$4.8 trillion - Interest on U.S. debt

[JimandChristy 1,689]

Wish people can also see that. But, many don't really care since their job is to make sure they have money for their family and food on the table. They don't have time to think of a bigger picture.

Bingo! This each to their own attitude is the Achilles heel of present day America. I don't believe the country was always like this. Sure it was not some socialist country but it clearly also did not have the present day every man for themselves attitude.

[Mr. Big Dog 10,747]

History in the US has PROVEN without a doubt that across the board tax cuts increase revenue to the IRS. Every time it is tried.

Did you plagiarize that piece of Republican fiction off of Boehner's blog, too, or did you come up with it all on your own? Either way, it's fiction.

The reality is that if you were to put into a line chart the relation of tax rate to revenue, you come up with a curve. When the tax rate is 0, the revenue is zero. As the tax rate goes up, the revenue goes up until you reach a certain point - the optimum tax rate. Once you pass the optimum - i.e. raise the tax rate too much, the revenues will indeed decrease and eventually be near or at zero when the tax rate reaches 100%. This is the point where your economy completely collapses and hence won't generate taxable income.

What this means is that tax cuts will raise revenues only as long as you are over the optimum tax rate but will have the opposite effect if you are at or below the optimum rate. If that wasn't the case, and your theory would hold water, it would mean that the highest revenues are to be collected at a zero tax rate. I think we can agree that a zero tax rate won't generate the highest revenues seeing that a zero rate means zero revenue.

The important thing to figure out, then, is whether we are north or south of the optimum tax rate. The budget evidence suggests that were were south of the optimum rate when Bush and the GOP enacted the last tax cuts during Bush's terms in office. I detailed the long term cost of Bush's tax cuts below. The data shows that we moved away from the optimum rate as the revenues have not increased but decrased as a result of the tax cuts. Hence, cutting taxes further at this point would make matters only worse as we'd move further away from that optimum rate.

Case in point:

If there's one thing that Republican politicians agree on, it's that slashing taxes brings the government more money. "You cut taxes, and the tax revenues increase," President Bush said in a speech last year. Keeping taxes low, Vice President ####### Cheney explained in a recent interview, "does produce more revenue for the Federal Government." Presidential candidate John McCain declared in March that "tax cuts ... as we all know, increase revenues." His rival Rudy Giuliani couldn't agree more. "I know that reducing taxes produces more revenues," he intones in a new TV ad.

If there's one thing that economists agree on, it's that these claims are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues.

To put Bush's tax cuts into picture for you:

The Long-Term Costs [of Bush's tax cuts]

• Over the 10-year period from 2005 through 2014, the direct costs of the enacted and proposed tax cuts would total $2.8 trillion. The cost would equal 2.1 percent of the economy in 2014.

• From 2005 through 2014, the increased interest payments on the debt that result from the tax cuts would amount to $1.1 trillion. The interest payments would grow steadily with each passing year and in 2014 would equal $218 billion — or 1.2 percent of the economy. This amount alone is as large a share of the economy as the government now spends on all programs and activities under the Departments of Education, Homeland Security, Interior, Justice, and State combined.

• Considering both the direct costs of the tax cuts and the associated increase in interest payments, the tax cuts would increase deficits by nearly $4 trillion between 2005 and 2014.

• Over the next 75 years, the cost of these tax cuts — assuming they are made permanent — would be more than the combined shortfall in the Social Security and Medicare Hospital Insurance trust funds.

To the latter point, that combined shortfall is 107 trillion dollars. That's the long term cost of Bush's tax cuts.

Edited November 20, 2009 by Mr. Big Dog

[mawilson 2,133]

The implementation of a federal GST/VAT is an absolute must.

Yes, please. Tax everyone across the board, including millions of illegal aliens.

History in the US has PROVEN without a doubt that across the board tax cuts increase revenue to the IRS.

Only for income taxes.

What we need is a consumption tax to replace income taxes.

[Mr. Big Dog 10,747]

History in the US has PROVEN without a doubt that across the board tax cuts increase revenue to the IRS.

Only for income taxes.

Joe's statement is overly simplistic and simply doesn't hold water. I detailed that in my post above.

[mawilson 2,133]

History in the US has PROVEN without a doubt that across the board tax cuts increase revenue to the IRS.

Only for income taxes.

Joe's statement is overly simplistic and simply doesn't hold water. I detailed that in my post above.

I agree with what you wrote above - I just don't think that the optimum rate can be higher than 50%.

There's something seriously wrong when you have to give more than one half of what you earn

to the government. That's when people start finding creative ways to hide their money.

[Mr. Big Dog 10,747]

History in the US has PROVEN without a doubt that across the board tax cuts increase revenue to the IRS.

Only for income taxes.

Joe's statement is overly simplistic and simply doesn't hold water. I detailed that in my post above.

I agree with what you wrote above - I just don't think that the optimum rate can be higher than 50%.

And you're probably right on that. We're well below that 50%, however, and the fact that the last round of tax cuts hasn't actually raised revenues but decimated them would suggest that we're currently south of the optimum which means that further cuts would not raise revenues but further decrease them. Not exactly a feasible strategy given the fiscal situation we're in.

[one...two...tree 2,762]

Let's look at Reagan's record... (from the Mises Institute)

Government Spending. How well did Reagan succeed in cutting government spending, surely a critical ingredient in any plan to reduce the role of government in everyone's life? In 1980, the last year of free-spending Jimmy Carter the federal government spent $591 billion. In 1986, the last recorded year of the Reagan administration, the federal government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically not reducing government expenditures.

Sophisticated economists say that these absolute numbers are an unfair comparison, that we should compare federal spending in these two years as percentage of gross national product. But this strikes me as unfair in the opposite direction, because the greater the amount of inflation generated by the federal government, the higher will be the GNP. We might then be complimenting the government on a lower percentage of spending achieved by the government's generating inflation by creating more money. But even taking these percentages of GNP figures, we get federal spending as percent of GNP in 1980 as 21.6%, and after six years of Reagan, 24.3%. A better comparison would be percentage of federal spending to net private product, that is, production of the private sector. That percentage was 31.1% in 1980, and a shocking 34.3% in 1986. So even using percentages, the Reagan administration has brought us a substantial increase in government spending.

Also, the excuse cannot be used that Congress massively increased Reagan's budget proposals. On the contrary, there was never much difference between Reagan's and Congress's budgets, and despite propaganda to the contrary, Reagan never proposed a cut in the total budget.

Deficits. The next, and admittedly the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down comfortably to about $200 billion, a level that seems to be permanent, despite desperate attempts to cook the figures in one-shot reductions.

This is by far the largest budget deficit in American history. It is true that the $50 billion deficits in World War II were a much higher percentage of the GNP; but the point is that that was a temporary, one-shot situation, the product of war finance. But the war was over in a few years; and the current federal deficits now seem to be a recent, but still permanent part of the American heritage.

One of the most curious, and least edifying, sights in the Reagan era was to see the Reaganites completely change their tune of a lifetime. At the very beginning of the Reagan administration, the conservative Republicans in the House of Representatives, convinced that deficits would disappear immediately, received a terrific shock when they were asked by the Reagan administration to vote for the usual annual increase in the statutory debt limit. These Republicans, some literally with tears in their eyes, protested that never in their lives had they voted for an increase in the national debt limit, but they were doing it just this one time because they "trusted Ronald Reagan" to balance the budget from then on. The rest, alas, is history, and the conservative Republicans never saw fit to cry again. Instead, they found themselves adjusting rather easily to the new era of huge permanent deficits. The Gramm-Rudman law, allegedly designed to eradicate deficits in a few years, has now unsurprisingly bogged down in enduring confusion.

http://mises.org/daily/1544

[mawilson 2,133]

And you're probably right on that. We're well below that 50%

Are we really? The top income tax rate is 35%, going to 38% soon,

plus the Social Security tax (6-12%, capped at $100k) plus the Medicare tax

(3% - not capped), plus the state and local taxes (10-12% in most states),

and we're already there.

[Joseph & Ana 0]

More dishonest dems. As I said, they spent more, so the deficit went up higher than the increased revenues. This transcends Republican and Democrat. As both are irresponsible spenders. But revenue under Republican tax-cuts did go up, whether they decided to spend more or not.

You can't deny that the revenue has gone up for all of those tax cuts. Raising taxes does not increase revenue. And yes he knows we're talking about income and business taxes but he's a wacko-dem who tows the line and plagiarizes off the DNC website on a daily basis.

[Joseph & Ana 0]

Let's look at Reagan's record... (from the Mises Institute)

Government Spending. How well did Reagan succeed in cutting government spending, surely a critical ingredient in any plan to reduce the role of government in everyone's life? In 1980, the last year of free-spending Jimmy Carter the federal government spent $591 billion. In 1986, the last recorded year of the Reagan administration, the federal government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically not reducing government expenditures.

Sophisticated economists say that these absolute numbers are an unfair comparison, that we should compare federal spending in these two years as percentage of gross national product. But this strikes me as unfair in the opposite direction, because the greater the amount of inflation generated by the federal government, the higher will be the GNP. We might then be complimenting the government on a lower percentage of spending achieved by the government's generating inflation by creating more money. But even taking these percentages of GNP figures, we get federal spending as percent of GNP in 1980 as 21.6%, and after six years of Reagan, 24.3%. A better comparison would be percentage of federal spending to net private product, that is, production of the private sector. That percentage was 31.1% in 1980, and a shocking 34.3% in 1986. So even using percentages, the Reagan administration has brought us a substantial increase in government spending.

Also, the excuse cannot be used that Congress massively increased Reagan's budget proposals. On the contrary, there was never much difference between Reagan's and Congress's budgets, and despite propaganda to the contrary, Reagan never proposed a cut in the total budget.

Deficits. The next, and admittedly the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down comfortably to about $200 billion, a level that seems to be permanent, despite desperate attempts to cook the figures in one-shot reductions.

This is by far the largest budget deficit in American history. It is true that the $50 billion deficits in World War II were a much higher percentage of the GNP; but the point is that that was a temporary, one-shot situation, the product of war finance. But the war was over in a few years; and the current federal deficits now seem to be a recent, but still permanent part of the American heritage.

One of the most curious, and least edifying, sights in the Reagan era was to see the Reaganites completely change their tune of a lifetime. At the very beginning of the Reagan administration, the conservative Republicans in the House of Representatives, convinced that deficits would disappear immediately, received a terrific shock when they were asked by the Reagan administration to vote for the usual annual increase in the statutory debt limit. These Republicans, some literally with tears in their eyes, protested that never in their lives had they voted for an increase in the national debt limit, but they were doing it just this one time because they "trusted Ronald Reagan" to balance the budget from then on. The rest, alas, is history, and the conservative Republicans never saw fit to cry again. Instead, they found themselves adjusting rather easily to the new era of huge permanent deficits. The Gramm-Rudman law, allegedly designed to eradicate deficits in a few years, has now unsurprisingly bogged down in enduring confusion.

http://mises.org/daily/1544

So basically what you're saying is that even though revenues went up, Reagan spent more, and its wrong when he does it. Under dems, they raise taxes, revenue goes down, they spend more, and they are the CORRECT ones on the issue.

Predictable.

[one...two...tree 2,762]

More dishonest dems. As I said, they spent more, so the deficit went up higher than the increased revenues. This transcends Republican and Democrat. As both are irresponsible spenders. But revenue under Republican tax-cuts did go up, whether they decided to spend more or not.

You can't deny that the revenue has gone up for all of those tax cuts. Raising taxes does not increase revenue. And yes he knows we're talking about income and business taxes but he's a wacko-dem who tows the line and plagiarizes off the DNC website on a daily basis.

Care to back that up with fact?

[one...two...tree 2,762]

So basically what you're saying is that even though revenues went up, Reagan spent more, and its wrong when he does it. Under dems, they raise taxes, revenue goes down, they spend more, and they are the CORRECT ones on the issue.

Predictable.

I take it you've never heard of the Mises Institute.

Here's some more sobering facts about Reagan...

(from the Myths of Reaganomics)

Deficits. The next, and admittedly the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down comfortably to about $200 billion, a level that seems to be permanent, despite desperate attempts to cook the figures in one-shot reductions.

This is by far the largest budget deficit in American history. It is true that the $50 billion deficits in World War II were a much higher percentage of the GNP; but the point is that that was a temporary, one-shot situation, the product of war finance. But the war was over in a few years; and the current federal deficits now seem to be a recent, but still permanent part of the American heritage.

One of the most curious, and least edifying, sights in the Reagan era was to see the Reaganites completely change their tune of a lifetime. At the very beginning of the Reagan administration, the conservative Republicans in the House of Representatives, convinced that deficits would disappear immediately, received a terrific shock when they were asked by the Reagan administration to vote for the usual annual increase in the statutory debt limit. These Republicans, some literally with tears in their eyes, protested that never in their lives had they voted for an increase in the national debt limit, but they were doing it just this one time because they "trusted Ronald Reagan" to balance the budget from then on. The rest, alas, is history, and the conservative Republicans never saw fit to cry again. Instead, they found themselves adjusting rather easily to the new era of huge permanent deficits. The Gramm-Rudman law, allegedly designed to eradicate deficits in a few years, has now unsurprisingly bogged down in enduring confusion.

http://mises.org/daily/1544

[Joseph & Ana 0]

More dishonest dems. As I said, they spent more, so the deficit went up higher than the increased revenues. This transcends Republican and Democrat. As both are irresponsible spenders. But revenue under Republican tax-cuts did go up, whether they decided to spend more or not.

You can't deny that the revenue has gone up for all of those tax cuts. Raising taxes does not increase revenue. And yes he knows we're talking about income and business taxes but he's a wacko-dem who tows the line and plagiarizes off the DNC website on a daily basis.

Care to back that up with fact?

http://www.house.gov/jec/fiscal/tx-grwth/r...ct/reagtxct.htm

"Furthermore, according to a study published by the National Bureau for Economic Research,[2] the Clinton tax hike is failing to collect over 40 percent of the projected revenue increases. "

"Furthermore, according to a study published by the National Bureau for Economic Research,[2] the Clinton tax hike is failing to collect over 40 percent of the projected revenue increases. "

"The Reagan tax cuts, like similar measures enacted in the 1920s and 1960s, showed that reducing excessive tax rates stimulates growth, reduces tax avoidance, and can increase the amount and share of tax payments generated by the rich. High top tax rates can induce counterproductive behavior and suppress revenues, factors that are usually missed or understated in government static revenue analysis. Furthermore, the key assumption of static revenue analysis that economic growth is not affected by tax changes is di sproved by the experience of previous tax reduction programs. There is little reason to expect static revenue analysis to evaluate the economic or distributional effects of current tax reform proposals much better than it evaluated the Reagan tax program 15 years ago. "

"Incidentally, the claim that unrealistic supply side Reagan Administration revenue projections caused large budget deficits during the 1980s is false. Nonetheless, this false allegation is often used against current tax reform proposals. The official Reagan revenue projections immediately following enactment of ERTA did not assume huge revenue increases, and were actually quite close to the CBO revenue projections. Even the Democrat-controlled CBO projected that deficits would fall after the enactment of the Reagan tax cuts. The real problem was a recession that neither CBO nor OMB could foresee. Even so, individual income tax revenues rose from $244 billion in 1980 to $446 billion in 1989. "

House website backs up everything I say. Leave it to the dems to demand sources for common knowledge and common sense. It doesn't come easily to them.

[Mr. Big Dog 10,747]

And you're probably right on that. We're well below that 50%

Are we really? The top income tax rate is 35%, going to 38% soon, plus the Social Security tax (6-12%, capped at $100k) plus the Medicare tax (3% - not capped), plus the state and local taxes (10-12% in most states), and we're already there.

Income tax rates are based on AGI. Even if you pay the top rate on your AGI, your effective tax rate is lower than that.

Case in point, Warren Buffet's effective tax rate is at 17%. Social Security tax - since capped at 100K - comes to a fraction of a fraction of a fraction of a percent for him. Add 3% Medicare tax and the man pays an effective 20% tax rate to the feds.

Bottom line, if you pay an effective tax rate of 50% today, you need to find a new accountant.

[Heracles 417]

By - you are no conservative. Tax and spend your brains out?

History in the US has PROVEN without a doubt that across the board tax cuts increase revenue to the IRS. Every time it is tried. Now, that doesn't mean teh gov hasn't spent their brains out even more. No, when they get more money they just spend more.

Definitely have poplar opposite views to American conservatives regarding taxation, what stimulates the economy and how to propel a nation. If someone is new to the western world, who do you think they would listen to? Would they listen to an American conservative, whose only response to everything is either war, cutting any and every program or tax cuts for the rich? Or would they (alternatively) listen to an Aussie conservative? That is, someone who has propelled a country of 21 million to be a leader in the financial world. Listen to someone who has implemented strategies that have allowed a country to avoid every single recession since the 1987 recession; which was caused by the US. A country who in the worst global recession, once again caused by the US (notice the pattern), is actually lowering their unemployment rate to (5.7%), increasing their house prices ($481K) and increasing their median salary to levels unheard of by Americans ($1,109 per week), ever.

As I have said before, would you listen to Chrysler and GM for advice on how to build a car or Toyota, and Honda. It's ridiculous to think you can use the same strategy, year after year, for every problem. Or use examples from 20, 50 or 80 years ago to justify the present. The world and economic environment is nothing like that of then. Aka time for new strategies.

Edited November 20, 2009 by Booyah!