Author Topic: Tax Policy  (Read 248925 times)

DougMacG

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Re: Tax Policy
« Reply #900 on: October 22, 2019, 09:44:05 AM »
Goolsbee is actually on to something here. 

You guys may remember my relating the tale of my step-father selling real estate tax shelters in the 70s and how they rapidly withered away with the Reagan tax rates cuts-- perfect example of the dynamic that Goolsbee describes.

Great example.  Goolsbee, 1999, was on to something.  His work in the Obama administration did not show any learning from this prior work.
-----------
"efficiency costs rise with the square of the tax rate"

DougMacG

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ccp

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DougMacG

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Re: middle class tax cuts maybe planned
« Reply #903 on: November 01, 2019, 05:24:14 PM »
https://www.newsmax.com/finance/streettalk/kudlow-tax-cuts-election/2019/11/01/id/939758/

Winning - or at least the possibility of winning.  Last election there was no Republican agenda on the table.  With 8 million of food stamps and when 70% of U.S. spending is writing checks To individuals, maybe it is time for some spending cuts too.
https://www.investors.com/politics/policy-analysis/us-government-payments-to-individuals-70-of-budget/

« Last Edit: November 01, 2019, 05:49:09 PM by DougMacG »

Crafty_Dog

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Re: Tax Policy
« Reply #904 on: November 02, 2019, 12:57:57 PM »
Generic Keynesianism says that deficits are for goosing a weak economy.  Putting aside the deep flaws of Keynesian economics, with a powerful economy such as we have now that is also running a $1T (!!! deficit) proposing tax rate cuts could easily play as highly irresponsible AND undercut our attacks on the irresponsibility of the various Dem proposals.


ccp

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Re: Tax Policy
« Reply #905 on: November 02, 2019, 01:21:51 PM »
The Left has always attacked any and all tax cuts as irresponsible
   and then bring up deficits (the only time they ever mention them )

but the tax cuts proposed are "middle class"

not just the corporations, or the upper class , business tax cuts we have seen.

so that would mitigate the Leftist attacks

And since when did we decide tax cuts are bad for the deficit.  I though we have argued revenues go up
and that it is the spending side that is far out of control .  - see Doug's post - 70 % of spending is for payments to individuals.


Crafty_Dog

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Re: Tax Policy
« Reply #906 on: November 02, 2019, 07:11:12 PM »
IMHO far too nuanced for the street brawl to come.

DougMacG

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Re: Tax Policy
« Reply #907 on: November 02, 2019, 10:29:25 PM »
"And since when did we decide tax cuts are bad for the deficit.  I though we have argued revenues go up"

Revenues only go up in situations where the rate cuts encourage new production and unleash new growth beyond what is otherwise lost applying the lower tax rate to the same static income. 

One example, "In the four years after the 2003 tax cuts become law, tax receipts exploded by $785 billion."  https://dogbrothers.com/phpBB2/index.php?topic=1467.msg20877#msg20877  Unlike Clinton Gingrich capital gains cuts  of 1997 that closed the deficit at the time, Bush did not end welfare as we know it. Instead he increased spending and the tax rate cuts never got credit for deficit reduction or anything else.

On the other side of it, Democrats like to point to is what happened recently in Kansas.  https://dogbrothers.com/phpBB2/index.php?topic=1791.msg98322#msg98322
They lowered tax rates but no one moved there for the lowered rate because several other states  have no income tax at all.  The limiting factor in their [agricultural] economy was not the state tax rate. At the time of the state cut, Obama raised federal tax rates, so there was no new, net incentive to produce. Revenues tanked and there were no corresponding spending cuts.

Tax rate cutting needs to be economically strategic and the most strategic ones are not necessarily the middle class cuts.  Trump wants to run on a more aggressive agenda.  In 2018, Republicans had none.  I hope he comes up with a great one - and great messaging to go with it.

Trump is constrained this coming year by the Dem House.  There are some things he can do without passage in Congress.  The one I have been pushing is to index long term capital gains to inflation.  This would be a windfall to the government revenues and to the economy because people would sell assets they wouldn't otherwise sell.  Opponents will argue it's not the middle class that has capital gains, but partly it is. 

He can propose a 10% middle class tax cut for the campaign and impose spending cuts if the Republicans take the house and hold the Senate. As Crafty suggests, that will be a battle in the election, especially the spending cuts and entitlement reforms going up against free everything that someone else will pay for.

Trump needs to boost the economy but not the deficit in his reelection year, especially if he doesn't get a trade breakthrough with China.
« Last Edit: November 03, 2019, 05:02:48 AM by DougMacG »

DougMacG

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Previous Trump Individual Tax Rate Cuts.
« Reply #908 on: November 03, 2019, 05:16:48 AM »
Previous Trump Individual Tax Rate Cuts.  These did not increase revenues, the business cuts are what stimulated the growth IMO.

Congress needs to make these cuts permanent, if not improve them.  Biden proposes to undo them.  Warren and Sander want to triple them.

Income Tax Rate        Income for Those Filing As:
2017   2018-2025    Single   Married-Joint
10%   10%               $0-$9,525   $0-$19,050
15%   12%         $9,525-$38,700 $19,050-$77,400
25%   22%       $38,700-$82,500 $77,400-$165,000
28%   24%     $82,500-$157,500 $165,000-$315,000
33%   32%   $157,500-$200,000 $315,000-$400,000
33%-35% 35% $200,000-$500,000 $400,000-$600,000
39.6% 37%       $500,000+      $600,000+
https://www.thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968

ccp

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CD Doug
« Reply #909 on: November 03, 2019, 09:34:37 AM »
"In the four years after the 2003 tax cuts become law, tax receipts exploded by $785 billion."

Wait wasn't that a dividend cut?

Your saying boosting middle class rate cuts doesn't boost buying activity and thus the overall economy?

I don't know I "buy into this".


DougMacG

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Re: Demand versus Supply side tax cuts
« Reply #910 on: November 03, 2019, 12:09:48 PM »
ccp:
"In the four years after the 2003 tax cuts become law, tax receipts exploded by $785 billion."

Wait wasn't that a dividend cut?"


   - It was more than that.  The biggest reductions were with capital gains.
https://en.wikipedia.org/wiki/Jobs_and_Growth_Tax_Relief_Reconciliation_Act_of_2003#Accelerated_credits_and_rate_reductions

Your saying boosting middle class rate cuts doesn't boost buying activity and thus the overall economy?

   - There is less boost in the middle than at the higher incomes.  Let's stereotype a middle class earner.  He or she goes to work 40 hours per week, makes a little over 30k and paying about 12% federal income tax at the margin, maybe 16% with state tax and 22% with employee FICA withholding.  Cut taxes by 10% and this earner is still paying 21% and still probably working 40 hours per week, but saving or spending a hair more.  That outs a little more money into consumption, or savings or personal debt reduction but doesn't start a new business, create a new job or keep a company from moving.  The rich have a higher rate to start and have more choices with their money, more opportunities to increase their production, accelerate their promotions, hire more, build more, sell more, etc.  Politically, a tax cut cannot target the rich, but excluding them takes away much of the economic gain.

Look at the Trump rate changes a couple of posts back.  The middle class gets the biggest percentage break but the bigger economic boost comes more from the incentives for businesses, investors and employers.  For example the tax rate cuts of the 1920s Andrew Mellon under Harding and Coolidge, the 1960s under JFK, the 1980s under Reagan, and 2000s under Bush were all considered supply side cuts.  Also the business side of the Trump cuts.
« Last Edit: November 03, 2019, 12:17:49 PM by DougMacG »

ccp

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Re: Tax Policy
« Reply #911 on: November 03, 2019, 04:38:30 PM »
I meant "capital gains"  ;

Yes I get the rich man's logic.
but don't agree with the bottom line.

not even politically.

and $30 is not middle class.  that was a good salary - in 1968.
not 2019.

suddenly we are saying tax cuts are really only meaningful if we give it to the most wealthy.
yes I get they pay the most in taxes to start with but all of us are being strangled with more and more taxes.

not buying it. 

we will have to agree to disagree on this one which is ok.

Crafty_Dog

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Re: Tax Policy
« Reply #912 on: November 03, 2019, 06:31:56 PM »
Current Spending =  Current Revenue + a portion of Future Tax Revenue


DougMacG

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Re: Tax Policy
« Reply #913 on: November 04, 2019, 03:01:20 PM »
Current Spending =  Current Revenue + a portion of Future Tax Revenue

George Gilder posed an interesting hypothetical back in the days of the Gilder forum.  What if we taxed nothing and all spending was deficit?  Government would be 'free', sort of like the Democrats health plan.

The burden of government would still be there, taking up its share of scarce resources.  Presumably we would pay the cost of it in inflation / devaluation of our currency and wealth.

What would happen in that scenario is partly happening now as we run trillion dollar deficits and don't even pretend to balance the budget.
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ccp: "we will have to agree to disagree on this one"

   - I think because I cannot put my thoughts to words very well.

I definitely want everyone to have a tax cut, especially including the middle class,  but the only way you actually make the burden smaller for everyone is to shrink the size, scope and cost of government.

The question I was trying to address was:  Which tax rate cuts grow the economy and grow revenues to the treasury?

Crafty_Dog

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Gilder's thought exercise
« Reply #914 on: November 04, 2019, 03:36:28 PM »
"George Gilder posed an interesting hypothetical back in the days of the Gilder forum.  What if we taxed nothing and all spending was deficit?  Government would be 'free', sort of like the Democrats health plan.

"The burden of government would still be there, taking up its share of scarce resources.  Presumably we would pay the cost of it in inflation / devaluation of our currency and wealth."

What a fascinating thought exercise!

DougMacG

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Re: Tax Policy
« Reply #915 on: November 04, 2019, 04:27:33 PM »
The U.S Bureau of the Census has the annual median personal income at $31,099 in 2016.
https://fred.stlouisfed.org/series/MEPAINUSA672N

Median household income was $63,179 for Americans in 2018.
https://fred.stlouisfed.org/series/MEHOINUSA672N

On the example I gave, the tax rate jumps to 22% at $38,700 (individual).
[I assume that is taxable income.]
Adjust the numbers to that tax rate for a higher earner but the analysis comes out in a similar manner.

When you cut just the 12 or 22% bracket, everyone above that pays less in that range of their income but their marginal rate, what they pay on their next dollar of income is unchanged.  Their incentive / disincentive to invest or earn one more dollar is unchanged.
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Capital gains were a big part of the 2003 tax rate cuts.  Capital gains taxes limit the flow of scarce resources in the economy to their most valuable use.  The capital gain tax rate affects ALL income.
« Last Edit: November 04, 2019, 04:44:30 PM by DougMacG »

DougMacG

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Re: Gilder's thought exercise
« Reply #916 on: November 04, 2019, 04:37:54 PM »
"George Gilder posed an interesting hypothetical back in the days of the Gilder forum.  What if we taxed nothing and all spending was deficit?  Government would be 'free', sort of like the Democrats health plan.

"The burden of government would still be there, taking up its share of scarce resources.  Presumably we would pay the cost of it in inflation / devaluation of our currency and wealth."

What a fascinating thought exercise!

Maybe we run it by Scott Grannis...

ccp

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Re: Tax Policy
« Reply #917 on: November 04, 2019, 05:09:42 PM »
https://www.cnbc.com/2018/09/26/how-many-americans-qualify-as-middle-class.html

If you’re single, a salary of around $26,000 to $78,000 qualifies you as middle-income.

very weird  imHO
so 2 thousand dollars a month and you are middle class.  Poverty is ~ . 12,500. so one makes twice poverty you fall into the middle class
and 80 per yr you are rich... ("upper income")

who makes these  definitions . - wall street people ???

  census ? Krugman?  IRS ? the Fed?
   harvard profs?

wow.



DougMacG

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Re: Tax Policy
« Reply #918 on: November 05, 2019, 07:01:22 AM »
https://www.cnbc.com/2018/09/26/how-many-americans-qualify-as-middle-class.html

If you’re single, a salary of around $26,000 to $78,000 qualifies you as middle-income.

very weird  imHO
so 2 thousand dollars a month and you are middle class.  Poverty is ~ . 12,500. so one makes twice poverty you fall into the middle class
and 80 per yr you are rich... ("upper income")
who makes these  definitions . - wall street people ???
  census ? Krugman?  IRS ? the Fed?
   harvard profs?
wow.

Yes, all economic measures have flaws. I picked median income instead of someone else's definition of middle class, but median personal income probably includes people who don't work full time.

Another flaw is that the employment market is not national. Incomes and taxes and expenses are higher where you live then in say Casper Wyoming, Bozeman is different than Billings. Why put all those in one class? Plus, we don't live in a class society.  There is an income spectrum or ladder. I hang out with people who make 10 times and a hundred times what I make and with people who own nothing. The main flaw in class thinking is mobility, people move through different income quintiles throughout their lifetime. When we talk about the rich and the poor we are sometimes talking about the same person at a different point in their life, not an us-versus-them fight that politicians are trying to fire up.

Crafty_Dog

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WSJ: Asset Forfeiture/Wealth Tax
« Reply #919 on: November 05, 2019, 08:30:04 AM »
Where Wealth Taxes Failed
Here’s a lesson from Europe that Warren and Sanders ignore.
By The Editorial Board
Nov. 4, 2019 6:40 pm ET
Opinion: Warren and Sanders Overlook Europe's Mistakes on Wealth Taxes
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Opinion: Warren and Sanders Overlook Europe's Mistakes on Wealth Taxes
Opinion: Warren and Sanders Overlook Europe's Mistakes on Wealth Taxes
The failure of wealth taxes in European countries over the past few decades undercuts Elizabeth Warren and Bernie Sanders' argument on how to pay for expensive social programs. Image: Ashlee Rezin Garcia/Associated Press
Bernie Sanders often points to Europe as his economic model, but there’s one lesson from the Continent that he and Elizabeth Warren want to ignore. Europe has tried and mostly rejected the wealth taxes that the two presidential candidates are now promising for America.

Senator Warren’s plan sets an annual 2% tax on assets above $50 million, and the rate rises to 6% for billionaires. Bernie Sanders wants to tax joint filers’ wealth between $32 million and $10 billion at rates of 1% to 8%. His advisers brag that this could wipe out half a billionaire’s wealth in 15 years. The candidates say these taxes will deliver “justice” and revenue to finance their vast new spending plans. That’s also what Europe’s socialists said only to find it didn’t work:

• Sweden. The Nordic country had a wealth tax for most of the 20th century, though its revenue never accounted for more than 0.4% of gross domestic product in the postwar era. One reason is that the levy treated different assets differently. This distorted investment as the wealthy took on debt to buy tax-free assets. If the U.S. farm lobby convinced President Warren to remove farmland as a taxable asset, say, prepare for a property bubble.

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The relatively small Swedish tax still was enough of a burden to drive out some of the country’s brightest citizens. IKEA founder Ingvar Kamprad famously left Sweden for Switzerland in the 1970s over onerous taxation. In 2007 the government repealed its 1.5% tax on personal wealth over $200,000.

• Germany. Berlin imposed levies of 0.5% and 0.7% on personal and corporate wealth in 1978. The rate rose to 1% in 1995, but the Federal Constitutional Court struck down the wealth tax that year, and it was effectively abolished by 1997. America’s Founders banned “direct taxes” not apportioned by state population. Ms. Warren argues her law isn’t a direct tax, but courts would get their say.

The German left occasionally proposes resurrecting the old system, and in 2018 the Ifo Institute for Economic Research analyzed how that would affect the German economy. The authors’ baseline scenario suggests that long-run GDP would be 5% lower with a wealth tax, while employment would shrink 2%. Business investment could see more dramatic declines. The report concluded that the wealth tax’s “burden is carried by virtually everyone, as indicated by the decline in GDP, investment, and employment.”

• France. In 1982 Socialist President François Mitterrand imposed a wealth tax with a top rate of 1.5% on assets above $1.5 million at the time. The tax was eliminated then reimposed several years later. In 2013 another Socialist President, François Hollande, tried to hit the wealthy even harder.

The results? Some 70,000 millionaires have left France since 2000, according to the South African research group New World Wealth. In 2017 French President Emmanuel Macron, a former economic adviser to Mr. Hollande, scrapped the scheme in favor of a property tax.

Ms. Warren expects her wealth tax to raise some $3.6 trillion in the first decade, while Mr. Sanders promises $4.35 trillion. France’s experience suggests this is fanciful. In 2016 French economist Eric Pichet noted that the wealth tax caused a net revenue loss. Paris collected €5.4 billion from the wealth tax in 2015. Yet total tax receipts were at least €7.5 billion lower than they otherwise would have been, since investment declined and hundreds of billions of euros moved offshore.

Mr. Sanders and Ms. Warren have proposed a minimum 40% exit tax on anyone renouncing U.S. citizenship—a sort of financial Berlin Wall to block this inevitable capital flight.

• Austria. One difficulty of imposing a wealth tax is figuring out how much someone is worth. Valuing securities, homes or private jets is at least relatively objective. What about modern art, race horses or closely held companies? When Austria abolished its decades-old wealth tax in 1994, officials cited the administrative burden of calculating the exact levy.

***
While a dozen European states had wealth taxes in 1990, the number has fallen to three today. Nationally Spain taxes fortunes above €700,000 at 0.2%, rising to 2.5% at roughly €10.7 million. Rates can vary among Spain’s regions, but does anyone think of Madrid as an economic model? Switzerland’s wealth tax hits the middle class, starting in the low six figures inside most of the country’s 26 cantons. Norway taxes wealth starting at about $170,000 at 0.85%, but the country’s oil reserves have let it get away with bad economic decisions for decades.

Despite the obvious flaws, the wealth tax stays alive in the socialist mind because it is the ultimate populist envy tax. Donald Trump popped off in support of a wealth tax when weighing a 2000 presidential bid, no doubt without much thought.

The best argument against a wealth tax is moral. It is a confiscatory tax on the assets from work, thrift and investment that have already been taxed at least once as individual or corporate income, and perhaps again as a capital gain or death tax. The European experience shows that it also fails in practice. The question is how much economic damage comes first.

DougMacG

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Wesbury tweet on wealth tax
« Reply #920 on: November 14, 2019, 05:16:38 PM »
When you tax something you get less of it.  If you tax “wealth” you get less wealth, which means slower growth and an environment that makes it harder for people to accumulate wealth.  What sense does it make to remove parts of a cow, instead of taxing the milk that it produces? - Brian Wesbury

This is a good analogy.   - Doug

Crafty_Dog

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Re: Tax Policy
« Reply #921 on: November 19, 2019, 11:19:52 AM »
Let's see if POTH accepts FedEx's challenge to debate on its article criticizing FedEx for having no taxes.

DougMacG

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Re: Tax Policy, Trump Tax Cut 2.0, Stephen Moore
« Reply #922 on: November 20, 2019, 06:59:16 AM »
He does not have my cut (indexing capital gains to inflation) in his list.  Much better idea than his no. 3), capital gains rollover.

This is an opinion column, not an administration document, posted for discussion.  No. 1) I think will not happen.  People who can afford to save get a break that people who can't afford don't.  No. 2) gives up too much revenue, per previous discussion.  Maybe Trump does it anyway in an election year where his competitors all want to blow up the deficit anyway.  A 'middle class tax cut' should be tied to a federal government spending cut - a simple concept.  Smaller burden of government = smaller government.  No. 3) does not bring in more revenue or stimulate much. No. 4) is to tamper with social security in an election year.  Let's go after entitlements in a comprehensive manner.   Otherwise, I like Stephen Moore.  )  Designing a tax cut for an entity already in a huge deficit is a formidable task.

https://www.realclearpolitics.com/articles/2019/11/19/trump_needs_tax_cut_20_141767.html
...
1) Tax-free savings accounts. My Heritage colleague Adam Michel has been pitching an idea that would allow Americans with incomes below about $150,000 to deduct up $10,000 each year from their taxable income if they put the money into savings. By raising national saving, this would provide a bigger pool of money available for investment and allow millions of Americans to own more stock.

Given that most middle-class families have very low savings, this would also acculturate Americans to squirreling away more money every year and watching the power of compound interest raise their lifetime wealth.

2) Reduce tax rates on the middle class to 15%. This is an idea that National Economic Council Director Larry Kudlow has floated. It reduces rates from 22% to 15% for those in the middle income range, which will modestly offer greater work incentives for millions of families while allowing people to keep more of their earnings.

3) Capital gains rollover. This would change the way we tax capital gains income. Currently, if you own a stock like IBM and want to sell it at a gain of, say, $50,000 and use those gains to buy stock in Uber, you have to pay a nearly 24% tax on the $50,000. But all you've done is rearrange your portfolio of stocks; you haven't really realized a gain in your income that you can spend.

This perversely locks in investment because people stay in old stocks and steer away from investing in new start-ups in order to avoid the capital gains tax. Under this "rollover" proposal, capital gains would be paid only when the money is withdrawn from the stock market entirely.

4) Private accounts for Social Security. Allow workers to put a small amount -- perhaps 2% -- of their payroll taxes into a private, personal retirement account. These accounts would be invested in the index funds of all stocks. This would allow for much higher lifetime returns from this money than conventional Social Security would offer. It would allow every participating American -- including tens of millions of minimum-wage workers -- to become shareholders and own a piece of the rock.
...

Crafty_Dog

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Crafty_Dog

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$1T repatriated
« Reply #924 on: December 29, 2019, 07:47:13 AM »


DougMacG

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Re: Grannis: Tax Code is Still Very Progressive
« Reply #926 on: January 06, 2020, 07:45:37 AM »
https://scottgrannis.blogspot.com/2020/01/the-tax-code-is-still-highly-progressive.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29

Yes, and he proves the case with the data.

Every time we 'reform' taxes, by the rules of trying to appease the Left, we cannot make tax rates less progressive, therefore rates just keeps getting steep and steeper over time, even when Republicans are in charge. 

I accept the compromise of having some progressivity in tax rates, but the other side should accept the math and science of the fact that the high rates on the richest are the most damaging to the economy.  Those are the people who are most able to change their economic activity based on the disincentives to produce put upon them.

DougMacG

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Tax Reform and Federal Revenues
« Reply #927 on: January 08, 2020, 09:04:34 AM »
Best data I can find.  Revenues are going up faster with lower tax rates than they were with higher rates.  This means incomes are going up even faster.  Proves fixed-pie economics false. 

FY 2020 - $3.64 trillion, budgeted.
FY 2019 - $3.44 trillion, estimated.
FY 2018 - $3.33 trillion.
FY 2017 - $3.32 trillion.
FY 2016 - $3.27 trillion.
FY 2015 - $3.25 trillion.
https://www.thebalance.com/current-u-s-federal-government-tax-revenue-3305762
https://www.usgovernmentrevenue.com/federal_revenue_chart

Meanwhile, US GDP growth is highest of the G7.
https://www.wsj.com/articles/tax-reform-has-delivered-for-workers-11577045463

Real disposable personal income per household has increased $6,000 since the tax cuts were passed.

Over the past year, nominal wages for the lowest 10% of American workers jumped 7%.

in January 2017, the Congressional Budget Office forecast the creation of only two million jobs by this point.  The economy has in fact created seven million jobs since January 2017.
[Wrong by 350%]

Federal Reserve’s median forecast had the unemployment rate inching up toward 5%, almost 1.5 percentage points higher than the current 50-year low, 3.5%.
[Wrong in direction and magnitude.]
-----------------------------------------
Higher incomes and lower unemployment means that federal welfare spending and transfer payments can be cut, closing the deficit. Whether or not lawmakers will do that is another matter.  If voters demanded that, it would happen.


Crafty_Dog

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Re: Tax Policy
« Reply #928 on: January 08, 2020, 01:30:50 PM »
I posted Doug's post on a FB conversation I am in with an econ prof.  Herewith his response:

Firstly, I’m reasonably sure the tax revenue historical and forecasted numbers aren’t adjusted for inflation. If you reduce them by about 2% per year they're not growing. A quick google found this article that lays that out:
http://www.crfb.org/.../no-tax-revenue-has-not-risen-not...

Interestingly enough from that TheBalance link you used:

“The revenue collected equals 16.3% of gross domestic product. That's the nation's measurement of economic output. That's like saying the average tax rate for the United States itself is 16.3%.

If that much production is going to the federal government, then you want to make sure it's reinvested into the economy to support future growth.

It's also much lower than the historical 19% target. But that's because President Donald Trump cut taxes. The OMB estimates GDP will increase by 3.1% in FY 2020. That's higher than the ideal growth rate.

Revenues would be much higher without the Trump tax plan. It was also lowered by the extension of the Bush tax cuts and the Obama tax cuts.”

https://www.thebalance.com/current-u-s-federal-government...

As to the rest, you may have noticed the 26% increase in the US deficit last year, including the 5% increase in discretionary spending. Since 2015, the deficit has more than doubled. The government borrows and spends more, GDP ends up higher, and unemployment decreases. Sure, tax cuts may have done a bit to boost the economy, but given it was already healthy, it seems unlikely that a tax cut mostly on high income people will change their spending habits sufficiently to make more of a difference than it will mostly just reduce their tax payments.

Again, here’s TheBalance to lay It out

https://www.thebalance.com/current-u-s-federal-government...

Higher incomes and lower unemployment due to a ballooning deficit doesn’t jump out as a situation where the deficit is going to close any time soon.

DougMacG

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Re: Tax Policy
« Reply #929 on: January 08, 2020, 09:10:59 PM »
I posted Doug's post on a FB conversation I am in with an econ prof.  Herewith his response:

Firstly, I’m reasonably sure the tax revenue historical and forecasted numbers aren’t adjusted for inflation. If you reduce them by about 2% per year they're not growing. A quick google found this article that lays that out:
http://www.crfb.org/.../no-tax-revenue-has-not-risen-not...

Interestingly enough from that TheBalance link you used:

“The revenue collected equals 16.3% of gross domestic product. That's the nation's measurement of economic output. That's like saying the average tax rate for the United States itself is 16.3%.

If that much production is going to the federal government, then you want to make sure it's reinvested into the economy to support future growth.

It's also much lower than the historical 19% target. But that's because President Donald Trump cut taxes. The OMB estimates GDP will increase by 3.1% in FY 2020. That's higher than the ideal growth rate.

Revenues would be much higher without the Trump tax plan. It was also lowered by the extension of the Bush tax cuts and the Obama tax cuts.”

https://www.thebalance.com/current-u-s-federal-government...

As to the rest, you may have noticed the 26% increase in the US deficit last year, including the 5% increase in discretionary spending. Since 2015, the deficit has more than doubled. The government borrows and spends more, GDP ends up higher, and unemployment decreases. Sure, tax cuts may have done a bit to boost the economy, but given it was already healthy, it seems unlikely that a tax cut mostly on high income people will change their spending habits sufficiently to make more of a difference than it will mostly just reduce their tax payments.

Again, here’s TheBalance to lay It out

https://www.thebalance.com/current-u-s-federal-government...

Higher incomes and lower unemployment due to a ballooning deficit doesn’t jump out as a situation where the deficit is going to close any time soon.


1) A few of his statements boggle my mind, starting with this:

"Sure, tax cuts may have done a bit to boost the economy, but given it was already healthy..."

   - No, (IMHO).  We were in stagnation prior to this, risking recession.  One evidentiary point on that would be that the voters threw out the party in power and changed course.  A second piece of evidence is that 4600 companies left the United States or moved operations out during the time that the US had the highest corporate business tax rates in the developed world.  [Links to that in this thread on the forum.]  Third, GDP growth was 1.5% in the last year of the prior administration. 

2)  "I’m reasonably sure the tax revenue historical and forecasted numbers aren’t adjusted for inflation. If you reduce them by about 2% per year they're not growing."

   - I agree they are likely not inflation adjusted dollars.  I also believe inflation was below the Fed target of 2% during that period.  But take that inflation as a constant over this period, then federal revenues were shrinking faster BEFORE Trump and before tax rates were cut.  That is a very dangerous situation IMHO if we accept the idea that large deficits are bad and that spending on everything is going up every year under both parties.  An economy with high tax rates and declining revenues is not "already healthy".  See Ibn Khaldun, 'The Muqaddimah'.  That combination leads to collapse, sooner or later. 

3) “The revenue collected equals 16.3% of gross domestic product. That's the nation's measurement of economic output. That's like saying the average tax rate for the United States itself is 16.3%. ... It's also much lower than the historical 19% target."

   - I disagree with the premise that taxes at a higher percentage of GDP is preferable or even that it necessarily brings in more money.  It doesn't necessarily mean that.

4)  "But that's because President Donald Trump cut taxes."

   - False.  Trump cut tax rates.  Taxes measured in dollars, what we use to pay our expenses, went up.

5) "The OMB estimates GDP will increase by 3.1% in FY 2020. That's higher than the ideal growth rate."

   - Oh boy, this is where we really part ways.  For one thing, 3.1% is the historical average rate of growth before anti-growth policies took power.  For another thing, it's not higher than the ideal growth rate.  Switch to micro-economics for a moment, which is better for you and your family, a 3% raise or a 4-5% raise?

6)  "If that much production is going to the federal government, then you want to make sure it's reinvested into the economy to support future growth."

   - I don't agree that government sector 'investment' is the driver of economic growth.

7)  Revenues would be much higher without the Trump tax plan.

   - Everyone is entitled to an opinion, but I don't agree with this and it is most certainly an unprovable assertion.  We were losing companies, losing revenues, losing our competitive advantage and due for a recession according to historical cycles.  The consequence of doing nothing to address the malaise we were in is something we will never know because voters took us in a different direction.

8 ) "It was also lowered by ... the Obama tax cuts.”

   - I don't think there was a net tax cut or tax rate cut over the Obama years.  PolitiFact:  "We rated his campaign promise that no family making less than $250,000 will see "any form of tax increase" as Promise Broken."
   
9) "As to the rest, you may have noticed the 26% increase in the US deficit last year, including the 5% increase in discretionary spending. Since 2015, the deficit has more than doubled."

   - Paraphrasing James Carville, It's the Spending Stupid.  If revenues are constant or rising, all of the increase in deficit is coming from the spending.  If 6 million people are off of food stamps, if black and Hispanic unemployment levels are at historic lows, if the number of people on federal disability assistance is declining, if we are coming home from two foreign wars... then maybe the deficit could be narrowed by cutting spending instead of raising tax rates when we already know that higher tax rates don't bring in more revenues.

10) "it seems unlikely that a tax cut mostly on high income people will change their spending habits sufficiently to make more of a difference than it will mostly just reduce their tax payments."

   - The tax rate cut was not mostly on high income people.  Changing investment habits is as important to the economy as changing spending habits.

11) "Higher incomes and lower unemployment due to a ballooning deficit doesn’t jump out as a situation where the deficit is going to close any time soon."

   - The deficit will close only when strong GDP growth is coupled with spending restraint, including entitlement reform (IMHO).
« Last Edit: January 08, 2020, 11:46:03 PM by DougMacG »

DougMacG

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Re: Tax Policy
« Reply #930 on: January 14, 2020, 08:08:45 AM »
Any further words from the econ prof who thinks 3.1% is "higher than the ideal growth rate"?

Here are some lower growth rates (Venezuela):


Crafty_Dog

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Re: Tax Policy
« Reply #931 on: January 14, 2020, 10:37:42 AM »
Quality work on those two posts Doug  8-)

DougMacG

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Re: Tax Policy, NYT Flat Tax
« Reply #932 on: January 15, 2020, 11:09:13 AM »
Does anyone remember when the NYT and Democrats favored a flat tax?

https://www.nytimes.com/1982/06/06/opinion/yes-there-is-a-better-income-tax.html

Opinion
Yes, There Is a Better Income Tax

June 6, 1982, Section 4, Page 20

As many Americans keep saying, it's a poison in the body politic. Who can respect an income tax system that allows many wealthy citizens to pay little or no tax yet claims close to half the marginal earnings of the middle class? Who can defend a tax code so complicated that even the most educated family needs a professional to decide how much it owes?

Unpopular as it is, however, the income tax system has been remarkably resistant to improvement. President Reagan's tax package will eventually roll back rates to the level of the late 1970's, but it will not simplify the code or rid it of provisions that penalize hard work and reward unproductive investment. No wonder that skeptical politicians rank serious tax reform with gun control and free world trade - as worthy causes unworthy of the time of realists.

The skeptics may yet be proved wrong. The obstacles to reform are no less daunting than they were a decade ago. But Congress is beginning to see that the public's tolerance is not unlimited; disaffection is great, cheating has increased. If any reform has a chance, it is the fresh start proposed by Senator Bradley of New Jersey and Representative Gephardt of Missouri.

Federal income taxes now claim only 12 percent of all personal income. But the income base that is taxed has been so eroded by exceptions and preferences that the rates on what is left to tax must be kept high. Thus, the tax on an extra dollar of income for a typical family earning $20,000 is 28 percent and progressively higher for the more affluent. The urge for reform, therefore, usually attacks the most egregious exemptions in the code, to exploit popular resentments and to enlarge the tax base.

But a diffused public outrage has been no match for well-funded special interests. So a new generation of reformers aims to rebuild the income tax base from scratch. It hopes to simplify the tax code and sharply lower the marginal tax rates for all.

The most dramatic fresh start, without changing the total amount collected, would be a flat-rate tax levied on a greatly broadened income base. Senator Helms of North Carolina would rid the law of virtually every tax preference and tax all income at about 12 percent. Representative Panetta of Cali-fornia would retain a few preferences and tax at a flat 19 percent. Either approach would greatly improve the efficiency of the system, simplifying calculations and increasing the incentive to earn. But the price of simplicity in such a flat-rate tax is an enormous redistribution of income.

According to the Congressional Budget Office, Mr. Helms's plan would raise the burden on those earning $5,000 to $10,000 by 147 percent - while decreasing the total paid by families in the $100,000 to $200,000 range by 47 percent. Mr. Panetta would fully protect the poor but would still be increasing the burden on middle-income families.

Lacking this radical simplicity, but preserving the present balance of pain, is the Bradley-Gephardt plan. It would continue to permit a few politically sensitive deductions, like home mortgage interest and contributions to charity. But more affluent families would pay a surcharge on these preference items. Also, the marginal tax rate would increase with income, topping out at 28 percent for those earning more than $37,000.

Unlike a flat tax, Bradley-Gephardt would thus not mix tax reform with redistribution: no income class would benefit at the expense of any other. But dozens of tax exemptions would be eliminated; most would pay tax on almost all types of income. The average citizen could thus figure his own taxes and figure that his neighbor was also paying a fair share.

Neither a flat tax, nor a sophisticated hybrid like Bradley-Gephardt, would be easy to enact. Hardly anyone objects to the idea of simplification; but almost every voter aims to protect a favorite piece of tax-exempt turf. Investors want preferences for capital gains; working parents want deductions for child care; Americans abroad want foreign income exclusions, and so on. All exclusions can find their justification. But by cumulatively narrowing the tax base, all contribute to making the income tax code a disaster.

The issue, then, is whether Congress can muster the vision to look to the common interest. The hurdles are formidable, but so are the potential benefits: a return to fairness and faith in a system that lies at the heart of responsible government.

A version of this article appears in print on June 6, 1982, Section 4, Page 20 of the National edition with the headline: Yes, There Is a Better Income Tax.

Crafty_Dog

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Re: Tax Policy
« Reply #933 on: January 15, 2020, 12:20:26 PM »
Nice find!

DougMacG

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Re: Tax Policy
« Reply #934 on: January 16, 2020, 09:42:43 AM »
Nice find!

Hat tip:  Dan Mitchell, economist who has worked at Heritage and Cato.

https://danieljmitchell.wordpress.com/page/1/

DougMacG

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Re: Tax Policy
« Reply #935 on: February 19, 2020, 05:53:11 AM »
"Most Democrat presidential candidates want to at least double the capital gains tax.  The #top1percent would then stop selling assets and thus APPEAR poorer the income tax data Piketty & Saez habitually abuse.  Not selling assets doesn't make the rich poorer - only the Treasury."   - Economist Alan Reynolds


Lawrence Hamtil
@lhamtil
 · Feb 15
The top 1% realize more capital gains (remember, it's a voluntary tax) when rates have been lower