tax reform package will also address. But because it did reduce some taxes without providing sufficient economic stimulus it swelled the deficit, forced interest rates higher, and triggered the second dip of the Carter/Reagan double dip recession. Most of the the 1981 policy was scrapped in 1982 with the largest tax increase in post war history. When that only made things worse it was Reagan's tax cuts of 1983--real tax cuts--was where it started turning around and getting better.

You'll have to identify those tax cuts. I'm not aware of any tax cuts in 1983. Here's that list of all major bills affecting revenue in the past century. See page 16 for a summary of the net impact on the treasury (aka net tax cut or tax increase):

https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/WP-81.pdf

Which tax cuts are you referring to when you talk about "Reagan's tax cuts of 1983"?

LostArtist · Dec 14, 2017

ludin said:
Remind me again who was in charge of congress? Congress sets the budget for the year.
Ol yea it was liberals in charge of congress.

So it was a liberal tax cut then! you cant' have it both ways

Fletch · Dec 14, 2017

MTAtech said:
I’ve never read the bill either but I know what is in it. That’s because there have been ample news reports from those that analyzed the bill.

I see. So you are barely less ignorant than those polled. So what is it about this tax cut bill that has you so outraged? Or is outrage just the rage nowadays?

haymarket · Dec 14, 2017

MTAtech said:
[h=1]The GOP Tax Cuts Are Even More Unpopular Than Past Tax Hikes[/h]

Heavens. I can't understand why most polled would dislike a bill that lowers taxes on the rich, raises middle class taxes and adds to the debt, without significant economic growth.

And to show you just how bat crazy the Republicans are, they actually believe this is going to save them from electoral disaster in 2018. It proves they live in an alternate reality apart from what the vast majority of the American people live in.

Fletch · Dec 14, 2017

JasperL said:
Homes and Loans: Prime Lending Rate History

View attachment 67226102

You're right, and that's the point, really. The Fed (Volcker) deliberately threw the economy into a major recession in the early 1980s to kill off inflation, and the 1980s boom followed the Fed lowering interest rates. So there was a lot going on besides the Reagan tax cuts, which functioned as just run of the mill Keynesian stimulus, at least in large part. Lower taxes, INCREASE spending, and put the tab on the deficits and debt.

That sounds like the Obama economy of the last decade.

Fletch · Dec 14, 2017

haymarket said:
And to show you just how bat crazy the Republicans are, they actually believe this is going to save them from electoral disaster in 2018. It proves they live in an alternate reality apart from what the vast majority of the American people live in.

Reminds me of you bat crazy leftists in 2010.

bubbabgone · Dec 14, 2017

MTAtech said:
[h=1]The GOP Tax Cuts Are Even More Unpopular Than Past Tax Hikes[/h]

Heavens. I can't understand why most polled would dislike a bill that lowers taxes on the rich, raises middle class taxes and adds to the debt, without significant economic growth.

Your link is 2 1/2 weeks old.
No one polled knows what's in it any more today then they did then.
And it's only today that it's approaching the final bill.
All they think is what they're told by the loudest mouth they hear as background noise.

haymarket · Dec 14, 2017

Fletch said:
Reminds me of you bat crazy leftists in 2010.

Except 2010 is long past in the rear view mirror and the destruction of the GOP in 2018 is something to look forward to.

TurtleDude · Dec 14, 2017

JasperL said:
I've debated this point many times with you. I know how things work, and I know there is no such thing as a Tax Santa Clause, a free lunch, Tax Fairy, Tax Tree that sprouts more dollars as rates come down, etc...... And so, tax rate cuts lower revenue.

And Tax Revenue = Tax Rate X Tax Base, so both economic activity and the rate matter. It's math.

The government takes too much money from some and not enough from others and overall too much in total. Its time to force the government to do with less

Parrish · Dec 14, 2017

Hawkeye10 said:
Does anyone besides me remember when Paul Ryan promised to be the adult in the room, would work to make sure that nothing bad happened to us?

At this point I cant see how he would be better than Pence as Trumps replacement.

This guy has completely failed America.

BOO

Does anyone remember his pledge to cut SS, Medicare and Medicaid?

ludin · Dec 14, 2017

LostArtist said:
So it was a liberal tax cut then! you cant' have it both ways

Please follow the conversation. You are 100% lost.

JasperL · Dec 14, 2017

TurtleDude said:
The government takes too much money from some and not enough from others and overall too much in total. Its time to force the government to do with less

You and the person I responded to claimed tax cuts paid for themselves, which is false.

As far as tax cuts, with smaller government, fine. That's why we have elections. Now the GOP just needs to take the political hit of cutting spending, because those tax cuts sure as hell aren't going to IMPROVE the deficit projections going forward.

SirGareth · Dec 14, 2017

MTAtech said:
[h=1]The GOP Tax Cuts Are Even More Unpopular Than Past Tax Hikes[/h]

Heavens. I can't understand why most polled would dislike a bill that lowers taxes on the rich, raises middle class taxes and adds to the debt, without significant economic growth.

Quiz for leftists:

Who got the best tax deal on this GOP tax reduction?

Family A paid no taxes at all in 2018 but received a $20,000 "refund" in February 2019 for child and EITC "credits" pocketing a cool $20,000

Family B paid $10,000 in taxes in 2017 and had them reduced by 10% to $9000 in 2018, pocketing a neat $1000

Family C paid $200,000 in taxes in 2017 and had them reduced by 2% to $196,000 in 2018, covering the $4000 cost of the rise in his property taxes for 2018.

TurtleDude · Dec 14, 2017

JasperL said:
You and the person I responded to claimed tax cuts paid for themselves, which is false.

As far as tax cuts, with smaller government, fine. That's why we have elections. Now the GOP just needs to take the political hit of cutting spending, because those tax cuts sure as hell aren't going to IMPROVE the deficit projections going forward.

\\

Here is the undisputed truth

raising taxes on citizens means less money for those who pay taxes

it sometimes means more money for government

cutting taxes means more money for the people who earn it

it sometimes means less money for government

JasperL · Dec 14, 2017

TurtleDude said:
\\

Here is the undisputed truth

raising taxes on citizens means less money for those who pay taxes

it sometimes means more money for government

cutting taxes means more money for the people who earn it

it sometimes means less money for government

If you want to substitute "For all purposes that matter to making decisions in the reality based world, it" for "it sometimes" and I'll agree with that.

Bottom line is there is a functionally 0% chance the tax cuts we are discussing will INCREASE government revenues. If the proposition is "there are cases in theory, in a reality not our own, in which a tax cut might increase revenue" that's true, but it's a red herring because we are in this reality nowhere NEAR the theoretical conditions in which a tax cut even MIGHT pay for itself with higher revenue.

So why bring it up? The only reason I know is to confuse what are very simple decisions. Tax cuts reduce revenues. If you want tax cuts, then where can we cut spending? Simple. On the other side, it's "spending requires higher taxes. If you want a new spending program, whose taxes will go up to pay for it."

Just as an aside, can you imagine the reaction if a theoretical Pres. Bernie Sanders proposed UHC then said on the campaign trail that the GOP has convinced him the Laffer Curve really IS real and he'll just keep cutting taxes to pay for his health care plan. And if we want free college, cut taxes some more!

A big chunk of the country believes some version of that - or says they do - including our current sitting Sec. of Treas!

JasperL · Dec 14, 2017

SirGareth said:
Quiz for leftists:

Who got the best tax deal on this GOP tax reduction?

Family A paid no taxes at all in 2018 but received a $20,000 "refund" in February 2019 for child and EITC "credits" pocketing a cool $20,000

Family B paid $10,000 in taxes in 2017 and had them reduced by 10% to $9000 in 2018, pocketing a neat $1000

Family C paid $200,000 in taxes in 2017 and had them reduced by 2% to $196,000 in 2018, covering the $4000 cost of the rise in his property taxes for 2018.

What's your point? Those appear to be made up examples so it's kind of hard to respond to fiction, without knowing where you're going with that made up hypothetical.

TurtleDude · Dec 14, 2017

JasperL said:
If you want to substitute "For all purposes that matter to making decisions in the reality based world, it" for "it sometimes" and I'll agree with that.

Bottom line is there is a functionally 0% chance the tax cuts we are discussing will INCREASE government revenues. If the proposition is "there are cases in theory, in a reality not our own, in which a tax cut might increase revenue" that's true, but it's a red herring because we are in this reality nowhere NEAR the theoretical conditions in which a tax cut even MIGHT pay for itself with higher revenue.

So why bring it up? The only reason I know is to confuse what are very simple decisions. Tax cuts reduce revenues. If you want tax cuts, then where can we cut spending? Simple. On the other side, it's "spending requires higher taxes. If you want a new spending program, whose taxes will go up to pay for it."

Just as an aside, can you imagine the reaction if a theoretical Pres. Bernie Sanders proposed UHC then said on the campaign trail that the GOP has convinced him the Laffer Curve really IS real and he'll just keep cutting taxes to pay for his health care plan. And if we want free college, cut taxes some more!

A big chunk of the country believes some version of that - or says they do - including our current sitting Sec. of Treas!

so when Kennedy and Reagan authored tax cuts the revenue of the federal government fell?

Kushinator · Dec 14, 2017

TurtleDude said:
so when Kennedy and Reagan authored tax cuts the revenue of the federal government fell?

Initially? Yes. Deficits also increased rather significantly.

538: The GOP Tax Cuts Are Even More Unpopular Than Past Tax Hikes

JasperL

ashurbanipal

AlbqOwl

JasperL

JasperL

AlbqOwl

ashurbanipal

JasperL

LostArtist

Member

Fletch

haymarket

Fletch

Fletch

bubbabgone

haymarket

TurtleDude

warrior of the wetlands

Parrish

ludin

JasperL

SirGareth

TurtleDude

warrior of the wetlands

JasperL

JasperL

TurtleDude

warrior of the wetlands

Kushinator

I'm not-low all the time