Government’s pockets thinning, I thought tax cuts increased revenue

[1blackman1]

Trust me Hedonist didn’t and couldn’t convert me on anything. It’s just good that y’all recognize that the govt is bringing in less money. Just because you can’t bring yourself to accept that maybe cutting taxes contributes to that, only means I’ll have to keep teaching you Reagonites.

[Ducbutter]

GDP growth rate 2021 > GDP growth rate 2022

Teach on!

[Tiny]

Originally Posted by 1blackman1

Trust me Hedonist didn’t and couldn’t convert me on anything. It’s just good that y’all recognize that the govt is bringing in less money. Just because you can’t bring yourself to accept that maybe cutting taxes contributes to that, only means I’ll have to keep teaching you Reagonites.

You realize those of us on the other side of the argument from you would like to see the federal government bring in less money and spend less as a % of GDP. You also realize that since I now see a glimmer of hope, of converting you, I'm like a dog with a bone.

Historically on average in the USA and the UK, a 1% change in taxes as a % of GDP eventually leads to an average of a 2.5% to 3% change in GDP attributable to the tax cut or tax increase at some point in the future. Obviously, tax cuts are associated with higher GDP growth and vice versa. This is supported by multiple studies, including Romer and Romer (2010), Cloyne (2013), and Mertens and Ravn (2013).

Furthermore, when you weed out small places (under 1 million population) and petrostates, the countries/territories with the highest GDP per capita in the world are the USA, Switzerland, Ireland, Singapore, and Hong Kong. These countries also have the lowest government revenues and government expenditures as a % of GDP. Coincidence? Hardly. When you leave more money in the hands of the people and businesses, and government syphons off less, you have stronger economic growth and a more prosperous country. Government doesn't grow the economy, people and businesses do.

And the effect isn't confined to GDP. From Mertens and Ravn, "A cut in the APITR (average personal income tax rate) raises employment, lowers the unemployment rate, and increases hours worked per worker," and is correlated with higher consumption and investment.

Of course, you don't want the national debt to grow out of control, like say Greece, when you lower taxes, so you must have disciplined spending as well.

It's a no brainer. Smaller federal government equates with greater prosperity.

References

Romer and Romer: https://eml.berkeley.edu/~dromer/pap...ERJune2010.pdf

Cloyne: https://www.aeaweb.org/articles/pdf/...aer.103.4.1507

Mertens and Ravn: https://discovery.ucl.ac.uk/id/eprin...103.4.1212.pdf

[lustylad]

Originally Posted by Tiny

Obviously, tax cuts are associated with higher GDP growth and vice versa. This is supported by multiple studies, including Romer and Romer (2010), Cloyne (2013), and Mertens and Ravn (2013).

Daayuumm Tiny! You're linking us to some scholarly economic studies that are way too impenetrable for Blackman!

But thanks, I'll enjoy wading through them!

Poor blackman. Too scared and insecure to admit he might actually agree with you (or hedonist) on anything lol.

[Tiny]

Originally Posted by lustylad

Daayuumm Tiny! You're linking us to some scholarly economic studies that are way too impenetrable for Blackman!

But thanks, I'll enjoy wading through them!

Poor blackman. Too scared and insecure to admit he might actually agree with you (or hedonist) on anything lol.

I just scanned the conclusions and results in those Lusty Lad. But I think I learned something new. I was perhaps giving the corporate tax cuts too much credit for lower unemployment. The TCJA’s big tax cuts for the working man, illustrated in the Waco Kid’s post in this thread, may have been more important. Mertens and Ravn’s research supports this. When the government’s taking less of your paycheck, you’re more motivated to work. There’s probably some kind of multiplier effect too, where by leaving more money in the hands of the people to spend on consumption you end up growing employment. That’s something you and TC would understand much better than I do.

The first two papers showed a change of 2,5% or 3% in GDP at the end of around 3 years I think, for a change of 1% in taxes as a % of GDP. (I’m typing on my cell phone and too lazy to check.) Undoubtedly the change in GDP, compared to the level when a tax cut took effect, would go on increasing in later years.

This is a better link for Cloyne’s paper - you can download without paying or logging in through your library -

https://www.researchgate.net/publica...United_Kingdom

[Ducbutter]

Posted in approx 10 other threads in here this morning but not this one. Hmmmmmm.?

No doubt we'll soon get a take down of one or more of your studies Tiny. Probably from someone the likes of Richard Wolfe, etc.
Ha!

[1blackman1]

Originally Posted by Tiny

I just scanned the conclusions and results in those Lusty Lad. But I think I learned something new. I was perhaps giving the corporate tax cuts too much credit for lower unemployment. The TCJA’s big tax cuts for the working man, illustrated in the Waco Kid’s post in this thread, may have been more important. Mertens and Ravn’s research supports this. When the government’s taking less of your paycheck, you’re more motivated to work. There’s probably some kind of multiplier effect too, where by leaving more money in the hands of the people to spend on consumption you end up growing employment. That’s something you and TC would understand much better than I do.

The first two papers showed a change of 2,5% or 3% in GDP at the end of around 3 years I think, for a change of 1% in taxes as a % of GDP. (I’m typing on my cell phone and too lazy to check.) Undoubtedly the change in GDP, compared to the level when a tax cut took effect, would go on increasing in later years.

This is a better link for Cloyne’s paper - you can download without paying or logging in through your library -

https://www.researchgate.net/publica...United_Kingdom

Keep more money work more. Makes sense to me. So maybe instead of cutting taxes for the wealthy (who need no further motivation to make more money) we should cut out as much tax for the poor as possible.

This is consistent with exactly what I suggested with the Blackman Tax Plan (BTP)

[Tiny]

Originally Posted by Ducbutter

Posted in approx 10 other threads in here this morning but not this one. Hmmmmmm.?

No doubt we'll soon get a take down of one or more of your studies Tiny. Probably from someone the likes of Richard Wolfe, etc.
Ha!

I see a glimmer of hope Ducbutter. Blackman is espousing the same flat tax system as what Ronald Reagan and Tip O'Neill implemented!

I didn't know who Richard Wolfe was until seeing your post. It's amazing, given the abject failure of Marxism, that people like him still believe what they do.

[Tiny]

Originally Posted by 1blackman1

Keep more money work more. Makes sense to me. So maybe instead of cutting taxes for the wealthy (who need no further motivation to make more money) we should cut out as much tax for the poor as possible.

This is consistent with exactly what I suggested with the Blackman Tax Plan (BTP)

OK, True, the progressivity of the tax regime doesn't matter as much as the overall level of taxation and spending. Look at the five places in the world with the highest GDP per capita (adjusted for purchasing power, after weeding out small places and petrostates). Singapore, Switzerland and Hong Kong all have regressive tax systems. On the other hand, the USA has the most progressive taxation in the developed world, and Ireland isn't far behind. What all five share is smaller government -- lower government revenues and government expenditures as a % of GDP than other developed countries.

But how much more progressive can you make the U.S. system? To illustrate, here's a graph from the New York Times originally posted by Texas Contrarian, comparing France and the USA,



And here's a good read on the seminal OECD study of tax progressivity among nations,

http://gregmankiw.blogspot.com/2011/...ssive-tax.html

And our tax system has only become more progressive since those came out. Obama and the Democrats axed the Bush tax cuts for well off taxpayers, while leaving them in place for others. The maximum tax on dividends and capital gains went up from 15% to 23.8%. And, from the Waco Kid's excellent post in this thread, the 2017 tax cuts made the system more progressive.

I'd guess your marginal tax rate, federal + state, is 43%. Isn't that high enough? Especially when the federal government is flushing a good % of what you pay down the drain.

[1blackman1]

I believe last year’s effective tax rate was about 22% which is likely far less than what my secretary paid, particularly compared to the difference in what we earned.

[Tiny]

Originally Posted by 1blackman1

I believe last year’s effective tax rate was about 22% which is likely far less than what my secretary paid, particularly compared to the difference in what we earned.

That's anecdotal, and, as you know, the effective rate is different from the marginal rate.

You're likely not including sales tax, property tax or state income tax, admittedly which go to fund some worthwhile expenditures. And, even after including regressive taxes at the state and local level, I seriously doubt your secretary is paying a higher %, unless her income is greater than yours.

[1blackman1]

I’m not sure how you come to that considering that she’s more likely to spend a higher percentage of her income than I am so she’s being taxed on every penny she earns since it gets spent. as a percent I suspect if she has a house rather than an appointment she’s more likely to spend more than me as well.

[Texas Contrarian]

Originally Posted by Tiny

I just scanned the conclusions and results in those Lusty Lad. But I think I learned something new. I was perhaps giving the corporate tax cuts too much credit for lower unemployment. The TCJA’s big tax cuts for the working man, illustrated in the Waco Kid’s post in this thread, may have been more important...

Hard to say, in my view, as they are very different types of tax cuts that potentially can benefit the economy in very different ways.

The corporate tax cut reduced the uncompetitiveness arising from the 35% statutory rate that placed US firms at a disadvantage relative to their foreign competitors, thus incentivizing offshoring and inversions of the type we saw in the mid-'10s. I think we would have done better to simplify the code and bring the corporate rate even lower, but at least it's now more or less in line with the OECD average.

The income tax rate reduction for working- and middle-class taxpayers put more money in the hands of non-affluent households with high marginal propensity to consume, thereby boosting consumption.

Originally Posted by Tiny

...And, from the Waco Kid's excellent post in this thread, the 2017 tax cuts made the system more progressive.

Yes, indeed.

The top tax bracket was only cut from 39.6% to 37% (a reduction of just over 6.5%), while the former 15% bracket (affecting most of the working class) was reduced to 12%, a 20% reduction.

And the capital gains tax was not reduced at all.

But that doesn't stop ideologues like Bernie (and most of the presstitute media) from babbling incessantly about tax cuts "for the rich."

[Tiny]

Originally Posted by Texas Contrarian

Hard to say, in my view, as they are very different types of tax cuts that potentially can benefit the economy in very different ways.

The corporate tax cut reduced the uncompetitiveness arising from the 35% statutory rate that placed US firms at a disadvantage relative to their foreign competitors, thus incentivizing offshoring and inversions of the type we saw in the mid-'10s. I think we would have done better to simplify the code and bring the corporate rate even lower, but at least it's now more or less in line with the OECD average.

The income tax rate reduction for working- and middle-class taxpayers put more money in the hands of non-affluent households with high marginal propensity to consume, thereby boosting consumption.



Yes, indeed.

The top tax bracket was only cut from 39.6% to 37% (a reduction of just over 6.5%), while the former 15% bracket (affecting most of the working class) was reduced to 12%, a 20% reduction.

And the capital gains tax was not reduced at all.

But that doesn't stop ideologues like Bernie (and most of the presstitute media) from babbling incessantly about tax cuts "for the rich."

I believe the cut in the corporate rate was badly needed, for the reasons you mentioned. The individual cuts, not as much.

Upper income tax payers just below the top bracket saw virtually no reduction in their marginal rates. Single filers making from $200,000 to $416,700 actually saw their marginal rates go up, from 33% to 35%.

[Texas Contrarian]

Originally Posted by Tiny

I believe the cut in the corporate rate was badly needed, for the reasons you mentioned. The individual cuts, not as much.

Upper income tax payers just below the top bracket saw virtually no reduction in their marginal rates. Single filers making from $200,000 to $416,700 actually saw their marginal rates go up, from 33% to 35%.

I agree with the observation in your first paragraph, though I'm generally a fan of keeping all rates as low as possible.

However, that's true if and only if we simultaneously cut spending, or at least strictly limit its growth.

Unfortunately, Republicans were big spenders in 2017-2018, though. During the Obama years, Paul Ryan spoke as though he intended to be the leading paragon of fiscal virtue, saying continually that we could be headed for a debt crisis. But with a Republican in the White House, he forgot all about that.

No wonder he got the fuck out of D.C. at the end of 2018!