Tax Cuts Lead to Great Tax Revenue

[Crazed Rabbit]

It turns out supply-side theory is correct.

According to the Congessional Budget Office, tax cuts of capital gains taxes led to an increase in tax revenue over what was projected, says Investor's Business Daily.
IMPORTANT NOTE: The years mentioned are off by a year. The taxes were cut in 2003, but didn't take full effect until 2004, and the numbers should be for the years 2004-2005. Everything is otherwise correct.
Here's a nice little chart showing the increase:

That's an increase of over 20%!
The tax cuts not only helped the economy but more than paid for themselves!

Crazed Rabbit

[Devastatin Dave]

Great news, unfortunately you won't hear this on the news because its good news for Bush. Bad news= Bush's fault, good news= don't report it.

[Lemur]

The tax cuts not only helped the economy but more than paid for themselves!

Two thoughts:

(1) It would be cool to see more than a single data point about this. Somebody should search and see if there have been any reliable, non-partisan studies of the net effect of capital gains taxes.

(2) As anybody who has studied Macro Econ 101 will tell you, there's an optimum point for pricing/revenue. The I.B.D. article would indicate that the current "price" is too high. But there will also be a price that is too low, and you won't have to go to zero to find it. Again, I wonder if there has been a reliable, non-partisan etc. etc. etc.

Oh, and as for the media, you're absolutely right. The fact that they don't highlight their economic reporting on long-term trends is beyond me. It *must* be an anti-Bush conspiracy! (Dare I say, "Vast, left-wing conspiracy"?)

[Crazed Rabbit]

(2) As anybody who has studied Macro Econ 101 will tell you, there's an optimum point for pricing/revenue. The I.B.D. article would indicate that the current "price" is too high. But there will also be a price that is too low, and you won't have to go to zero to find it.

Certainly. A factor of supply side is that decreasing tax cuts forever will not always increase tax revenue. This is validation for the theory behind supply side. The economy will always increase with less taxes, and that is always good for society, if not for tax revenues.

On a different point, I'd argue that its not the point, nor should it be, of government to collect the maximum amount of taxes possible. But that's another debate.

Crazed Rabbit

[Erebus1101]

Republicans say the evidence supports their case for keeping taxes on investment as low as possible. Democrats contend the economic impact of the tax cuts has been modest and that there's little correlation between investment tax rates and economic growth.

I think democrats have a point. From what I know, it seems that revenues from taxes on capital gains are marginal. Although I am also of the opinion that taxes on cap gains should be as low as possible, the US government shouldn't sell it as a victory. The effects on those tax cuts were predictable. However most economists agree that the US deficit will be a problem in the future and since the gains from the taxes on cap gains are quite low, they won't solve it. The US will still need to balance their budget and to do that they will have to either cut expenses or increase taxes.

[Crazed Rabbit]

The US will still need to balance their budget and to do that they will have to either cut expenses or increase taxes.

The US will need to balance the budget, hopefully sooner rather than later, but will not necessarily need to raise taxes. Indeed, this shows us that decreasing taxees can lead to more revenue. That and cutting excess programs.

The democrats are also wrong (as they so often are) about the economic impacts of tax cuts. Look at the difference between the projected tax revenue after the tax cut and the actual revenue. I would think that the projected revenue was using current investment rates as a guide, coupled with the lower tax rates. But investment rose greatly after the tax cuts, leading to the higher tax revenue.

And tax cuts will always increase economic performance, because it decreases the cost of doing business and/or buying products.

Crazed Rabbit

[Erebus1101]

Tax cuts on capital gains were beneficial, but those are not by far sufficient to resolve US deficit problems and not all taxes behave equally. We are still to see wether tax cuts in other more important areas will be as beneficial as this, and I think they probably won't.
I will try to find out more on this subject later, because I think other countries also tried tax cuts but the results were different in each case.

[Seamus Fermanagh]

Balancing the budget would require more tax revenue and/or less spending.

Problem:

Nobody wants to cut any spending anywhere. Moreover, substantial chunks of the budget are devoted to servicing the debt or "entitlement" programs that supposedly cannot be altered.

Problem:

Nobody wants to tax increases and the segment of society that bears the least burden expects that burden to lessen. Remember, the top 10% of wage earners in the USA pay 63% of the taxes. The bottom 45% or so of wage earners pay little or nothing. Unfortunately, the higher the taxes get on the top 5%, the greater the incentive for that top 5% to become citizens of Monaco or the Caymans and select Chuck U. Farley as their representative to the rest of us.

The revenue system itself is addled and needs a complete overhaul. Moreover, many of the entitlements need to be phased out over the next 50 years so that government can get out of peoples daily lives as much as safelly possible.

AdrianII wasn't too far off with his "reach for my wallet" jibe.

[Goofball]

The economy will always increase with less taxes, and that is always good for society, if not for tax revenues.

While I agree with you on most moints in this thread, the above statement is not exactly true. The economy (or the amount of trade, and therefor, profit) being generated will always improve as taxation drops as long as taxation does not drop so low that the government is unable to maintain infrastructure.

If the government stops maintianing roads, for example, trade would certainly take a big hit.

As to lower taxes always being good for society, that is also true only to a certain minimum level. If sufficient taxes are not being levied to fund a police force, I daresay that would not be too great for society.

[Crazed Rabbit]

You do have a point. I was just concentrating on the effects of taxes, and not the benefits of said taxes.

A small level of taxation is necessary for the very basic structure of society; police, a judiciary, roads, etc. But the vast majority of what our taxes pay for don't help the economy.

Crazed Rabbit

[Lemur]

A small level of taxation is necessary for the very basic structure of society; police, a judiciary, roads, etc. But the vast majority of what our taxes pay for don't help the economy.

You seem to be implying that the U.S.A. should cut spending. Well, that's a great idea, and I'm all in favor, so please point me out to the political party capable of doing so.

Neither the Democrats nor the Republicans have demonstrated the spine to make meaningful cuts. In fact, the last five years have been an unmitigated disaster for anybody who believes in smaller government. We either need a third party, or we need a split government again. Both of our major parties have behaved like teenagers with daddy's credit card whenever they've had a lock on the government.

I've heard the starve-the-beast arguments, and I'm not impressed. Show me where it's worked. Please. Please.