Posted on 03/12/2008 7:08:49 AM PDT by reaganaut1
[A]n exogenous tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent.
These output effects are highly persistent. The behavior of inflation and unemployment suggests that this persistence reflects long-lasting departures of output from its flexible-price level, not large effects of tax changes on the flexible-price level of output. Romer and Romer also find that the output effects of tax changes are much more closely tied to the actual changes in taxes than to news about future changes, and that investment falls sharply in response to exogenous tax increases. Indeed, the strong response of investment helps to explain why the output consequences of tax changes are so large.
(Excerpt) Read more at nber.org ...
Ping!
Fair Tax ping!
You could put these stats in front of libs, and especially lib politicians, and even if they knew they were correct, they’d reject the premise.
It’s not about increasing revenue to the treasury (as happens with every tax CUT), or about doing what’s good for the economy -
it’s about the power and control of being able to punish those who are successful.
bttt^ and bookmark
tx for the ping!
So by raising taxes Obama will end up cutting some of the billions he plans to send to Africa and undeveloped countries under the United Nations formula. Remember, he sponsored the bill to tie what we give to undeveloped countries to a percentage of GDP (using UN guidelines). Law of unintended consequences. He'll have to modify the legislation to say the "GDP when I was elected."
My Problem is the Republicans and MSM is so silent. Don't they know just stating that Sigles will lose $XXXX and marrieds with 2 children will lose $YYYY in increased taxes will wash out Obama's/Hillary's chances like a snowball on a hot sidewalk.
Why are we Republican's keeping so silent??
tax cuts precede increased GDP |
Lots of us have been saying this all along.
The difference here is that NBER uses big words and we prefer to eschew obfuscation --oops, we leave out junk that just makes it hard to see what we mean. We may be wrong, because for years we've laid it all out as clear as a bell and so many freepers have totally missed the point.
These freepers come on like somehow they're the only ones who care, how they're the only ones who're willing to protect future generations from the killer deficit.
--and increased GDP precedes revenue increases |
Reality check.
If we really want less debt then we've got to bring about the revenue increase that only comes with economic growth. Tax cuts make GDP grow.
Wait, maybe I'm being too clear --exogenous exogenous exogenous exogenous --is the point more convincing now?.
Granted raising taxes at this point shrinks the economy, which causes the actual revenue generated by the taxes to shrink.
But the Democrat answer is simple and elegant: they will just raise taxes some more so they can dole out economic relief.
Of coarse, this will cause an even greater short fall in revenue, and an even more economic woes that they need revenue to fix.
The next step is obvious: blame both problems on "the rich" and raise taxes...
How big would Clinton or Obama tax increases be relative to GDP?
What part of the word "progressive" are you not understanding? (see above for illustration).
Breaking...Sun is the center of the Solar System! This is news?
“What is needed is a book that makes “Economics, Taxes, Wealth, Free-Market Systems, Capitalism, and Government Control Made Simple”.”
Yes, but Thomas Sowell has been writing columns and books on such themes for years, and where has it gotten us?
Lots of us have been saying this all along.
The difference here is that NBER uses big words and we prefer to eschew obfuscation --oops, we leave out junk that just makes it hard to see what we mean. We may be wrong, because for years we've laid it all out as clear as a bell and so many freepers have totally missed the point.
These freepers come on like somehow they're the only ones who care, how they're the only ones who're willing to protect future generations from the killer deficit.
Reality check.
If we really want less debt then we've got to bring about the revenue increase that only comes with economic growth. Tax cuts make GDP grow.
Wait, maybe I'm being too clear --exogenous exogenous exogenous exogenous --is the point more convincing now?.
More colorful, yes. More convincing, no. I haven't had the time to read the paper on which this thread is based, just to skim it. However, I get the impression that you have not read it either. Otherwise, you would have likely noticed some of its comments about deficit-driven tax changes such as the following excerpt on page 40:
Responses to Deficit-Driven Tax Changes. In Section IV, we found that the response of GDP to a deficit-driven tax increase is positive, though not significant. Since the literature has suggested that deficit-reducing fiscal reforms may have such positive effects, we look at the response of the components of GDP to deficit-driven tax changes.
In addition, following is an excerpt from the conclusions on page 43:
Finally, we find suggestive evidence that tax increases to reduce an inherited budget deficit do not have the large output costs associated with other exogenous tax increases. This is consistent with the idea that deficit-driven tax increases may have important expansionary effects through expectations and long-term interest rates, or through confidence.
Even if you only looked at the pictures, you would have seen the following chart from figure 6 on page 62:
Hence, tax increases to "protect future generations from the killer deficit", as you put it, appear to have a slightly positive effect on the GDP according to this paper. As I said, I haven't had time to do more than skim the paper so I cannot offer comments on its specifics. Still, it helps to at least read enough of the paper to know what it is claiming.
Anyhow, I'm sure you'll be happy to hear that I've updated my analysis of the Reagan and Kennedy tax cuts to include the Bush tax cuts. Following is a graph from it:
As you can see, the 10-year growth in GDP has been pretty stable since the 1975-1985 period. The updated analysis is at http://home.att.net/~rdavis2/taxcuts.html. Feel free to let me know if there are any specific numbers or conclusions that you disagree with.
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