Reducing Taxes Increases Tax Revenue

[Divinus Arma]

It's like they always said, if you want more pie than bake a bigger pie rather than take a bigger slice.

Reduce Taxes, grow the economy, and spur greater revenue.

Surprising Jump in Tax Revenues Curbs U.S. Deficit
By EDMUND L. ANDREWS
WASHINGTON, July 8 — An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.

On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year's levels and that the deficit will be about $100 billion less than what they projected six months ago. The rising tide in tax payments has been building for months, but the increased scale is surprising even seasoned budget analysts and making it easier for both the administration and Congress to finesse the big run-up in spending over the past year.

Tax revenues are climbing twice as fast as the administration predicted in February, so fast that the budget deficit could actually decline this year.

The main reason is a big spike in corporate tax receipts, which have nearly tripled since 2003, as well as what appears to be a big rise in individual taxes on stock market profits and executive bonuses.

On Friday, the Congressional Budget Office reported that corporate tax receipts for the nine months ending in June hit $250 billion — nearly 26 percent higher than the same time last year — and that overall revenues were $206 billion higher than at this point in 2005.

Congressional analysts say that the surprise windfall could shrink the deficit this year to $300 billion, from $318 billion in 2005 and an all-time high of $412 billion in 2004.

Republicans are already arguing that the revenue jump proves their argument that tax cuts, especially the 2003 tax cut on stock dividends, would spur the economy and ultimately increase revenues.

New York Times: http://www.nytimes.com/2006/07/09/wa...gewanted=print

[rotorgun]

Indeed, the rise in tax revenues just happens to be in direct proportion to the genral rise in the price of just about everything, starting with oil products. It is utterly amazing how that works! It is also so wonderful that most of the revenue appears to be going overseas to help "free" the muslim nations of the world-all at our expense! How very nice. I feel richer already! Yes, paying three times what I did in 1999 for fuel, food, and services makes me feel so very much better off-almost like a CEO of an oil corporation with a 4 million dollar retirement package with stock options! How exceeding fine I feel!

Thank you so much for making me feel better. May I have another?

[Philippus Flavius Homovallumus]

Lowering taxes removes the burdan on the economy and allows growth, which creates wealth, which can be taxed.

The problem is that few modern governments can actually afford to lower taxes because they spend so much due to huge public welfare systems and shoddy buerocracy.

[rotorgun]

3 times as much for food and services? Where do you live, China? Gas prices have risen, but Food and Services has not changed noticeable for me.

All right, maybe I was overstating that bit about food and services, (I live in Tennessee BTW) but you have to admit that prices on everything have gone up overall. Housing, food, services, etc. have gone up about 75-100% in my area. If the prices seem low, it is probably because of all the outscourcing and hiring of immigrant (legal or otherwise) labor who manufacture and/or provide these services and products. How many items does one by that have a "Hecho en Mexico" label on them, or a made in China/Taiwan/Pakistan/India disclaimer?

While I admit that the NAFTA agreement was signed into law by the Clinton administration, it was a very bi-partisan bill that made it so. The Democrats had to sign on for it in order to get the Republicans to go along with them on balancing the budget.

Wigferth Ironwall
Lowering taxes removes the burden on the economy and allows growth, which creates wealth, which can be taxed.

True, but let's consider true reform of the biased (towards the poor and the extremely wealthy), graduated tax system with one that is more fair for all. The middle, and upper middle classes always get the screws put to them after the cryin' is done.

The problem is that few modern governments can actually afford to lower taxes because they spend so much due to huge public welfare systems and shoddy buerocracy.

Agreed, but it looks awful bad when you can't help your own, but can throw billions towards the third world, and in giving aid to all of the many countries we support that look down their noses at us as they smile and accept our money. "Charity begins at home" my mother taught me. Then look after your neighbor, when your own house is in order.

[JAG]

It might be true that in the long term reducing taxes can increase tax revenue, but just because this might well happen it does not mean that the lives of the people is better or that this increase in taxed income for government actually means anything. It might sound great and look good, but when you look at the details of what it means it isn't neccesarily good.

I wrote a fairly long post, but then deleted it by accident - yes I closed the wrong web browser window, what a twat I am - when I can be bothered to re write it I might, but as it is very annoying I shall just give you the jist of what I was gonna say.

Under Thatcher in the UK and Reagan in the US, the reduction in tax meant that social mobility decreased and child poverty increased, not to mention the other countless ways of measuring social justice and mobility which went down. A reduction in tax directly means less spending on public services which directly means less social mobility.

Tax breaks are not equally distributed between rich and poor, they affect both equally yet are slanted away from the poor in their benefits and negatives. Yes some might say that having more disposable income is better than giving it to government, but that is not true. Being given a bigger ladder but then at the same time having the ladder pulled away from your feet is, I am sure you will agree, not a good thing. Giving poorer people more money yet spending less on schools, healthcare, public services etc is completely counter productive and means poorer people get an even rougher deal. Having more money than before means nothing when you look at the fact that everyone else has more money - with those who earn more gaining significantly more with the tax breaks - and with the reduction in spending by government, money tends to take on a far bigger importance in peoples lives. Having enough money to get your child into a certain school or giving them private tutors because the local state school is rubbish...

What is the point of the government gaining more taxable income anyway, if Conservatives are in power, the only benefit they see from more taxable income is to reduce taxes further. Thus the negatives I stated previously are just compounded and continue to get worse, great.

yadda, yadda, loads more reasons, too hot, tired and annoyed I deleted my post to bother typing them now. Basically tax breaks suck.

[Divinus Arma]

Ooooh. I hate when I do that! I feel for ya JAGermeister.

It might be true that in the long term reducing taxes can increase tax revenue.

Excellent. I'm pleased that you agree. Because the point of taxes is to increase revenue, right? And thus if the government does not have to decrease services, but yet it is able to still increase revenue... then does it not stand to reason to decrease taxes? Granted, some will get richer. But, guess what? Their riches also get taxed, leaving more money for the "poor"! And the rich will tend to spend more of their money on higher risk ventures, like business loans, or new company operations expansions, or other financially high risk- high reward situations. The richer the rich get, the more money gets passed to everyone else. But not by compulsion, but because it stands that the rich will simply make more money by investing more money.

And most importantly, my socialist-leaning friend, this has NOTHING to do with cutting services.




*Skips off to grab a beer to drink to capitalism*

[Alexander the Pretty Good]

JAG, what you are saying just does not match the evidence.

Taxes in the US went down, and as you and the rest of the lefties confirm it was mostly for the rich. In fact, I remember much anger of that.

Now tax revenue went up, even though the government is collecting with lower rates.

Corporate tax payments are expected to exceed $300 billion, up from $131 billion three years ago.

Three years ago was 2003. The year the evil capitalists and their disgusting bourgeois toadies reduced taxes on the fat cat.

The government has not reduced spending at all. So there are two explanations for the surge in revenue.

1) Tax cuts spurred on the economy.
2) The economy mystically did well regardless of the tax cuts.

Now, on point #2, one would have to give credit to Bush again. Because, as we are so often reminded, Clinton was great because the economy was good, and that the Prez must take responsibility for the economy when it goes bad (the 2000-ish recession was Bush's fault, too, remember?)

You guys are stuck between a rock and a hard place: either the economy in general is getting better (and Bush deserves kudos) or the tax cuts are working (and Bush and the Republicans deserve kudos).

And how could having more revenue hurt the dependents of the state? Surely that means more money to give to welfare hangers-on? If the state chooses to spend the new money in a different manner, that's a separate issue. The fact of the matter is that by letting the hated upper class get away with less taxes could help the oppressed and downtrodden.

EDIT: DA beat me to it.

[Alexander the Pretty Good]

Well of course. It's just amusing to point out how dogmatic they've become over the issue. They don't really care if the proposed course of action will do more for the lower classes; their Big Issue is doing anything to hurt the upper class and resist anything that could lessen their burden.

[Big_John]

why don't we wait a bit before everyone starts glad-handing eachother.

Both supporters and critics of Mr. Bush cautioned against attributing much long-term significance to the recent fiscal improvement, in part because tax revenues have become more volatile.

[Aenlic]

Let's look at the results, if we take as a given the idea that reducing taxes increases tax revenue.

At what point does reducing taxes start decreasing tax revenue? It must at some point, unless taxes are immune to the application of logic. If you reduce taxes to nothing, then you have no tax revenue. Obviously. So, at some point in the proposed equation, you reach an equilibrium point where any further decrease to taxes will begin decreasing tax revenue, otherwise it would be mathematically impossible to reach the taxes reduced to zero equals tax revenue reduced to zero point.

Clearly, unless one cares to argue that there would somehow still be tax revenue without taxes, then the statement "reducing taxes increases tax revenue" is demonstrably false. Perhaps it should be amended to something more realistic, such as "reducing taxes might increase tax revenue until a certain point, at which reducing taxes further would decrease tax revenue."

I'm not taking a stance either way on the issue of taxes here. I'm just objecting to broad statements which are logically impossible.

[Divinus Arma]

Yes, but according to you, oh licker of aens, there should be NO taxes. After all, no government means no taxes, eh? eh? eh?

[Crazed Rabbit]

Under Thatcher in the UK and Reagan in the US, the reduction in tax meant that social mobility decreased and child poverty increased, not to mention the other countless ways of measuring social justice and mobility which went down. A reduction in tax directly means less spending on public services which directly means less social mobility.

It's amazing that you seem to think low taxes are inherently bad. It doesn't even matter that more money is being raised-which could be spent on social programs. The dogma is so ingrained, it seems the means -heavy taxes on the evil rich!-matter more than the ends - revenue for the gov't.

yadda, yadda, loads more reasons, too hot, tired and annoyed I deleted my post to bother typing them now. Basically tax breaks suck.

Why? Your claim holds no water. More money has been raised for the government, and the people have more money to use as they see fit. Or are those people just to stupid to know how to spend the money, or those lousy rich keeping to much of it?

Corrected:

"reducing taxes will might increase tax revenue until a certain point, at which reducing taxes further would decrease tax revenue."

It's called the Laffer curve (sp?), and as can be seen, we have not reached the equilibrium yet.

Crazed Rabbit

[Lemur]

It's called the Laffer curve (sp?), and as can be seen, we have not reached the equilibrium yet.

For those who want to do some cursory reading on the Laffer Curve ...

The Laffer-curve concept is central to the supply side economics theory, and the term was reportedly coined by Jude Wanniski (a writer for the Wall Street Journal) after a 1974 afternoon meeting between Laffer, Wanniski, Dick Cheney, and his deputy press secretary Grace-Marie Arnett (Wanninski, 2005; Laffer, 2004). In this meeting, Laffer reportedly sketched the curve on a napkin to illustrate the concept, which immediately caught the imaginations of those present. Laffer himself professes no recollection of this napkin, but writes, "I used the so-called Laffer Curve all the time in my classes and with anyone else who would listen to me" (Laffer, 2004). Laffer also does not claim to have invented the concept, attributing it to 14th century Islamic scholar Ibn Khaldun and, more recently, to John Maynard Keynes.

They're all Kenesians when you get down to it, aren't they?

[Aenlic]

Yes, but according to you, oh licker of aens, there should be NO taxes. After all, no government means no taxes, eh? eh? eh?

Sliding so very close to the edge there, Eclectic. If you want to take it to a personal level, I'm in. You up for jumping off the porch?

Just as an aside, Aenlic would be Ænlic, but I'm usually too lazy to mess with alternate characters. It's Anglo-Saxon for "only" or "solo" or "alone" in case you didn't know.

Now, I don't recall making puns on your name recently. Perhaps you intended your post for someone else, eh? If not, step off that porch, as I said. I'm always ready for a little dogginess in the mud; as long as it isn't with a puppy.

As to the government thing, I was very clear in my post that I wasn't making an argument for or against taxes. Maybe you just didn't read that far into the post.

Now that we've gotten the petty BS out of the way, how about answering the question. You started the thread. So, once again:

At what point does decreasing taxes tip over the equilibrium point and begin to decrease tax revenues?

If you don't want to engage in a discussion about the information in your threads, then why post them? Maybe they're really just trolling, hmm?

Anything else I can clear up for you?

[discovery1]

Whoah, lemur. Calm down. He was being light and jovial, not sharp and insulting.

That's Aenlic, not Lemur.

What of the arguement that the tax cut didn't really do much to improve the economy, since its affects are so slow? Thus it would have brought in more money still to leave the taxes alone.

The only reason I replied was to correct Cube......

[Duke of Gloucester]

Aenlic is, of course, spot on. There is a similar conept in pricing called elasticity of demand which suggests that there is an optimum price for a product. A lower price than the optimum reduces income because sales don't increase enough to compenstate for the price drop, whereas an increase from the optimum loses more through the drop in sales than it gains from the increase price. Thus one of the things a government tries to do (or should try to do) is to set the tax rate at the optimum level. I have never heard of this Laffer curve, but it just seems to me like the elasticity of demand argument applied to taxation.

Lowering taxes removes the burdan on the economy and allows growth, which creates wealth, which can be taxed.

Government spending can also boost the ecconomy and promote growth, so it is not straightforward. The taxation argument is that you reach a stage where people think the extra work to increase earnings is not worth it because of how much disappears in tax or they decide not to buy something because sales taxes are too high.

The problem is that few modern governments can actually afford to lower taxes because they spend so much due to huge public welfare systems and shoddy buerocracy.

If the tax is set at the right level you generate more revenue which would allow bigger public welfare systems and even shoddier bureaucracy if that is what you choose to do with the money raised.

[Aenlic]

For those who want to do some cursory reading on the Laffer Curve ...

The Laffer-curve concept is central to the supply side economics theory, and the term was reportedly coined by Jude Wanniski (a writer for the Wall Street Journal) after a 1974 afternoon meeting between Laffer, Wanniski, Dick Cheney, and his deputy press secretary Grace-Marie Arnett (Wanninski, 2005; Laffer, 2004). In this meeting, Laffer reportedly sketched the curve on a napkin to illustrate the concept, which immediately caught the imaginations of those present. Laffer himself professes no recollection of this napkin, but writes, "I used the so-called Laffer Curve all the time in my classes and with anyone else who would listen to me" (Laffer, 2004). Laffer also does not claim to have invented the concept, attributing it to 14th century Islamic scholar Ibn Khaldun and, more recently, to John Maynard Keynes.

They're all Kenesians when you get down to it, aren't they?

Heh, you posted while I was busy replying to Eclectic.

Yep, the good ol' Laffer Curve, reportedly a favorite of Dick Cheney's. It does go back to Keynes and beyond though. Laffer is a supply-sider. If I were to start talking Keynesian economic theories in this thread, I'd immediately be jumped by all the wanna-be Adam Smiths and Milton Friedmans and accused of spouting liberal economic nonsense. I tried to couch it in terms that prevent the debate from getting to that point. It never ceases to amuse me when conservatives start arguing like mixed economists such as Keynes while thinking that they're actually being true to monetarists like Friedman or Austrian School laissez-faire economists like Hayek.

But you spoiled my fun, Lemur. Now I can't trap them in their own inconsistencies. (sigh)

Edit: Exactly, Duke of Gloucester! In fact, studies indicate a wide range of possibilities for that optimum point. One study, I'll locate it later if I get bored, put the optimum tax rate at 80%! But that might cause a few apopleptic fits in the backroom here. It might be best to keep it hushed.

[Aenlic]

There are many flaws with the basic concept, GC.

One of the biggest blind spots is the problem with finite resources. Increased revenue from the highest oil prices ever inflate the economic "success" numbers. Such revenue simply can't last forever; because it is based on finite resources. At the moment our entire economic future appears to be based on the idea that something else will come along to replace oil. That's rather blindly optimistic. It's not far from saying we'll be fine because in the future space aliens will save us.

There is also something else to consider when viewing the current economy as a success. How much of the current economy is actually dependent upon deficit spending by the government on the military for the war rather than reductions in taxes? Currently the government is spending massive amounts for the war, far more than it takes in. That money has to go somewhere, yes? It goes into the economy and inflates the numbers. What happens when the war ends and the military spending decreases dramatically? Is a permanent state of war and deficit spending required to give the economy the appearance of health it doesn't really have?

War economies have far too much in common with scary notions like Lenin's "war communism" for me to take much comfort in numbers which entirely depend on war. They're both artificial and they both depend on war. Makes me nervous. Add to that the blind optimism in future resources and I'm skeptical about our chances to pull our heads out of dark, wet warm places before the whole house of cards comes crashing down. On the other hand, such events are fodder for revolutions.

[Aenlic]

I was listing a couple of what I see as additional flaws in the concept, not arguing against what you said, GC.

[Duke of Gloucester]

No matter what segment of the population you are reducing taxes for, you will create more money in their pockets. Obviously, though, this works best if you reduce taxes for everyone. The more money people have, the more money people spend, the more money people spend the more money other people have to make more things for people to spend more money on, ect.

I am not sure why it makes a difference who spends the money, Government or people. Both can stimulate the ecconomy, so I don't think it is about leaving more money in the ecconomy. Higher taxation reduces revenue because people work less hard (because their earnings are taxed) or spend less (because sales taxes are too high), If the governemnt takes £1 out of my pay packet that I would have spent at Sainsbury's and spends it on road building the amount ot money in the ecconomy is unchanged. Not being an ecconomist, I may be wrong about this but it makes sense to me. If I was an ecconomist, then I might not have any clearer idea. As the saying goes: "If all the economists in the world were laid end to end, they still wouldn't reach a conclusion." (GBS I think)

[Divinus Arma]

I want to address this before going back on topic:

Sliding so very close to the edge there, Eclectic. If you want to take it to a personal level, I'm in.

I was trying to be funny, not personal. It may be wise to grow an extra thick layer of dermis when you have the opportunity. Not only will it keep you warm and serve to protect your internal bits, but you may also have the added benefit of one slightly more powerful certain sense that is absolutley essential to survival in the online environment.

Remember, we do not have the benefit of non-verbal interpersonal cues as we do in the real world, so things may be very easily mis-interpreted. If you have a RL history of recieving social persecution or ostricization, than you will tend to inadvertantly perceive persecution in an all-text environment as well. In other words, I feel bad that you were beat up as a kid.

You up for jumping off the porch?

I have never heard this figure of speech. Care to enlighten me?

[Ironside]

It's a long and slow process, but stands to pure reason and logic that a very rich people paying 1% taxes will net more revinue than a very poor people paying 80% taxes.

Only with (almost) unlimited growth and with exponetal curves that remains the same during all times.

And unless I have missed something, the base of the economy is basically how many times those 100 bucks passes hands during a year correct? No matter what hands it passes through. Thus only if the state is more inefficient on that than buissness is it a loss to the economy, and added to that only if the side-effects are lesser than the lost profit (good education and good public health increase production and thus revenue).

Änd I'm still waiting for a good study on how much extra income the state gets simply by going in debt (that increases the amount of money into the system and based on the above principle it should most likely increase the size of the economy much more than the original intake. Increased revenues should be a simple result out of that. The question is if it covers the original debt).

You guys are stuck between a rock and a hard place: either the economy in general is getting better (and Bush deserves kudos) or the tax cuts are working (and Bush and the Republicans deserve kudos).

See above. And even if proven false, increasing something that is already costing you your entire military expendures doesn't feel that smart IMO (aka the interest of the debt).

Corporate tax payments are expected to exceed $300 billion, up from $131 billion three years ago.

An atleast 229% increase in 3 years because of a tax-cut?
What exactly is taxed here? And what ecactly was taxed here 2003? As I find that corperations growing with that speed would have quite an impact on the economy and it seems to barely move compared to that number.

[Divinus Arma]

And unless I have missed something, the base of the economy is basically how many times those 100 bucks passes hands during a year correct?

No. You are wrong. This assumes that in order for someone to get rich, someone else has to get poor. That just is not the case.

The tax base for public revenue is based on private profit and income. If private profit and income increase, so do public revenues. The economy "expands" when there is a greater demand for currency than currently exists. Instead of allowing the value of a dollar to continually increase upwards, the government prints more money. Thus, the value of the currency remains the same, but more money is in the system thus making the nation wealthier without creating an adverse impact on currency value.

If the government did not print additional currency, then the price of a dollar would increase domestically as well as internationally. For trade, this would make the United States less competitive, decreasing demand for dollars and consequently decreasing the international value of the dollar over time.

Domestically, the rising value or price of a dollar means that prices become prohibitive, causing a deflationary effect on product and service prices. What would happen if we simply stopped printing money? Currency would become scarce and individuals would hoard it. And btw, "electornic funds" must be backed by currency- this is the prupose of the Federal Reserve, to regulate and balance the flow of currency into the system. Anyway, so consider if currency were more scarce. What would happen to the price of a product? The product maker needs money, and since money is "worth more" (since their is less of it around), then he is willing to lower his prices in order to get his hands on some money. That's where it gets scary. When merchants start lowering their prices, consumers recognize the trend and refuse to buy, waiting for the price to drop so they can save more of their scarce dollars. This is deflation and is one of the worst things that can happen to an economy. Prices drop, profits drop, business operations contract, people are laid off, money becomes scarcer and consolidated into fewer and fewer hands.

Back to the Federal Reserve: The Fed regulates the flow of currency into the system through the Fed rate. The Fed Rate basically determines the "cost" of money. If the fed rate is low, as it has been for the last few years, then the cost of money is reduced. A loan is nothing more than the cost of money, or the cost of capital, in business terms. (Cost of capital can be far more complicated, but I am just being simple for benefit of this topic).

If the cost of capital is high, then consumers will purchase less because credit rates are high. Businesses will spend less on new ventures because the required return on investment is higher to meet the cost of capital. When money is cheap, as has been the case, then businesses will take greater risks because the required rate of return is not as high since the financing costs less.

The goal of the government is to keep prices as stable as possible, allowing the economy to expand through the fullfillment of demand for currency.

The reducation of taxes acts in the same way as a reduction in the federal reserve rate. It reduces the cost of capital and therefore the required rate of return is less. Businesses are able to take on additional risk in new ventures and demand for employees goes up because businesses need human resources to staff those operations. When demand for employees goes up, the wages and benefits of employees go up as well. And if a company decides to purchase more machinery or new technology rather than employees, than the builders of that technology are able to expand operations and consequently hire more employees for their operations. For the company that purchases new technology, the productivity of each existing employee goes up- namely, more work is being done per employee overall. This decreases the cost of employees to the firm and allows them to expand into new operations and... hire more employees.

In this way, the reduction of taxes acts to create jobs, improve wages, and expand the economy.

[Kralizec]

The title is flawed: reducting taxes could increase tax revenue under some circumstances.

With a tax rate of 100% there wouldn't be any tax revenue, because people would simply would refuse to work or evade taxes.
And with a tax of 0%, there won't be any revenue either. Imagine that.
Somebody else already mentioned the Laffer curve. This is all really quite obvious, the real question is where the optimum of the curve lies. Laffer himself suggested that the tax rate during Reagan was beyond the optimum, and thus recommended tax cuts.

Even if he was right, the optimum tax rate is not etched in stone, and dependent on a lot of different factors. In a recession the government would decrease taxes (as well as increase spending) to encourage new investments. In that case the long ter benefits offset the short term loss of income. When the recession has ended, the lower taxes might not be longer warranted and in fact be counter productive.
In this case, that seems to have worked. The US has pretty much recovered from the post 9/11 depression because of the extra investments encouraged by lower taxes.

It's interesting to note that a paper from the Congressional Budget Office shows that a proposed 10% cut would over the first 5 years only earn back 28% at most of lost income, and over the second five years at most 32%.

@ Lemur: I think you'll find that supply side theorists and Keynesians are sworn emenies

[Philippus Flavius Homovallumus]

Government spending can also boost the ecconomy and promote growth, so it is not straightforward. The taxation argument is that you reach a stage where people think the extra work to increase earnings is not worth it because of how much disappears in tax or they decide not to buy something because sales taxes are too high.

While ecenomics is not my sandbox I'd just like to point out that increased public spending and jobs in the public sector is an increase in the beurocracy, such as we have in the UK, and it eventually stiffles the economy and the government, as it is doing here.

[Kanamori]

This has been a very scientific thread; I'm glad that we've all come to grandiose conclusions w/o thinking too much.


It should be obvious that lowering taxes cannot always be beneficial for revenue. For how else can revenue be made if none is ever collected? At the other end, if all of the profit is collected as government revenue, it would seem obvious that nobody would feel too much like working. As such, it should also be obvious that both statements "reducing taxes increases tax revenue" and "increasing taxes is beneficial for government revenue" are false and any attempt to ratify them w/ particular instances is an exercise in faulty thinking and misapplication of meaning. Where exactly the equilibrium is has been in debate among intellectuals who have devoted themselves to this problem and it is probably beyond the scope of any one on these boards.

Perhaps, we should not make claims about incredibly huge and complex systems w/ mere paragraphs, if we are concerned at all w/ being correct.

[Aenlic]

This has been a very scientific thread; I'm glad that we've all come to grandiose conclusions w/o thinking too much.


It should be obvious that lowering taxes cannot always be beneficial for revenue. For how else can revenue be made if none is ever collected? At the other end, if all of the profit is collected as government revenue, it would seem obvious that nobody would feel too much like working. As such, it should also be obvious that both statements "reducing taxes increases tax revenue" and "increasing taxes is beneficial for government revenue" are false and any attempt to ratify them w/ particular instances is an exercise in faulty thinking and misapplication of meaning. Where exactly the equilibrium is has been in debate among intellectuals who have devoted themselves to this problem and it is probably beyond the scope of any one on these boards.

Perhaps, we should not make claims about incredibly huge and complex systems w/ mere paragraphs, if we are concerned at all w/ being correct.

Exactly! I said the exact same thing in a different way, up there somewhere

And I'm still waiting for an answer from someone on the conservative supply side of this argument. I'll ask again. How do you know if it was tax cuts which increased tax revenues or if it was massive deficit military spending to support the war in Iraq and rising oil prices which actually increased the revenues? Anyone? Bueller?

And Eclectic. I'd enlighten you, but some people have the equivalent of a sort of inverted Schwarzchild radius which protects them from the light of knowledge, making them immune to enlightenment. Sorry, guy, can't help you.

[Redleg]

And I'm still waiting for an answer from someone on the conservative supply side of this argument. I'll ask again. How do you know if it was tax cuts which increased tax revenues or if it was massive deficit military spending to support the war in Iraq and rising oil prices which actually increased the revenues? Anyone? Bueller?
:

The answer most likely lies someone in the middle of both situations. To claim that decreasing the tax rate has not had an impact on the economy is just as problemic as stating that military spending has not had an impact upon the economy.

Both have happen and both have had an impact on the economy.

The supply side works in the scope of attempting to find the optimum tax rate that the people can handle and still increase productivity.

Now there are many ways that supply side economics fails - but attempting to find the optimum level is not one of them.

[Papewaio]

A lot of this is based on business perceptions. So it isn't necessarily the new rate of tax, it is the perception of the change.

Even a tax rate increase could have a positive effect if it is viewed as part of a better business climate and a more stable economy to invest in long term.

However a lot of business processes are so short term they do not avoid tax, instead they are looking for a short term gain (Mutual funds for instance). So tax is only one part of the picture. Interest rates quite often are seen as a more pressing issue... tax is only paid on profit and can be avoided, interest rates is normally buisness to business and as such aren't so easy to dodge nor is it a good idea to avoid all debt if you wish to grow (going into debt to pay dividends is stupid, to buy a new plant or brush up the brand identity can be viewed as good debt if they work).

[Aenlic]

The answer most likely lies someone in the middle of both situations. To claim that decreasing the tax rate has not had an impact on the economy is just as problemic as stating that military spending has not had an impact upon the economy.

Both have happen and both have had an impact on the economy.

The supply side works in the scope of attempting to find the optimum tax rate that the people can handle and still increase productivity.

Now there are many ways that supply side economics fails - but attempting to find the optimum level is not one of them.

A reasonable answer. Not too far from my own view, at least in regards to what has been affecting the economy. It's much more complicated right now than a simple taxes go down = tax revenues go up. Which has been the entire point of my posts in this tread, I think.