Oh Dear! Did the Trump Tax Cuts Really "Pay For Themselves"?

[Tiny]

Originally Posted by Texas Contrarian

Did you not notice something just a bit fishy about that? He claimed that the income tax cuts mostly benefited the "rich." But that's completely false, as the new tax rate was reduced by a far larger percentage for lower and middle income taxpayers than for high income earners.

Originally Posted by lustylad

I agree it's false, but let's examine why. What if we wanted to be scrupulously fair and cut taxes equally for everyone? The simplest way to do this would be to lower all bracket rates proportionately... e.g., a 10% across-the-board cut would reduce a 28% bracket rate to 25.2%, lower a 16% bracket rate to 14.4%, etc.

The problem is our federal income tax system is already so steeply progressive that the DOLLAR amounts involved are lopsidedly concentrated in the top brackets. So a proportionate, across-the-board cut in rates (what can be more fair, right?) reduces the sheer dollar amounts owed by high earners a lot more than it does for lower- or medium-income earners.

This allows the dim-retards to point to dollar amounts, not bracket rates, to demagogue EVERY tax cut as flowing to the "rich". Well no shit sherlock, if you live in a country where the top 10% pay a whopping 70% of all federal income taxes, then of course they're the ones who benefit the most in sheer dollar terms from any meaningful cuts.

What makes this so pernicious is that over time it becomes politically harder to cut taxes and easier to raise them (but only "on the rich"), making our tax system even more steeply progressive and worsening the vicious cycle.

Over time, this will gradually emasculate fiscal policy as a useful, available tool for stimulating the economy during periods when it used to be called for.

Our friend WTF would do well to look at the before and after TCJA tax brackets in the Tax Foundation link below. I provided some calculated numbers, which illustrate points in your posts. My quote was a reply to a post by SpeedRacer.

Great points in both of your posts. I nominate LustyLad's for the best tax-related post of 2022.

Originally Posted by Tiny

Look at tax rates before and after the Tax Cuts and Jobs act. You can find those here:

https://taxfoundation.org/final-tax-...ails-analysis/

On marginal income, single filers making $200,000 to $424,950 actually saw their tax rates go up, from 33% to 35%.

People making over $500,000 are saving 1- (37%/39.6%) = 6.5%.

On the other hand, for middle class taxpayers, the savings on taxes on marginal income are 12% for those making $38,700 to $82,500*, and 14% for those making $93,700 to $157,500**.

Also, upper income individuals who were formerly able to partly deduct state income taxes and investment expenses had those deductions thrown out the window.

Yes, there were certain wealthy people, like owners of rental real estate, who will do very well as a result of the tax cuts for pass through entities. Again, I'd consider this to be a sop to certain special interests, not to the wealthy.

Footnotes

* 1-(22%/25%) = 12% decrease in marginal tax rate
** 1-(24%/28%) = 14% decrease in marginal tax rate

[Tiny]

WTF, Do you think you could get Bernie to look at the Tax Foundation table and read LustyLad's post? Well, maybe LL needs to edit it first to remove the word "dim-retards." But I really think it could change Bernie's mind about all this.

[Texas Contrarian]

Originally Posted by lustylad

I agree it's false, but let's examine why. What if we wanted to be scrupulously fair and cut taxes equally for everyone? The simplest way to do this would be to lower all bracket rates proportionately... e.g., a 10% across-the-board cut would reduce a 28% bracket rate to 25.2%, lower a 16% bracket rate to 14.4%, etc.

The problem is our federal income tax system is already so steeply progressive that the DOLLAR amounts involved are lopsidedly concentrated in the top brackets. So a proportionate, across-the-board cut in rates (what can be more fair, right?) reduces the sheer dollar amounts owed by high earners a lot more than it does for lower- or medium-income earners.

This allows the dim-retards to point to dollar amounts, not bracket rates, to demagogue EVERY tax cut as flowing to the "rich". Well no shit sherlock, if you live in a country where the top 10% pay a whopping 70% of all federal income taxes, then of course they're the ones who benefit the most in sheer dollar terms from any meaningful cuts.

What makes this so pernicious is that over time it becomes politically harder to cut taxes and easier to raise them (but only "on the rich"), making our tax system even more steeply progressive and worsening the vicious cycle.

Over time, this will gradually emasculate fiscal policy as a useful, available tool for stimulating the economy during periods when it used to be called for.

Yep. And this happens again and again. Wash, rinse, repeat.

Bill Clinton and congressional Democrats focused on the top bracket in 1993, pushing it to 39.6% from the previous 31% level, while leaving middle-class rates in place.

Then, ten years later, Dubya and Republicans passed an across-the-board income tax cut, with the bulk of the dollar amount (about 80%) going to taxpayers in the lower brackets.

Then, true to form, ten years later Obama and the Democrats pushed the top-bracket rate back to 39.6% (from 35%), leaving the Bush tax cuts in place for almost 99% of taxpayers.

So we end up with rates for non-affluent taxpayers being ratcheted down repeatedly and never returned to the previous cycle's levels, while rates on high earners always get pushed up again.

Of course, in many cases politicians have to do some horse-trading in order to get enough House members on board for any tax cuts at all.

[Texas Contrarian]

People like Dean Baker (and Bernie Sanders, for that matter) often rail about Reagan's supposed "tax cuts for the rich," claiming or at least insinuating that they are largely responsible for the inequality we see today. But nothing could be further from the truth!

If you want to have fun with your progressive friends, ask them sometime if they are aware that the net effect of the multiple tax policy changes under Reagan was to cut taxes for the middle class and raise taxes on the wealthy. (Yes, that's correct. Raise taxes on the wealthy!)

If they respond by telling you that you're full of shit, you can then say, "Really? Are you sure you understand how the tax code has actually worked through modern American history?"

Dean Baker has a long history of demonstrating that he fails to understand this issue. For that matter, so do both Krugman and Stiglitz, who really should know better.

I posted an article with a summary rundown of a few key points just a few months ago. (Sorry, CaptainMidnight was who posted that.)

https://money.cnn.com/2010/09/08/new...n_years_taxes/

[WTF]

Originally Posted by Texas Contrarian

People like Dean Baker (and Bernie Sanders, for that matter) often rail about Reagan's supposed "tax cuts for the rich," claiming or at least insinuating that they are largely responsible for the inequality we see today. But nothing could be further from the truth!

If you want to have fun with your progressive friends, ask them sometime if they are aware that the net effect of the multiple tax policy changes under Reagan was to cut taxes for the middle class and raise taxes on the wealthy. (Yes, that's correct. Raise taxes on the wealthy!)

If they respond by telling you that you're full of shit, you can then say, "Really? Are you sure you understand how the tax code has actually worked through modern American history?"

Dean Baker has a long history of demonstrating that he fails to understand this issue. For that matter, so do both Krugman and Stiglitz, who really should know better.

I posted an article with a summary rundown of a few key points just a few months ago. (Sorry, CaptainMidnight was who posted that.)

https://money.cnn.com/2010/09/08/new...n_years_taxes/

Tell that to lustylad....he posted a right leaning article a few months back admitting that not only were they responsible for huge deficits but their policies were to blame for the growing income inequality.

[WTF]

You actually have to buy the research but if you, lusty and Tiny promise to read the research...I'll buy it for uall. Although someone might have to explain it to Tiny.

Also do any of you know why he is turning Bernie on us?

https://www.tandfonline.com/doi/full...eedAccess=true

The authors argue that across-the-board tax cuts, such as the Reagan tax cuts of 1981 and 1986, generate inequality on a very large scale. The windfall of money to the superrich is an order of magnitude greater than that of the rest of the society even if in percentage terms it is smaller. It is increasingly clear that there is “no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently” (Piketty 2014, 21). We demonstrate with a straightforward model of how an across-the-board tax cut generates large-scale inequality.

[Tiny]

Originally Posted by Texas Contrarian

People like Dean Baker (and Bernie Sanders, for that matter) often rail about Reagan's supposed "tax cuts for the rich," claiming or at least insinuating that they are largely responsible for the inequality we see today. But nothing could be further from the truth!

If you want to have fun with your progressive friends, ask them sometime if they are aware that the net effect of the multiple tax policy changes under Reagan was to cut taxes for the middle class and raise taxes on the wealthy. (Yes, that's correct. Raise taxes on the wealthy!)

Here's an interesting article that describes how Reagan countered "bracket creep," by cutting taxes for the middle class. Rampant inflation during the 1960's and 1970's kept pushing people into higher and higher tax brackets, until the Gipper came to the rescue! Not only did he and Volcker rid the country of the scourge of inflation, but Reagan allowed hard working Americans to keep more of their own money!

WTF, Maybe you could try to get Bernie to read this too?


Lessons From the Great Inflation of 1973-81
Then as now, what drove higher prices was excess demand owing to runaway government spending. Ronald Reagan and Paul Volcker understood.

History withholds its wisdom from those who ignore its lessons. Forty years ago this month, the fiscal policy of President Ronald Reagan and the monetary policy of Federal Reserve Chairman Paul Volcker broke the back of the 20th century’s most destructive inflation, ushered in an economic expansion that effectively lasted a quarter of a century, and banished inflation—until now.

The buildup to the Great Inflation started in 1966, when Congress, at the urging of the Johnson administration, expanded funding for both the war in Vietnam and the War on Poverty. This “guns and butter” policy produced a double-digit surge in federal spending. By 1973 inflation was running at 8.7% and would average 9.2% for nine years—far surpassing average inflation of 3.3% between 1946 and 1972 and 2.7% from 1982 through 2019. During the 1973-81 Great Inflation, even after adjusting for inflation, federal revenue rose by an average 4.1% a year. The share of the economy taken by the federal government in taxes rose by nearly one-eighth, from 17% to 19.1%.

That’s astonishing, because Congress never voted to raise income taxes during that period. In fact, after LBJ’s 1968 temporary tax surcharge, which didn’t slow inflation, Congress cut federal income taxes in 1971, 1975, 1976 and 1977. So how did taxes rise at a record pace? Surreptitiously and automatically through inflation and bracket creep. As the Congressional Budget Office explained in 1980, “taxpayers with two dependents . . . earning $15,000”—around $57,000 in 2022 dollars—“and filing a joint return would pay $294 more in federal income taxes—a 23.8% rise in tax liability—if the family’s adjusted gross income and itemized deductions rose by 13.3%,” the inflation rate of 1979. With 16 tax brackets and 9% inflation over the period, bracket creep increased taxes as a share of gross domestic product by 2.1%, dwarfing the later Clinton and Obama tax increases combined.

But record tax increases couldn’t keep pace with spending. Annual real federal spending increased by 4.3%, defense fell by 0.1%, and social spending exploded by 6.3%. As a share of GDP, total spending rose by 2.6%, defense fell by 1.5%, and social spending rose by 4.1%, almost a one-third increase in the share of national income being spent by the federal government on social spending. Compare that with the New Deal: Social spending rose by a then-unheard-of 2% of GDP from 1933 through 1939.

Guns and butter ignited excess demand and inflation in 1966, but butter has fueled excess demand and inflation ever since. Monetary policy has accommodated these fiscal excesses; and supply disruptions, including those caused by the six-month Arab oil embargo in 1973 and the pandemic shutdown in 2020, exacerbated them. But federal spending has driven inflation in postwar America.

When Reagan took office in January 1981, the inflation rate was 12.5%. The tax burden and the level of federal spending were both postwar highs, respectively 19.1% and 21.6% of GDP. By the end of the Reagan presidency, real average annual federal spending growth had declined to 2.5% from 4.3% and social spending growth to 1.9% from 6.3%. Real annual defense spending growth had risen to 4.3% from minus 0.1%. As a share of the economy, total federal spending had fallen by 1% and social spending by 1.5%; defense spending had risen by 0.5%.

Reagan achieved this spending restraint during a deep recession, which saw unemployment rise to 10%. The Federal Reserve’s tightening sent prime interest rates to 20.5% in 1981. Neither Reagan nor Volcker ever flinched. In addition to dramatically reducing the real growth in government spending and excess demand, Reagan cut taxes, creating incentives to work, save and invest. Congress indexed individual tax brackets for inflation beginning in 1985. Reagan built on Jimmy Carter’s transformational deregulation effort, completing the decontrol of oil and gas prices and further lightening regulatory burdens across the economy. Those efforts cut the costs of moving people and products by 50% and gave America the world’s most efficient supply chain.

In conjunction with Fed monetary tightening, cutting spending, taxes and the regulatory burden brought inflation down quickly. By fall 1982, inflation had been cut in half, and by the end of Reagan’s first term it was reduced to normal levels, where it remained until the 2020s.

With the sharp drop in the inflation rate, bracket-creep revenue the CBO had assumed would be generated in 1982-84 failed to materialize. The drop in inflation alone reduced bracket-creep tax increases by $108 billion in those three years. The double-dip recessions of 1980-82 slashed revenue by another $184 billion. According to CBO, the plummeting of inflation and the 1980-82 recessions cost the Treasury $292 billion, more than the static cost estimate of $280 billion for the Reagan tax cuts during 1982-84. The Reagan tax cut reduced the tax burden from 19.1% of GDP to 17.8% in eight years, reversing 68.5% of the nine-year bracket-creep tax increases. By 1984 runaway inflation was over, real GDP growth hit 7.2%, and it was “Morning in America.” The economic recovery effectively lasted 25 years, until the Great Recession of 2007-09.

During the pandemic, total federal spending exploded as government spent in two years what it had spent in the three years before the pandemic. The Federal Reserve accommodated this fiscal explosion by buying or offsetting three-fourths of all the government debt incurred. The money supply expanded at the fastest rate in postwar history.

With inflation running at 9.1% and negative growth for the past two quarters, President Biden continues to press for massive increases in taxes and spending. Even though stimulus spending has ended, the Biden budget for fiscal 2023 calls for spending 30.2% more than the pre-pandemic 2019 nominal level. By executive order, regulatory appointments and antitrust actions, Mr. Biden has imposed the nation’s heaviest peacetime regulatory burden. He continues to attack big oil, big banks, big tech and big grocers and continues to search for price fixing, all policies that failed in the 1970s.

Mr. Biden is pursuing policies that are the exact opposite of the policies Reagan used to stop the inflation and revive the economy. Mr. Biden may think he can tax, spend and regulate America out of the inflation and recession. History suggests otherwise.

https://www.wsj.com/articles/lessons...cy-11659448515

[Tiny]

Originally Posted by WTF

You actually have to buy the research but if you, lusty and Tiny promise to read the research...I'll buy it for uall. Although someone might have to explain it to Tiny.

Also do any of you know why he is turning Bernie on us?

https://www.tandfonline.com/doi/full...eedAccess=true

The authors argue that across-the-board tax cuts, such as the Reagan tax cuts of 1981 and 1986, generate inequality on a very large scale. The windfall of money to the superrich is an order of magnitude greater than that of the rest of the society even if in percentage terms it is smaller. It is increasingly clear that there is “no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently” (Piketty 2014, 21). We demonstrate with a straightforward model of how an across-the-board tax cut generates large-scale inequality.

Piketty's full of it. He makes lots of bogus assumptions to try and show that capital is undertaxed compared to labor. He wants to tax the hell out of YOUR gains on YOUR midstream stocks. And like the other radical left French economists, he's a favorite of Bernie Sanders.

You really need to do some soul searching about Bernie, WTF. Stockholm Syndrome can be debilitating.

[WTF]

Originally Posted by Tiny

Piketty's full of it. He makes lots of bogus assumptions to try and show that capital is undertaxed compared to labor. He wants to tax the hell out of YOUR gains on YOUR midstream stocks. And like the other radical left French economists, he's a favorite of Bernie Sanders.

You really need to do some soul searching about Bernie, WTF. Stockholm Syndrome can be debilitating.

Tiny was that you and Bernie at the DeSantis give away rally?

Gains should be taxed when sold or transfered, imho.

[lustylad]

Originally Posted by WTF

Tell that to lustylad....he posted a right leaning article a few months back admitting that not only were they responsible for huge deficits but their policies were to blame for the growing income inequality.

???

Word of advice - if you don't know how to use the eccie search function to locate/quote whatever comment you imagine I or any other poster made in the past, you should not rely on your faulty memory to distort said past comment, assuming it actually exists.

[WTF]

Originally Posted by lustylad

???

Word of advice - if you don't know how to use the eccie search function to locate/quote whatever comment you imagine I or any other poster made in the past, you should not rely on your faulty memory to distort said past comment, assuming it actually exists.

Oh it exists....it was in the thread about how Reagan started this huge
debt to GDP ratio.

It was a link you provided and cherry picked.

I actually read it and pointed it out to you at the time.

For the right incentive I'd dig it up and prove either you have a selective memory are you're lying.

Do you deny that Reagan's tax policies increased income inequality?

BTW, have you finished reading that CHIPS bill yet?

[lustylad]

Originally Posted by WTF

Oh it exists....it was in the thread about how Reagan started this huge
debt to GDP ratio.

It was a link you provided and cherry picked.

I actually read it and pointed it out to you at the time.

For the right incentive I'd dig it up and prove either you have a selective memory are you're lying.

You've hijacked SEVERAL threads with your constant whining about Reagan and the debt/GDP ratio. Your obtuseness even exasperated Waco, which is hard to do.

If the quote/link exists, then find it. Otherwise I have no idea wtf you're talking about.

I can't debate a ghost.

[Jacuzzme]

Stick your income inequality where the sun doesn’t shine. The entire premise of this thread is horseshit. It’s not the government’s money in the first place, it belongs to the people who earned it, therefore tax cuts can’t “pay for” themselves. The feds need to do with less, just like they expect the citizens have to when their money is stolen by Uncle Sam, at the barrel of a gun.

[WTF]

Originally Posted by lustylad

You've hijacked SEVERAL threads with your constant whining about Reagan and the debt/GDP ratio. Your obtuseness even exasperated Waco, which is hard to do.

If the quote/link exists, then find it. Otherwise I have no idea wtf you're talking about.

I can't debate a ghost.

Wacko....who is this Wacko?

You?

[Texas Contrarian]

Originally Posted by WTF

https://www.tandfonline.com/doi/full...eedAccess=true

The authors argue that across-the-board tax cuts, such as the Reagan tax cuts of 1981 and 1986, generate inequality on a very large scale. The windfall of money to the superrich is an order of magnitude greater than that of the rest of the society even if in percentage terms it is smaller. It is increasingly clear that there is “no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently” (Piketty 2014, 21). We demonstrate with a straightforward model of how an across-the-board tax cut generates large-scale inequality.

Huh?? What the hell is this guy talking about? When was there a "windfall of money to the super-rich"? Any possible "windfall of money" to the wealthy occurred over a period of many years before the 1986 tax reform act, not after it, since that legislation shut down a veritable smorgasborg of deductions, loopholes, and easy tax-sheltering maneuvers that allowed affluent investors to get their effective tax rate down to a small fraction of the statutory 70%. This history professor has utterly no understanding of the issue.

Originally Posted by Tiny

Piketty's full of it...

Yep! I shamelessly stole a line from a long-time friend of mine and have used it a few times:

"If you cite Professor Piketty in anything you write, you should include a disclaimer notifying readers that your piece is for entertainment purposes only."

Originally Posted by WTF

Do you deny that Reagan's tax policies increased income inequality?

Since the set of tax policy changes enacted during the Reagan era cut taxes for lower and middle income taxpayers, while raising taxes on the wealthy, how in the world could it possibly have increased income inequality?