tax cuts = revenue // tax increases = stupidity?

Question

The inflation-adjusted 2004-2007 revenue surge of 25 percent represents the largest three-year tax revenue surge since 1966-1969. So the Bush tax cuts are doing more to raise tax revenue than any other action in modern American history.

Economics 101:
Tax cuts encourage and allow increased economic activity.

Tax increases discourage and decrease economic activity.

So which of you Libs want to raise taxes now? And why?

Answer 1

And I'll add to that - the revenue increases from 1966-1969 were followed by a surge in inflation. In 1969 inflation hit 5% and CPI ultimately rose much more. When Bernanke says he's focused on inflation that means in theory it could crack 3%, we have very different tolerance levels now.

But I think you should clarify the ALLOW part, because that's it. YES a business makes an investment if the after-tax return justifies the cost, and so taxes affect that. Individuals, same thing. But the bigger issue is the capital with which the overall level of investment and production and consumption increase - - the Fed does not create capital, it can affect the supply of money. The economy generates its own capital, if it is, as you say, allowed to. Profit is capital. When you tax profit you leave less capital for the economy to reinvest - - which the economy ALWAYS does - - - except for Japanese housewives.

What makes it work is the multiplier effect, a lot more than the behavioral part of it. It's both but it's more the multiplier effect.

Now, some Lib will point out that even if there is a Laffer Curve, it has a right side. Yes, it does. Tax cuts allow the economy to grow organically, in the form of rising incomes, which are taxable. Up until a certain point, the increase to the tax base more than offsets the decrease in the tax rate. The experience of the last four years tells us we were still on the left side of the curve both when Bush Sr. raised tax rates (real revenue fell the following year by more than 2%) and when Bush Jr. cut them (tax revenue is increasing at about 11% per year, 4X CPI, as you point out).

However at some point the equation does flip.

But the increase in economic activity, in the tax base, is still there. The rising incomes, the job creation, is still there.

So there should be less of a "need" for many of the government programs then - you should be able to cut jobless programs when unemployment falls.

So, yes, keep cutting even after we've passed the point where the tax cuts continue to pay for themselves on the federal revenue side, because the macroeconomic result is still a reduced "need" for federal spending.

Kevorkian, you know the answer to that - the deficit is declining, we shouldn't have one at all, we do but that's on the spending side. YES I BLAME BUSH but not his tax policies - - - if your boss gives you a $4K raise and your husband blows $5K at the track, you're down $1K but it's not your boss' fault.

Jose the war has nothing to do with it - - interest on foreign held debt is, and has for several year been, much larger than the total deficit. That means we're not "pumping" the economy Keynesian-style, haven't been since early in the Reagan years. Should this be the case? Is that good? NO. But it cannot be said that the budget deficit is artificially pumping the economy.

Answer 2

TRUTHiness IS BACK!

A republican always measures the economy from the top down.
A democrat measures it from the bottom up.

In other words, just because there is rise in the average of income by the numbers, it doesn't mean incomes are growing. It can simply mean the rich are getting richer. That's not a bad thing in and of itself. There is a balance that TRUTH was talking about. Between where the economy is so good we don't need the government (which is highly unlikely) and where the economy is so bad that we can't function without government (which is a depression). And I, like a lot of people, think we hit that balance very well during the 90's and we were on a very sustainable course.

To answer though, yes everyone loves a tax cut. But it's hard to justify the economy wouldn't be doing the exact same thing if there were no tax cuts. The difference would be, that we'd have no deficit. That money has to come from somewhere- either by a huge steady increase in economy over a generation...or through a tax hike.

====ADDITION====

That ‘balance’ I was talking about IS the division in this country. Just because the economy seems to be working, that doesn’t mean it’s working for everyone or even most. There are real major challenges that face people these days at the bottom. It’s not a matter of ‘not being lazy either’, it’s a matter of affording things like housing, or education, or health! And often times overcoming prejudice. Those are necessary things. Frankly, I think the economy is working for less people than it is working for. It’s the difference between where the people are, and where the money is. Right now the money has the power.

Answer 3

Economics 101,
The revenue increase is because we are at war not because of the tax cuts. War which is paid with credit. So while we build revenue from war, we spend more money than what we make.

Is just like getting a 1,000,000 loan to create a business but the business is not producing enough to pay the loan. So while everybody think you are a millionare because of your business you know you owe everything. Who are you trying to fool?

Answer 4

Yes! We should cut all taxes untill there is no more money to protect the environment, there is no more money to educate people, our roads crumble to pieces, we will have no more money to fund our army, and people that can't take care of themselves are left starving and out in the cold, all so the rich can get richer and the poor get poorer. Great idea!

Answer 5

You can have all the revenue you want with tax cuts.

But the morons in charge have spent more above revenue than any other president in history creating the largest deficit in history.

Answer 6

because it did i guess you forget about the recession in 2000 that bush led us back from i guess you forget about the economic effects of 9/11 that bush led us back from i guess you forget about the roughly 7.5 million jobs greated after the bush tax cuts (that meant more people paying taxes)

Answer 7

Indeed. If we cut spending, we could cut tax rates even further. Then, everyone could do with their incomes as they see fit. Giving, spending, saving, etc.

Answer 8

Liberals want government to control everything. Liberals want to control the government. They don't care if people have financial success. Liberals like to keep their constituents poor so they can control the poor with promises of government help.

Answer 9

In fact you are 100% correct. As Republicans we need to get our Leaders to quit spending so much though.....

Answer 10

you bet ye, we want to get those stupids out of office.