Just to provide a little backup on my discussions of Reagan and Bush, here are some of my posts from several years ago on the subject:
http://boards.straightdope.com/sdmb/showpost.php?p=7386110&postcount=29
http://boards.straightdope.com/sdmb/showpost.php?p=4944218&postcount=215
http://boards.straightdope.com/sdmb/showpost.php?p=2839123&postcount=22
Old myths die hard.
Just one question: Is there any marginal rate at which a cut will not result in an increase in revenue?
And its corollary: How will we know what such a rate is?
Oh…and here is a graph of federal revenues in constant dollars that I made a couple of years ago using data from the FY2011 Federal Budget historical tables available in Excel format. Lots of interesting remarks one can make about it, but I’ll just let folks contemplate the picture for themselves.
There was this dude named Arthur Laffer who went out drinking one evening and found himself doodling on a cocktail napkin. He stared at one particular curve, kind of parabolic, or maybe bell shaped, and had an epiphany of sorts. He showed this drawing to his boss, saying that the X was tax rates, the Y was revenue, and we were beyond the peak revenue position, that if we cut taxes, we could reach, or at least approach, maximum revenue. So, according to the Laffer Curve, if you cut below the peak revenue rate, you start to lose money.
One problem with the Laffer Curve is that you never see it graduated, so it cannot answer your second question. It is just nebulous theory, very light on substance. Another problem is that it is missing a third axis: how would the calculation play out over time? As far as anyone can tell, Arthur Laffer was only ever just blowing smoke.
You are denying reality.
Federal tax revenue was $1082.97 in FY 1980 and $1425.69 in FY 1989 (2005 dollars).
That is an increase of 31.6% in the 1980’s decade.
Wow. The economy must have really been humming in 2008 after 8 years of Republican economic management!
You keep including the effect of his tax cuts, which were revenue negative with his tax increases, which were revenue positive.
It’s especially misleading to include the revenue from his payroll tax increases, since that’s clearly independent from a discussion of his income tax policies.
Why are you presenting such misleading argumentation?
Because this is what think tanks put out there for dopes to pick up and carry around knowing that it will sound credible to enough people and motivational for people who would never check facts that go along with their beloved narrative.
As Hentor the Barbarian points out, by looking at ALL revenues, you are including the effect of the payroll tax increases. Also, if you look over long enough periods of time, federal revenues will rise (although it is interesting to note that revenues for the federal income tax have still never quite recovered to 2000 and 2001 levels following the Bush tax cuts!). You have created a straw man, which is “If we cut taxes, we will never again have revenues higher than we had before the tax cut.” The actual argument is that if we cut taxes, then revenues will decrease and, while they will eventually increase again as they inevitably do over time, they will be lower than they would have been in absence of the tax cut.
The actual breakdown in numbers for the rise in revenues between 1980 and 1989 are that Social Security revenues rose 48% while individual income tax revenues only rose 19%. The specific years chosen are also about the highest individual income tax revenue you can get over such a period…For example if you choose 1981 to 1990, you only get 14%. Whichever you choose, this is a pretty poor performance over such a long period: Between 1990 and 1999, individual income tax revenues grew by 51%; if you instead use 1991 and 2000, you get a 75% increase!
Another poor performance is the revenue increase from 1953 to 1961 under Eisenhower
Federal revenue increased by 17.3%
High taxes ≠ high revenue
Is there some coherent argument in there? I can’t even find out enough about how taxes changed under Eisenhower to know what to make of this. It seems like you are just throwing up random flack to deflect attention from the fact that your original supply side fantasy claims have been utterly shredded in this thread.
Maybe you need to stick to places on the web where they consider studies by the American Council on Capital Formation to be a serious unbiased source of information on the effect of taxes on the economy.
Okay, I couldn’t resist it, so I actually clicked on the link to that ACCF study. Even without any expertise in macroeconomic modeling, I can already see huge fatal problems with it. One is that it almost exclusively focused on a scenario that nobody with any significant political constituency is advocating, which is getting rid of all of the tax cuts. The second is that, as near as I can tell, the what-if scenario is to get rid of all the tax cuts and replace them with absolutely nothing, so what you are doing is taking money out of the economy. Simple Keynesian analysis would tell you that this would have a negative impact in a distressed economy! The real question would be, say, to use the model to look at what would happen if you just got rid of the tax cuts on the wealthy and used the money to do something stimulative in another way, like spending on infrastructure improvements or assistance to state governments that have been considerably contracting their employment or even use it to give tax cuts targeted at people who actually need tax cuts and would spend any money that they got from tax cuts.
Basically, what they are telling us is that the “fiscal cliff” that was set up because the Republicans held raising the debt ceiling hostage because of their unwillingness to compromise on anything that might harm their sole economic constituency (the top 1%) turns out to be a bad thing if it actually happens.
Well, duh!!!
Actually, to the author’s credit, he doesn’t really try to oversell his results as presenting evidence that we need to not raise taxes on the wealthy. Rather, he says:
Of course, the Republicans won’t agree to this exactly because they want to hold the economy hostage to getting their tax cuts for their sole constituency, which is the top 1%. (And, also because they are almost all beholden to Grover Norquist and his “tax pledge”.)
Raising taxes on the top 1% or the top 5% isn’t going to balance the budget.
Because the problem is spending.
Right. So cut way back on the military, go to a much cheaper and more cost effective universal health care plan involving a single payer, eliminate corporate welfare programs (aka subsidies) and get our housing system under control. Should do the trick. That IN CONJUNCTION with properly taxing the wealthy should to the trick. Force US companies to keep jobs in the US for products they sell in the US so our tax base will grow as well. (When people have jobs, they have money, and you can tax them, crazy idea, eh?)
Thanks, I’m glad you asked.
It’ll help. You certainly can’t raise taxes on the middle-or-lower classes.
If the very first thing you cut isn’t the military, you’re not serious about cuts.
Actually they don’t; they already have the money to buy those things, that’s why we call them “rich folks”. They can only buy so many yachts, or drink so many bottles of expensive wine. When rich folks get a windfall from a tax cut, they sock it away into foreign bank accounts and multi-national investments, where it doesn’t benefit our economy. The wealthy in America are severely under-taxed, and have been for decades.
That is not valid argument against doing it.
The top 1% and top 5% already pay a highly disproportionate share of the federal income tax while the bottom 47% pay nothing.
http://taxfoundation.org/article/summary-latest-federal-individual-income-tax-data-0
Everything needs to be cut.