I can't figure this out

Politicians in WashDC are talking about a tax cut; the question has now become its size from a couple hundred billion to a staggering $2.6 trillion over the coming ten years. All of this is based on greater revenues which the press keeps describing as larger than expected. Million, billion, trillion, gazzillion… what I find bothersome is the trend in states revenue that is going in the opposite direction - ie: less than expected.

The AP wire service had a story on 9 Feb “State Budgets Feel Economic Strain” - sorry I can’t find the link online. Maybe the Rockefeller Institute on govt has something. The AP message was: some states have to cut their budgets by up to $1b because revenues are less than expected. They noted the Rust Belt [Michigan, Ohio], the South [N Carolina, Alabama], Sluggish Farm Econ [Kansas, Wisconsin, Iowa] and for some freakish reasons for Florida and Washington State.

My questions for any economists or those who might know:
> why the disparity between govt financing?
> Will the economy benefit enough in the long run to allow a humongous Federal tax cut now which could boost the economy and continue to provide revenue surpluses?
> Will the states benefit as well?

Any thoughts?

Unless something changed I thought the cut was only 1.6 trillion. Greenspan said that there should be a tax cut. Personally, I don’t think it should be as large as the 1.6 Bush wants. From what I’ve heard it relies on future surpluses. Those surpluses aren’t likely to be there if people aren’t making money off the stock market, and the way that’s been going they aren’t making much.

There were a couple of economists on CNBC on Friday saying what needed to be cut was the capital gains tax.

Some rabid Republicans have suggested adding another $1b to Bush’s proposal… I don’t agree. I don’t agree with Bush’s amount either. I think that it should be targeted; some to increase immediate spending and some to feed the retirement kitty [401(k), IRAs] which were/are the source of capital investments which helped bring on the economic boom. Your capital gains suggestion might have merit as well.

BUT are we shooting ourselves in the foot if the state deficits are only an omen on lower federal revenues?

The tax cut is one of the few political bones that Shrub can easily toss to the people. It will be political suicide for politicians to oppose it too vigorously. So, it will be likely to pass unlike a lot of the more controversial issues that Dubya has already stirred up.

Any tax cut is premature until we have the ecomony back on track. Especially a tax cut that will do so little for so many of the American people.

In answer to your last two questions,

No one predicted the length of the current boom nor the current downturn.

“The future’s not ours to see”
“Que sera, sera”


Yeah, Zenster, it does seem self-serving of Bush to push a huge tax cut which is politically popular as well as endorsed by Greenspan. The President and Congress have been
fiscally irresponsible before - just take a quick look at what Reagan and the Democrats/Republicans in Congress brought us in the early 80s. Whatever happened to the Republican theme of “states responsibility” aka states rights or balanced budgets or pay off the national debt?

On the other hand [maybe granting too much deviousness to Bush], are they trying to weasel out of attempts to improve the voting systems nationwide by denying the availability of state and federal funds to help pay for new optical scanner or ATMlike voting machines?

The military certainly was caught off guard this past week with Bush’s proposal to straightline the Defense Dept’s budget. Caught with their pants down and jaws agape, it seems to me.

Hhhmmm, it’s in the middle of the afternoon to think such paranoid thoughts…

This thread started off with a vague, slim chance of staying in GQ, based on the first of the three questions (why the disparity). However, all of the posts thus far have addressed the other two questions, which are unequivicallobly GD territory. Welcome to your new home, thread!

Actually, what Greenspan said, if you listen to his actual words instead of the simplified version put forward by Bushies, is this (paraphrased): “It would be better to reduce the surplus by a tax cut than by new spending.”

He said nothing about applying the surplus to the debt. He said nothing about tax cuts stimulating the economy (in fact, he implied that they would have no effect). What he said was that, given the choice of applying the extra dollars to new programs vs. returning them to taxpayers, the latter would be preferable. That’s all he said.

Just clarifying a point. Carry on.

I wasn’t quite sure where to put the original posting so I decided GQ because I would like to know if there is some relationship between state revenue directions and federal revenue directions. Logically there should be some direct relationship since both are based on income [except in a few states like FL which has no personal income tax].

Thanks to Cervaise as well for his clarification of Greenspan’s comments.

Whether this thread belongs in GQ or GD isn’t a big deal for me. The responses so far haven’t really address this core question however they have been valuable. So, I am a kicking this up again to see if there are any additional thoughts or suggestions of where to go to find out an answer.

I suspect that the growth of the proposed tax cut is a bargaining chip. Everyone knows that some compromise will be required in any event, and you might as well stake your position further out to get a better starting point.

I personally would be in favor of eliminating the debt over any tax cuts if the Balanced Budget Amendment had gone through. As it is, I think the balancing of the budget will only free up the pressure against spending increases, so I’d rather take any tax cut that is offered.

To add some information. Here in Washington State we actually have a giant budget surplus. However, we’ve also had a rash of initiatives. One capped spending, so no matter how much money we’ve got sitting in the coffers, it can’t be spent. Another problem is that many taxes/user fees/whatever are dedicated to a particular item. So, gas taxes cannot be spent on schools, they must be spent on transportation, lottery money can’t be spent on roads, it must be spent on schools, etc.

The idea was that this would prevent the fat-cats from getting a huge slush fund that they could spend any way they wanted. But it also means that many programs have money they can’t spend, while other programs are on the verge of bankruptcy.

For instance, we used to have a very large tax on cars. We just had an initiative that cut the tax to almost nothing. Well, all that money that used to go to fund public transportation and roads is now gone, and the money has to come from somewhere, except all our other money is dedicated to certain functions. But we still have enough money to build the Mariners and the Seahawks two brand-new side-by-side stadia.

Seattle Doper here. Tim Eyman should be clubbed repeatedly with a length of rebar.

Carry on…