Well that was fast....Strike three!

Hangdog42 · Jan 3, 2011

You would think that deficit math would be simple. If you spend more than you take in, you've got a deficit. If you increase spending , or decrease revenues, the deficit gets bigger. And eliminating the deficit involves either spending less, or taking in more, or some combination of the two.

However, with the new rules in effect in the House, paygo (or cutgo) rules only affect spending, not tax cuts.

This is a complete sham. Cutting taxes, without having offsetting cuts in spending, increases the deficit. This was proven beyond a shadow of a doubt during the last 30 years. Considering that most of these people ran on a deficit reduction platform, they need to shape up now. Either they are serious about reigning in the deficit or not. Pretending that tax cuts don't have to be offset by spending cuts is cowardice of the highest order.

Martimus · Jan 3, 2011

Ya know... in a sense I'm OK with the new house rules. Why? Because they are still an improvement over the status quo. Lets face it... most of Congress seems to be of the opinion that if they need more money, the US Mint will just print it.

Maybe this will move them, albeit very slowly, into a more acceptable fiscal mindset. I won't hold me breath on this but maybe... just maybe... they'll finally start doing what we're paying them through the nose to do.

ElasticNinja · Jan 3, 2011

when you are the worlds largest largest economy, it just doesnt matter :rolleyes:

you print money, making the debt worth less
seems ye can keep doing it to infinity

copestag · Jan 3, 2011

I would absolutely agree with you that any cuts to current taxes need to be offset with spending cuts.... this is just common sense if you want deficit reductions or even or deficit neutral effects... I wouldnt call this a complete sham, as its FAR more likely there will be bills that attempt to increase spending than there will be bills that attempt to decrease current taxation......I believe cutgo is a far better approach than paygo..... paygo says you have to come up with new money (usually achieved through increased taxes).... cutgo says you have to reallocate the money you have (decrease waste in another program)....this is the same principle we ALL use in our everyday lives....... you spend the money you have.... if you need a new pair of shoes and your money is all allocated then you simply take a little out of your candy bar fund this month to buy your shoes

but yes I would agree that any NEW tax cuts should be offset by spending cuts...... this should not be an excuse to not cut taxes....... but rather an incentive to decrease spending..... the problem is some people believe that all income belongs to the govt and they simply allow us to keep a certain portion

ElasticNinja · Jan 3, 2011

spending cuts generally have a lesser impact as well
Tho tax raises are important too

dark4181 · Jan 3, 2011

You can't cut spending, or taxes! There are too many people out there that are dependent on their savior, the government, to provide them with a life, paycheck and the American dream of a home! You can't take that away from them, for how can they survive without the government to lead them around by the nose.. er.. hand!?!?

[/sarcasm]

mike114 · Jan 5, 2011

It has proven that tax cuts increase revenues to the government. Kennedy proved it, Reagan proved it and GW Bush proved it. The problem has always been that spending always increased and at faster rates than what was being collected. I've said it before, it doesn't matter how high taxes are, this government will always spend more than we have.

JimmyRayBob · Jan 5, 2011

mike114 said:
It has proven that tax cuts increase revenues to the government. Kennedy proved it, Reagan proved it and GW Bush proved it. The problem has always been that spending always increased and at faster rates than what was being collected. I've said it before, it doesn't matter how high taxes are, this government will always spend more than we have.

Thank you for saying this ... i was reading this thread a just about ready to write something similar.

A great example of this is what has happened in the past when the tax rates on capital gains was lowered. EVERY TIME THIS TAX RATE HAS BEEN LOWERED - THE AMOUNT OF REVENUE FROM CAPITAL GAINS TAXES HAS INCREASED.

In my mind taxes should be used for one thing only - to bring in revenue to the government. Find the tax rate that maximized REVENUE and use that rate. Spending is an entirely different matter (and is completely out of control). Unfortunately there are some people in government that believe taxes should be used to change behavior (sin taxes anyone?). Even President Obama - when asked about lowering capital gain tax rates in order to RAISE REVENUE balked at the idea because it didn't "seem fair". What the heck isn't fair about a way to increase TAX REVENUE by lowering rates? Again, i'm not talking about a hypothetical "if we lower the rate, revenue will go up", I'm talking about what has actually happened in the past. Capital Gains tax rate goes down, revenue goes up. But i guess lowering the capital gains tax rates (for everyone) will benefit the "rich", not the "poor", so it just doesn't seem fair. It doesn't matter what it will do to government REVENUE.

I have now completed my rant for the day. Thanks for reading.

byteware · Jan 5, 2011

Hangdog42 said:
You would think that deficit math would be simple. If you spend more than you take in, you've got a deficit. If you increase spending , or decrease revenues, the deficit gets bigger. And eliminating the deficit involves either spending less, or taking in more, or some combination of the two.

This isn't exactly true. It's what I call Lazy thinking.

After the Bush tax cuts went into effect, revenues went from 16.5 percent of the GDP to 18.5 percent of the GDP.

Many of the activities that generate taxes are voluntary, and cutting taxes can increase those activities which increases the taxes paid.

Think of it like a sale at JCPenny. My wife generally doesn't shop at JCPenny much because it's expensive. Put up a little sale like 10% off, and she shops there like crazy. Now, it's true that they make less on each item they sell, but they sell so many more that they actually make much more money than they would have otherwise.

It's the same logic with the government. The effect isn't permanent. After a year, it becomes the regular price instead of the sale price. But cutting taxes does cause an increase in spending, which causes an increase in tax revenue collected.

ElasticNinja · Jan 5, 2011

Excluding the stimulis measures, the deficit is still huge
So isnt cutting taxes completely out of the question
Even with the eurocrisis, the world and european economies are back on two feet again
Its time to close the gap for the US, and lowering taxes wont help
Of cousre you could raise other taxes to cut others, but what can you raise?
Fuel Tax? sure
Property Tax? local level
Car buying tax? not with the state of the US auto industry, tho a scale based on emissions could sneakily raise a small bit extra
Capital Gains? shouldve been raised years ago
VAT? its terribly convuluted at the moment, the federal government should probably not even be involved with it

JimmyRayBob · Jan 5, 2011

shadowninty said:
Excluding the stimulis measures, the deficit is still huge
So isnt cutting taxes completely out of the question
Even with the eurocrisis, the world and european economies are back on two feet again
Its time to close the gap for the US, and lowering taxes wont help
Of cousre you could raise other taxes to cut others, but what can you raise?
Fuel Tax? sure
Property Tax? local level
Car buying tax? not with the state of the US auto industry, tho a scale based on emissions could sneakily raise a small bit extra
Capital Gains? shouldve been raised years ago
VAT? its terribly convuluted at the moment, the federal government should probably not even be involved with it

I've only got a minute ... so i'll only address one of the items you mentioned - the CAPITAL GAINS TAX. Why would you want to raise that when every time in history that it has been lowered resulted in higher government revenue?

Don't assume higher tax rates automatically results in higher revenue and that lower tax rates always result in lower revenue. Lower taxes can (not always, but can) result in higher economic growth, and higher revenue. Finding the optimal tax rate is the BIG question. A lot of people believe the optimal tax rate is higher than current rates and a lot of people believe the optimal tax rate is LOWER than current rates.

Remember - i'm talking about tax rates and revenue - NOT DEFICITS / DEBT. Deficits are the result of tax revenue and SPENDING. I am NOT talking about spending right now.

hakr100 · Jan 5, 2011

shadowninty said:
Excluding the stimulis measures, the deficit is still huge
So isnt cutting taxes completely out of the question
Even with the eurocrisis, the world and european economies are back on two feet again
Its time to close the gap for the US, and lowering taxes wont help
Of cousre you could raise other taxes to cut others, but what can you raise?
Fuel Tax? sure
Property Tax? local level
Car buying tax? not with the state of the US auto industry, tho a scale based on emissions could sneakily raise a small bit extra
Capital Gains? shouldve been raised years ago
VAT? its terribly convuluted at the moment, the federal government should probably not even be involved with it

Getting rid of the deficit and solving a variety of other fiscal problems isn't rocket science:

1. Let the Bush tax cuts for the wealthy expire.
2. Raise the capital gains tax rate.
3. Raise inheritance taxes on inheritances valued at more than $X
4. Do not allow any pension programs, government or private, to have unfunded liabilities.
5. Impose a means test on social security benefits
6. Cut the military budget by 50% as soon as unemployment drops to 5%
7. Subject all income to social security taxes.
8. Make the Federal Health Benefits program available to all, with those who can pay for it paying for it and those who cannot paying on a sliding scale of some sort, with taxpayer subsidies covering the rest.
9. Subject all non-earnings income to higher tax rates.
10. End corporate subsidies and welfare.

JimmyRayBob · Jan 5, 2011

hakr100 said:
Getting rid of the deficit and solving a variety of other fiscal problems isn't rocket science:

1. Let the Bush tax cuts for the wealthy expire.
2. Raise the capital gains tax rate.
3. Raise inheritance taxes on inheritances valued at more than $X
4. Do not allow any pension programs, government or private, to have unfunded liabilities.
5. Impose a means test on social security benefits
6. Cut the military budget by 50% as soon as unemployment drops to 5%
7. Subject all income to social security taxes.
8. Make the Federal Health Benefits program available to all, with those who can pay for it paying for it and those who cannot paying on a sliding scale of some sort, with taxpayer subsidies covering the rest.
9. Subject all non-earnings income to higher tax rates.
10. End corporate subsidies and welfare.

Re: #2 - how does raising the capital gains tax rate increase revenue?

byteware · Jan 5, 2011

shadowninty said:
Excluding the stimulis measures, the deficit is still huge
So isnt cutting taxes completely out of the question

Your not thinking about the entirety of the equation.

Tax revenue is the result of spending combined with the tax rate.

Raising tax rates tend to depress spending, which tends to lower tax revenues.

Lowering tax rates tends to increase spending, which tends to increase tax revenues.

Tax rates do not equal revenue, they are just part of that equation.

ElasticNinja · Jan 5, 2011

byteware said:
Your not thinking about the entirety of the equation.

Tax revenue is the result of spending combined with the tax rate.

Raising tax rates tend to depress spending, which tends to lower tax revenues.

Lowering tax rates tends to increase spending, which tends to increase tax revenues.

Tax rates do not equal revenue, they are just part of that equation.

indeed, but when you raise taxes there is still a gain, just not as much as it seems on paper

byteware · Jan 5, 2011

shadowninty said:
indeed, but when you raise taxes there is still a gain, just not as much as it seems on paper

Well, not necessarily.

Tax revenues are a result of x (spending) * y (tax rate) [roughly].

changing y affects x, but you cannot control or predict how much. You can try to predict, but you can really only guess. Some guesses are more educated than others, but they are still just guesses.

if you raise y, the tax rate, and x drops too much, spending, then you take in less revenue than you did before you made the change.

If you lower y, the tax rate, and x doesn't climb enough, spending, then you take in less revenue than you did before you made the change.

The thing is... people tend to overreact to both raising and lowering taxes.

A little extra money and you tend to overspend (i.e. what you do when you go to a sale... it's too good to pass up).

A little less money, and you tend to worry and oversave.

If you want people to spend more and spur the economy on, then you either have to make them feel more secure or more rich... you can make them feel more rich by lowering taxes. You can't make them feel more secure ever. The talking heads on TV get paid to terrify them.

Hangdog42 · Jan 5, 2011

byteware said:
After the Bush tax cuts went into effect, revenues went from 16.5 percent of the GDP to 18.5 percent of the GDP.

But that assumes that the increase is due solely to the tax cut, and not to the normal business cycle. In other words, would revenue have shown the same increase without the tax cuts simply because the size of the economy increased? This is one of the problems with the "always cut taxes" logic, there is a strong tendency to assign economic benefits to specific events that the cutters want to hype. The economy tends to be much more complicated than that.

ElasticNinja · Jan 5, 2011

byteware said:
Well, not necessarily.

Tax revenues are a result of x (spending) * y (tax rate) [roughly].

changing y affects x, but you cannot control or predict how much. You can try to predict, but you can really only guess. Some guesses are more educated than others, but they are still just guesses.

if you raise y, the tax rate, and x drops too much, spending, then you take in less revenue than you did before you made the change.

If you lower y, the tax rate, and x doesn't climb enough, spending, then you take in less revenue than you did before you made the change.

The thing is... people tend to overreact to both raising and lowering taxes.

A little extra money and you tend to overspend (i.e. what you do when you go to a sale... it's too good to pass up).

A little less money, and you tend to worry and oversave.

If you want people to spend more and spur the economy on, then you either have to make them feel more secure or more rich... you can make them feel more rich by lowering taxes. You can't make them feel more secure ever. The talking heads on TV get paid to terrify them.

the main issue is confidence, especially confidence in having a job
your tax cut logic could apply to a steadily growing economy, but not in the bust situation we are now

either way, for the deficit to be cut you need a combination of the two

EDIT: I beleive savings rates are at there lowest in the US & UK ATM, due to government bolstered false cofidence
In Ireland, they are at there highest, due to lack of confidence in the domestic economy (exports are doing fantastic, corparation tax 24% above targets, deficit €800m less than thought [only €18bn

]

), as the government cant afford stimulis

AndyLL · Jan 5, 2011

mike114 said:
It has proven that tax cuts increase revenues to the government. Kennedy proved it, Reagan proved it and GW Bush proved it. The problem has always been that spending always increased and at faster rates than what was being collected. I've said it before, it doesn't matter how high taxes are, this government will always spend more than we have.

That is a myth put out by the supply siders.

Go to the inflation adjusted number:
Historical Tables | The White House

It took four years for tax revenues to chance up to the revenues before Bush's cuts.

The reason Bush's tax cuts had to expire after 10 years was because they passed it using reconciliation and under the bryd rule if it increases the deficit it has to expire.

So they know it would increase the deficit when they passed them otherwise they would have made them permenate.

AndyLL · Jan 5, 2011

Martimus said:
Ya know... in a sense I'm OK with the new house rules. Why? Because they are still an improvement over the status quo. Lets face it... most of Congress seems to be of the opinion that if they need more money, the US Mint will just print it.

Actually the current rules are a true paygo ( although weak ) which requires either tax increases or spending cuts. That's why Obamacare had to be deficit neutral over 10 years.

After Gingridge and Clinton battled it out there were tough PayGo rules that lead the the balanced budgets for 3 years.

The expired and was not renewed in the earlier 2000s

byteware · Jan 6, 2011

Hangdog42 said:
But that assumes that the increase is due solely to the tax cut, and not to the normal business cycle. In other words, would revenue have shown the same increase without the tax cuts simply because the size of the economy increased? This is one of the problems with the "always cut taxes" logic, there is a strong tendency to assign economic benefits to specific events that the cutters want to hype. The economy tends to be much more complicated than that.

Your claiming that in the midst of a recession, the increase in tax revenues would be because of normal spending?

Tax revenues were declining compared against GDP. We were heading into a recession.

The Chief of the Congress Budget Office has stated that the increase was due to the Tax cuts. I know that this is hard for you to take, but it just is.

byteware · Jan 6, 2011

AndyLL said:
It took four years for tax revenues to chance up to the revenues before Bush's cuts.

This is true, but your point is not.

It took four years for tax revenues to catch up, because we were dipping into a recession.

That's why it's important to look at what portion of the GDP was being collected in revenue before and after the tax cuts.

The economy was tanking, but we were taking in more of that economy in taxes.

See the CBO's statement on the effect of the taxes. They are responsible for non-partisan determinations on such matters, and they determined that the revenues collected were more than they would have been.

I understand that this is hard to take, but the truth is what it is.

Hangdog42 · Jan 6, 2011

byteware said:
Your claiming that in the midst of a recession, the increase in tax revenues would be because of normal spending?

It depends upon what you mean by recession. By a strict economist view, the current recession ended in June 2009 (i.e. the economy actually started growing), however, most people perceive a recession by the state of the job market, which is always a lagging indicator. So yeah, it is possible for a growing economy to create more tax revenue during a time most people perceive as being a recession.

I'm not arguing that a tax cut can't produce a temporary boost in revenues, but if you look at the tax cut from the standpoint of the long-term deficit, it isn't as cut and dried as some people think that tax cuts pay for themselves.

In fact, it 2005, the CBO produced a report (warning PDF) on the impact of a hypothetical 10% tax cut. Their conclusion was that over 10 years, the increase in revenues recovered at most, 32% of the revenue from the cut. Obviously the remaining 68% was covered by increasing the deficit if spending remained unchanged.

A lot of the tax cut assumptions are based on the Laffer curve, and leaving aside problems with the curve itself, the biggest problem is that there is no way to determine where on the curve a country is. The assumption by the tax cut crowd is that we are always on the far right, and therefore a tax cut will always result in increased revenue, but that could just as easily be a highly mistaken assumption.

Really, the lazy thinking around here is to not separate the short-term benefits of a tax cut from the longer term implications. Since this is a discussion about the overall deficit, which is very much a long-term issue, focusing exclusively on the short term is misguided at best.

byteware · Jan 6, 2011

Hangdog42 said:
It depends upon what you mean by recession. By a strict economist view, the current recession ended in June 2009 (i.e. the economy actually started growing), however, most people perceive a recession by the state of the job market, which is always a lagging indicator. So yeah, it is possible for a growing economy to create more tax revenue during a time most people perceive as being a recession.

I'm not arguing that a tax cut can't produce a temporary boost in revenues, but if you look at the tax cut from the standpoint of the long-term deficit, it isn't as cut and dried as some people think that tax cuts pay for themselves.

I've never argued for permanent tax cuts.

If you'll read what I've written, I've even stated that at some point it's no longer the sale price, but the price everything IS at.... at which point the tax cut becomes less effective.

Hangdog42 said:
Really, the lazy thinking around here is to not separate the short-term benefits of a tax cut from the longer term implications. Since this is a discussion about the overall deficit, which is very much a long-term issue, focusing exclusively on the short term is misguided at best.

Again, I've made that clear in what I've written regarding sales that go on too long.

AndyLL · Jan 6, 2011

byteware said:
This is true, but your point is not.

It took four years for tax revenues to catch up, because we were dipping into a recession.

That's why it's important to look at what portion of the GDP was being collected in revenue before and after the tax cuts.

The economy was tanking, but we were taking in more of that economy in taxes.

You didn't go read the numbers. revenue % of GDP declined also.

Also... The FY before Bush that I was comparing it to was the year of the internet crash.... so the numbers 4 years were compared to a recession year.

If you look to the year before that Bush had only 1 year out of 8 that income receipts were significantly higher.

[quote ]
See the CBO's statement on the effect of the taxes. They are responsible for non-partisan determinations on such matters, and they determined that the revenues collected were more than they would have been.
[/quote]
The CBO itself is fairly nobn-partisan... the head of it is not. The CBO has stated that Bush's tax cuts would greatly increase the deficit.

I understand that this is hard to take, but the truth is what it is.

[/quote]

Funny... you reference an unlinked blog post to make your case. I post links to the actual numbers... and you claim the truth?

Well that was fast....Strike three!

Well-Known Member

One bite at a time...

Android Expert

Android Expert

Android Expert

Well-Known Member

Well-Known Member

Android Enthusiast

Android Expert

Android Expert

Android Enthusiast

Android Expert

Android Enthusiast

Android Expert

Android Expert

Android Expert

Well-Known Member

Android Expert

Well-Known Member

Well-Known Member

Android Expert

Android Expert

Well-Known Member

Android Expert

Well-Known Member

BEST TECH IN 2023

Smartphones

Best Android Phones

Upcoming

Best iPhones

Upcoming

Tablets

Best Tablets

Upcoming

Laptops

Best Laptops

Upcoming

Televisions

Best TVs

Upcoming

Game Consoles

Best Game Consoles

Upcoming

Wearables

Best Wearables

Upcoming

Smart Home

Smart Home Tech

Upcoming

Similar threads