Posted on 10/23/2003 6:26:22 AM PDT by .cnI redruM
Edited on 07/12/2004 4:09:40 PM PDT by Jim Robinson. [history]
In a recent speech at Georgetown University, Howard Dean unveiled his economic plan, calling it "Reclaiming the American Dream." Since its centerpiece is a complete repeal of the Bush tax cuts, the plan amounts to a gigantic tax increase. And let there be no mistake: Mr. Dean's claims to the contrary, "Reclaiming the American Dream" will result in a huge tax increase on child-rearing working families. How ironic it is that one of Mr. Dean's "clear objectives" is to "[r]elieve the crushing burdens on American families." Contrary to the details of his schemes, he also claims his program "will strive for greater tax fairness for middle-class working families."
(Excerpt) Read more at washtimes.com ...
You show me the calculation you have in mind, and we'll talk.
But your questions assumes that lower taxes will lead inevitably to higher deficits and higher taxes will lead inevitably to lower deficits. It ignores the economic effects of lower taxation.
To take an extreme example, you have Country A that has a tax rate of 10% and Country B that has a tax rate of 90%. If you ignore the economic effect of taxation, you would expect the country with a higher tax rate to have nine times greater government income. But, all other things being equal, you would have much, much more economic activity in the low tax country, and as a result, overall government income would probably be higher with lower taxes.
There will be some relationship between tax rates and government income, but to assume it is linear is just silly, as evidenced by the extreme example above.
There is an optimal point of taxation that maximizes governmental income without retarding economic activity. But to assume that Congress happened upon that point by accident back in 1996 does not make any sense at all. Bush cut taxes from those levels, but there was nothing optimal about those levels. Add to that the competing societal values of self reliance versus shared responsibility, and optimizing the tax rate is impossible, because people can not agree on what is optimal.
In addition, deficits are a function of taxing and spending, a fact that Liberals everywhere love to ignore. If we had President Howard Dean, sure we would have higher taxes and more tax revenue on the short term, but we would also have a cornocopia of spending increases for health care, make-work, and who-knows-what, that might far overshadow any increase in revenue from increased taxes.
So who's to say that long-term interest rates would be lower under President Dean? The more I listen to Dean, the more I think his deficits would make Bush's look puny by comparison.
That's also where the discussion is over and you have won. If a person cannot draw a dozen ad hominens a day in his various social groups, he is either ineffective in argument or is not participating fully.
An obvious case of drifting into complacency. Lazy brain lack of insight. Typical Liberal.
How's that? Aad hominem enough?
I'd argue that such a calculation is impossible, and that it doesn't really do very much to further discussion by examining one slice of a very complex pie.
If tax cuts lead to higher deficits, which increase the cost of borrowing, then money gained via a tax cut may be lost via other means, such as higher interest rates. Conversley, if tax increases lead to lower deficits, the opposite may be true.
My point is simply that looking at a very narrow example really doesn't give you a clear picture of the true impact of tax policy.
We've been heading in that direction for a long time. Now we're in a situation, thanks to the EITC, where low income folks actually get paid by the federal government instead of paying taxes.
IMHO, the only real solution to the tax mess is a scrapping of all income-based taxation, both individual and corporate, and replacing the current system with a national sales tax, payable by all, with exemptions for food, housing, medical, and education.
I don't argue that there is a one-to-one relationship, and I agree that lower taxes will have a stimulative effect. However, if lower taxes always led to increased revenues, the corollary is that cutting income taxes down to say, 1%, would give the federal government a huge spike in revenue. Do you believe that to be true?
What I would suggest though is that in the current political climate, there is no incentive to cut spending, so the end result of tax cuts is increased deficits, as we are currently seeing. It is unfortunate that we are in this situation when there is so much potential for massive spending cuts.
Of course not. There is a point between 1% and 99% that will maximize government revenue. At the low end, lowering the rate of taxation is not made up for by the increase in economic activity. For instance, cutting the tax rate from 2% to 1% would halve government revenue, but would have a negligible effect on the economy, since taxes are no longer a significant cost at 2%.
It's a curved function with a peak. To suppose that peak just happens to fall at the point of the 1996 tax package is to engage in "magical thinking".
And then you have the political question of the role of government in society, and whether or not maximizing government tax revenue is a good thing. For example, from a human freedom point of view, starving the government is always a good idea. The fewer resources they have, the less trouble they can cause.
If I had to guess, I would say we are on a reletively shallowly sloped portion of the revenue/tax rate curve, and that decreased taxes will be largely recovered through economic acceleration. They may not be fully recovered, but that is not necessarily a problem. Having smaller government and more money left with the earner is a desirable thing, IMHO.
Unfortunately for us all, the spending discipline in Washington, at all levels, leaves a lot to be desired.
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