Yeah, sorry about that.
The fact is, in trying to answer all the questions from you, expat, and ChessExpert, I got a little sloppy in my answer to you. I looked quickly at the following graph and saw that individual income tax revenues did drop sharply from 1982 to 1984 as a percentage of GDP:
Just because we're all nipping at you shouldn't cause you to rush your answers. Relax. This isn't homework. There's not a deadline.
I also glanced at the second graph at that URL and noted that, corrected for inflation, total revenues dropped for two years (though I see now that it was from 1981 to 1983).
How much of the tax revenue during Carter's term was due to inflation pushing people into higher brackets? Reagan fixed that and now you blame him for indexing?
Still, the graphs and numbers do not suggest to me that Reagan's first tax cut "paid for itself" in the sense of tax revenues being higher than they would have been otherwise.
I have a different definition of "paying for itself". If you cut the rate from 70% to 50% and don't lose money, it's "paid for itself". I never claimed a tax cut would raise more revenues, except for capital gains tax cuts.
Of course, a tax cut will result in higher after tax income. That's its chief goal.
Now you're beginning to understand!! So, Reagan cut rates, people kept more of their own income and tax revenue didn't drop by 28% (even though rates did, from 70% to 50%). You'll have to agree that if no one changed their behavior in reaction to the rate cut, revenues should have dropped close to 28%.
Anyhow, I cannot keep up with all of the questions from you, expat, and ChessExpert.
I apologize again if we've been too rough on you.
Otherwise, I'll just have to pick and choose among your questions and answer a few of them as I have time.
No hurry. Take your time. How about answering this one?
Did that reduction in taxes help the economy to grow faster?
I have. I can give you historical examples where taxation, which had been so close to 100% that revenue was nil, was lowered and revenue was restored.
How much of the tax revenue during Carter's term was due to inflation pushing people into higher brackets? Reagan fixed that and now you blame him for indexing?
Maybe you should likewise take a little more time with your answers. How would fixing the bracket-creep problem cause revenues to drop? As the second table at http://home.att.net/~rdavis2/recsrc.html shows, inflation-adjusted individual income tax revenues dropped from $514.05 billion in 1981 to $455.25 billion in 1984 (figures are in 2000 dollars). That's a drop of 11.4 percent in real revenues over three years. Furthermore, according to page 12 of the Treasury document at http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf, indexing of individual income tax parameters did not begin until 1985.
I have a different definition of "paying for itself". If you cut the rate from 70% to 50% and don't lose money, it's "paid for itself". I never claimed a tax cut would raise more revenues, except for capital gains tax cuts.
Revenues need to keep up with inflation. In addition, services to individuals need to keep up with population. Both of these can be accomplished by revenues keeping up with GDP growth. As you can see from the graph in post #35, individual income tax revenues have generally done this since 1952. You seem to be saying that we can ignore inflation. If that is the case, then you can be the one who explains to our soldiers in Iraq why their salaries cannot at least keep up with inflation.
Did that reduction in taxes help the economy to grow faster?
The following is from the analysis at http://home.att.net/~rdavis2/taxcuts.html:
The only remaining argument in favor of the Reagan tax cuts, at least from a revenue point of view, would seem to be that they permanently raised the level of the GDP, thus bringing in slightly higher revenues far into the future. According to the graph and second table, the GDP reached a high 8-year growth rate of 34.3% from 1982 to 1990. However, the GDP seems to have reaching a similar high about every ten years over the past several decades. It reached a high of 41.57% from 1958 to 1966, 29.20% from 1971 to 1979, and 32.58% from 1992 to 2000. Hence, these figures don't provide any strong evidence that the Reagan tax cuts permanently affected the GDP one way or the other.
Now, it does make sense that pumping borrowed money into the economy would cause some short-term increase in the GDP. However, that is likely to be offset by additional interest costs in the long-run. In any case, the figures don't reveal any lasting increase in GDP growth.