# Why let tax cuts for the wealthy expire? **URL:** \ **Category:** Great Debates\ **Created:** [July 26, 2012, 5:31pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470 "2012-07-26T17:31:04Z")\ **Posts on this page:** 15\ **Page:** 4
**Author:** ![yorick73](https://avatars.discourse-cdn.com/v4/letter/y/b5a626/32.png) [@yorick73](https://boards.straightdope.com/u/yorick73)\ **Post date:** [July 27, 2012, 10:55pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/61 "2012-07-27T22:55:21Z")
> [@Ravenman](#): > > No. You’re not paying attention to what I wrote. Tax rates going down does not make the economy improve. The 1990s show that tax rates can go up and the economy improves a lot. In the 2000s, taxes went down by a lot, but income growth was pretty modest. > [@Ravenman](#): > > A minor quibble with how I phrased something is a trifle compared to your entire argument being unsupported by facts. No, it is a major quibble. Clinton raised taxes when the economy was booming. Of course the economy still grew…the question is how much more could it have grown in the absence of tax increases. But, the economy did not grow as fast as many expected coming out of a recession. Economic growth accelerated after the 1997 tax cuts and real wages grew at 6.5%. The economy grew by a full percentage point higher than it did between 1993 and the 1997 tax cuts. > [@Ravenman](#): > > Wrong. Again, tax rates for the rich went down a lot in the 1980s, and their incomes grew modestly, clearly because of the improving economy. Tax rates for the rich went up in the 1990s, and the economy improved a lot, leading to huge growth in the incomes of the wealthy. There’s no connection between tax rates and income growth. There’s no connection between tax rates and economic growth. There is, obviously, a direct connection between economic growth and income growth for the wealthy. Actually, the biggest increase in income came after the modest 1997 tax cuts. Of course there are many factors that go into improving the economy and tax rates are not the only factor. We can argue for another 3 pages on the effects of tax cuts on economic growth but that’s not the point of this thread. As I’ve stated the rich can move their money to shield it from tax increases. Obama has admitted that there is not a correlation between tax hikes and tax revenue. The question is whether a tax increase on the “rich” will impact small businesses and result in an even larger economic downturn. ---
**Author:** ![yorick73](https://avatars.discourse-cdn.com/v4/letter/y/b5a626/32.png) [@yorick73](https://boards.straightdope.com/u/yorick73)\ **Post date:** [August 1, 2012, 5:12pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/62 "2012-08-01T17:12:58Z")
> [@yorick73](#): > > [Heritage](http://www.heritage.org/research/reports/2012/07/obama-s-taxmageddon-tax-increase-would-hurt-job-creation#_edn4) used data from the Treasury Department to show that 28 percent of small business that actually employ people would be affected. I haven’t read the entire [Treasury document](http://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/OTA-T2011-04-Small-Business-Methodology-Aug-8-2011.pdf) but they separated small business that employ people from individuals that claim business income on the side. Here is the relevant part from the Heritage study: > > So, that 3% figure may be inaccurate. Does anyone dispute the Heritage findings? If not, does anyone think a tax increase that could affect 28% of small businesses a good idea in the current economy? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 1, 2012, 6:21pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/63 "2012-08-01T18:21:57Z")
> [@yorick73](#): > > No, it is a major quibble. Clinton raised taxes when the economy was booming. Of course the economy still grew…the question is how much more could it have grown in the absence of tax increases. But, the economy did not grow as fast as many expected coming out of a recession. Economic growth accelerated after the 1997 tax cuts and real wages grew at 6.5%. The economy grew by a full percentage point higher than it did between 1993 and the 1997 tax cuts. > > Actually, the biggest increase in income came after the modest 1997 tax cuts. Of course there are many factors that go into improving the economy and tax rates are not the only factor. And what happened in 2000? Is the goal of economic policy to encourage growth even if that growth is unsustainable? This is not the only example - a raise in interest rates in the mid-2000s might have slowed the housing bubble and reduced the impact of its inevitable collapse. Keynes did not say that governments should always run a deficit. He said that in good times taxes should be set to have a surplus (or at least a balance) in order for there to be money to stimulate the economy during recessions. One of Bush’s major sins was running large deficits during good times (thanks to unfunded wars) and thus putting us in a bad position when things crashed. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [August 1, 2012, 6:31pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/64 "2012-08-01T18:31:08Z")
> [@yorick73](#): > > Does anyone dispute the Heritage findings? If not, does anyone think a tax increase that could affect 28% of small businesses a good idea in the current economy? I dispute it. Heritage analysis of tax policy is [not credible.](http://origin.heritage.org/research/reports/2001/04/the-economic-impact-of-president-bushs-tax-relief-plan?1) See the part about the tax cuts and paying off the national debt by 2011. ---
**Author:** ![adaher](https://avatars.discourse-cdn.com/v4/letter/a/dec6dc/32.png) [@adaher](https://boards.straightdope.com/u/adaher)\ **Post date:** [August 1, 2012, 6:37pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/65 "2012-08-01T18:37:11Z")
The CBO’s analysis used similar assumptions. Heritage is partisan, unlike the CEO, but they are a legitimate think tank and it’s unfair to question their credibility simply because they used similar optimistic projections as everyone else. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [August 1, 2012, 6:58pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/66 "2012-08-01T18:58:17Z")
Heritage uses a different methodology than CBO to come up with higher rates of growth and more tax revenues, and you want to give them credit for that? If gambler A says the 49ers are going to win the 2013 Super Bowl by 5 points, and Gambler B says it’s going to be a 30-point blowout, if the 49ers don’t win, that doesn’t make Gambler B reputable because of what Gambler A said. Having enough money to employ lots of partisan analysts doesn’t make a think tank legitimate. ---
**Author:** ![adaher](https://avatars.discourse-cdn.com/v4/letter/a/dec6dc/32.png) [@adaher](https://boards.straightdope.com/u/adaher)\ **Post date:** [August 1, 2012, 7:15pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/67 "2012-08-01T19:15:05Z")
The difference between Heritages’ optimistic figures and the CBO’s are not far off. I don’t know the exact numbers, but I do remember that in 2001, the CBO forecast “surpluses as far as the eye can see.” ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [August 1, 2012, 7:17pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/68 "2012-08-01T19:17:11Z")
> [@yorick73](#): > > Does anyone dispute the Heritage findings? If not, does anyone think a tax increase that could affect 28% of small businesses a good idea in the current economy? Think-tanks on the opposite side of the political spectrum (and ones who frankly have a bit track record of honesty than Heritage does) sure do. [Here](http://www.cbpp.org/cms/index.cfm?fa=view&id=3806) is what the Center for Budget and Policy Priorities says: > [@](#): > > The claims that allowing the Bush tax cuts for high-income people to expire would seriously harm small businesses rest on an exceedingly broad, and misleading, definition of “small business.”[2] The definition is so broad, in fact, that under it, both President Obama and Governor Romney would count as small business owners — as would 237 of the nation’s 400 wealthiest people.[3] > > … > > Contrary to these claims, an extension of the high-income Bush tax cuts would, in essence, constitute a massive tax cut for very wealthy individuals who overwhelmingly aren’t small business operators. Analysis by the Urban Institute-Brookings Tax Policy Center finds that extending the tax cuts for people over $250,000 of income ($200,000 for single filers) would overwhelmingly benefit the highest-income taxpayers: 82 percent of the value of the tax cut would flow to filers with more than $1 million in adjusted gross income, who would get an average tax cut of $164,000 a piece.[5] More details at the link that I gave. Look, you don’t have to be a genius to figure out what is going on here. The rebranding of rich folks as “job creators” is just a ploy for the Right to protect their favorite interest group, obscenely rich folks. The people who create jobs are mainly those who buy the goods in our demand-driven economy, which are the working folks. What do you expect a think-tank completely beholden to the obscenely rich to say? That they are in favor of extending the tax cuts to help their extremely rich friends who all believe that they are obscenely rich because of how wonderful and productive they are and it is a travesty that the society expects them to part with so much of this money? ---
**Author:** ![adaher](https://avatars.discourse-cdn.com/v4/letter/a/dec6dc/32.png) [@adaher](https://boards.straightdope.com/u/adaher)\ **Post date:** [August 1, 2012, 7:18pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/69 "2012-08-01T19:18:48Z")
Have to admit, the effect of tax policy on job growth has constantly been overstated by conservatives. ---
**Author:** ![Kearsen](https://avatars.discourse-cdn.com/v4/letter/k/82dd89/32.png) [@Kearsen](https://boards.straightdope.com/u/Kearsen)\ **Post date:** [August 1, 2012, 7:21pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/70 "2012-08-01T19:21:44Z")
> [@Voyager](#): > > No wonder you don’t want to discuss it. > Tax money (the investment) is levied by the elected representatives of the people (the investors) and funneled through Congress to the Executive branch to the people who actually do the work - who might be government employees or contractors. > > Excluding startups with direct representation by VCs, in a business executives selected by the Board who are (theoretically) elected by the investors (share holders) take money from where-ever and funnel it to the workers who actually do the work. > The situations are almost identical. If you say government does not create value because workers do the work, CEOs don’t create value because workers do the work - and so should certainly not make as much as they are making today. Risk plays a minor role. ---
**Author:** ![yorick73](https://avatars.discourse-cdn.com/v4/letter/y/b5a626/32.png) [@yorick73](https://boards.straightdope.com/u/yorick73)\ **Post date:** [August 1, 2012, 7:37pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/71 "2012-08-01T19:37:58Z")
> [@jshore](#): > > Think-tanks on the opposite side of the political spectrum (and ones who frankly have a bit track record of honesty than Heritage does) sure do. [Here](http://www.cbpp.org/cms/index.cfm?fa=view&id=3806) is what the Center for Budget and Policy Priorities says: > > More details at the link that I gave. > > Look, you don’t have to be a genius to figure out what is going on here. The rebranding of rich folks as “job creators” is just a ploy for the Right to protect their favorite interest group, obscenely rich folks. The people who create jobs are mainly those who buy the goods in our demand-driven economy, which are the working folks. > > What do you expect a think-tank completely beholden to the obscenely rich to say? That they are in favor of extending the tax cuts to help their extremely rich friends who all believe that they are obscenely rich because of how wonderful and productive they are and it is a travesty that the society expects them to part with so much of this money? The Heritage study takes the “pass through” factor into account in calculating the number of small businesses (that employ people and make over 200K) that would be hit with a tax increase. Here is the relevant point: > [@Heritage](#): > > According to the Treasury study, out of 34.8 million tax returns that claimed flow-through business income, 4.3 million employed workers in 2007 (the most recent year for which data are available). The more than 30 million returns with business income (88 percent of the total returns with business income) that did not qualify as employer-businesses are those individuals earning business income from side jobs. > > It is those 4.3 million employer-businesses that matter most when it comes to determining the impact that President Obama’s tax increase would have on job creation. The Treasury report shows that 1.2 million, or 28 percent, of them earned more than $200,000—the income threshold over which President Obama’s tax increase would apply. More important as it pertains to job creation, those 28 percent of businesses earned almost all—91 percent—of the income earned by flow-through employer-businesses. It seems to me that it would be relatively easy to exclude small businesses that employ people from facing a tax increase. Nobody, at least that I am aware of, has proposed limiting the tax increase to those who do not own small businesses. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 1, 2012, 8:03pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/72 "2012-08-01T20:03:32Z")
> [@Kearsen](#): > > Risk plays a minor role. Huh? If you want safe, low yielding investments, risk is minor. If you want high yielding investments risk is major. Pretend that isn’t the case, and you wind up with the recent crash. ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [August 1, 2012, 8:28pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/73 "2012-08-01T20:28:10Z")
> [@yorick73](#): > > The Heritage study takes the “pass through” factor into account in calculating the number of small businesses (that employ people and make over 200K) that would be hit with a tax increase. As near as I can tell, that addresses maybe one of the 4 points that are made in the CBPP analysis and it doesn’t even deal with the more reasonable definition of “small business owner” that the Treasury Dept study uses. And, of course, it doesn’t address at all the points made as to even why the economic case for needing to keep the tax rates low on those small proportion of high income taxpayers who are really small business owners is weak too…E.g., that in the current economic situation, the limiting factor on businesses is weak demand not inability to meet the demand with current capacity and available money to increase capacity. ---
**Author:** ![Jackmannii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jackmannii/32/311_2.png) [@Jackmannii](https://boards.straightdope.com/u/Jackmannii)\ **Post date:** [August 1, 2012, 10:05pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/74 "2012-08-01T22:05:15Z")
> [@yorick73](#): > > For those that favor an increase in the rates for people making over $250K is it only a matter of fairness for you or do you honestly feel it will help the economy, federal budget, etc.? Let tax cuts for the wealthy expire. I refer of course to “Bush’s tax cuts for the wealthy”, which is what Democrats called them when they were first announced. Of course, since many middle class taxpayers would have to pay thousands more every year if the entire tax cut package were to expire, Dems have changed their tune and now are focused only on cuts affecting the wealthiest. But you can’t begin to solve the horrendous budget mess just by snipping off the politically easy portion of the Bush tax cuts. Let 'em all expire. Since they were “tax cuts for the wealthy” in the first place, it should be easy to justify eliminating them. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [August 1, 2012, 10:13pm UTC](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470/75 "2012-08-01T22:13:30Z")
> [@yorick73](#): > > Remember in 2008 when Charles Gibson confronted Obama with the fact there is not necessarily a correlation between tax increases and revenue increases? Obama admitted as much but stated that he favored increasing taxes on the rich out of fairness. I remember when Peter Orszag told Charlie Rose that the Laffer Curve was bunk. “When you mean to raise taxes, that’s what you do.” I trust Orszag’s economics over Obama’s, Gibson’s, or Rose’s. But that wasn’t a nationally televised debate. I guess you missed it. [Previous page](https://boards.straightdope.com/t/why-let-tax-cuts-for-the-wealthy-expire/629470.md?page=3)