Ah, nothing like taxes to get the usual suspects trotting out their usual arguments. Well, I guess it’s my obligation to trot out mine. 
First, in response to Scylla, yup we still remember those nifty supply side / trickle down arguments. And, of course, I agree with you that one needs to provide incentive to be productive and all that cool stuff. That’s why, for example, a completely confiscatory tax for all income above a certain amount would be a bad idea.
But, what we are arguing about here is a marginal rate of 33 vs 36 vs 39.6%, and this for people who are already not paying the 7.25% (?) FICA tax that “we” are paying on their income that falls into that tax bracket. [Confession: “We” in quotes because last year I just reached the income where I didn’t quite pay FICA on my last dollar earned.] And, as CyberPundit points out, there are countervailing effects that must be considered.
*Originally posted by december *
Oh, dear, with sources like that…As they say, apples don’t fall far from the tree. Let’s see, the last time I was directed to something on Little Reagan’s website, it was an article purporting to show that not only was the vote count for Buchanan in Palm Beach County not anomalously high but rather was anomalously low and sure proof that the Democrats had committed fraud (double-punched ballots that were originally only for Buchanan, or something like that). Turns out this article made its claims by quoting a few correct figures (like the 3407 Buchanan votes in PBC) and then making manifestly false claims about figures it did not quote (like the votes in other counties) that were easily verified to be false by going to the Florida Dept of Elections website. …Just to give you a little background on the source you are relying on here.
As for this article, one can say that there is a measure of improvement here in that it doesn’t seem to contain out-and-out lies about the statistics; it just gives only part of the story.
If one looks at Federal Budget numbers (go to the Federal Budget page for FY2001 and download hist.pdf … I don’t have the link offhand, just the PDF file I downloaded months ago), one finds that although the claim is technically correct that the revenues as a percentage of GDP have reached an all-time high at the end of the Clinton era, there is another side to the tale: If one looks at federal outlays as a percentage of GDP, they have been dropping all through the Clinton era and are, as of 1999, at a level so low that it has not been equalled since 1973-1974 and has not been lower since 1966. In fact, these outlays have averaged considerably lower in the Clinton era than the Reagan era. They are also projected in these budget projections [from the Clinton Administration] to continue falling out through 2005, the last year projected; receipts are also projected to top off in 2000 and decline as a percentage of GDP after that…And, I assume Clinton’s budget projections were not factoring in a Bush tax cut!
So, why the big difference between whether you look at receipts or outlays? Well, it is because back in the Reagan era, we were running a deficit and receipts were considerably larger than outlays; now, we are running a surplus and outlays are larger than receipts! Everyone still want to go back to the “good ol’ days”?
By the way, receipts as % of GDP are rising rather gradually and steadily since 1993 which suggests to me that it is not purely a direct jump from taxing people at higher rates (since the higher rates were put into effect right away and not gradually, unless I am mistaken), but rather because the economy was doing quite well and there are more wealthy people falling into the higher tax brackets! Now, is that something you really want to argue is a bad thing?!? [By the way, some might try to argue that this could be due also to “bracket creep” from inflation, but looking at my IRS 1040 booklets over the past few years, it seems that the brackets for income tax are in fact adjusted upward each year.]
As for the whole question of what happened after the Reagan tax cut, we have had that argument before and, because of recession-expansion cycles and the like, one seems to be able to read into the numbers what one wants to see to some degree. However, what can be very directly debunked is the Laffer curve notion that we would get higher government revenues with lower taxes because the economic expansion would offset the lower rates. I would have to dig up the thread of several months ago to get all the specifics, but what I remember is that in real (constant dollar) terms, government revenues in fact declined when the tax cut took affect and took a few years to recover to pre-tax cut levels. In fact, if one looks only at income tax receipts (relevent since, as few people seem to remember, Reagan also increased Social Security taxes a couple years after decreasing the income tax rates), then it took until like 1987 for these receipts to recover to their 1981 levels, which I believe was an unprecedented drop in constant dollar income tax revenue. So, no Virginia, cutting the income tax rate on the wealthy did not provide higher revenues for the government.
