[quote=SK in CV][quote=EconProf]
The clear message: total government revenues collected go UP in the years following the tax cut as the economy expands and people earn more and pay more in our progressive tax rate structure. [/quote]
I think that message is far from settled. From US Treasury numbers:
You’ll note that in the years immediately following the Kennedy tax cuts, revenue was relatively flat. In the years following the Reagan tax cuts in 81 and 82, revenues declined, and it took almost 6 years for them to return to levels before the cuts. In the years immediately following the Bush I tax increases, revnues increased. And after a small decline during the recession of the early 90’s, after the Clinton tax increase, revenues sharply increased (as the economy grew at historically high rates). After the Bush II tax cuts, revenues initially fell sharply for 4 years(beginning with the recession of the early part of this decade), and have risen since but still not to the level they were in 2000.
As I said, there is no empirical evidence that tax cuts raise revenues. Historically, that has simply not consistently been the case. Other factors, of course, have been present. The economy is cyclical, and marginal tax rates are not the only factor which drives it. But the perfect model has not been created. At best, supply side theory has provem to be an incomplete model. At worst, a total failure.[/quote]
SK: I didn’t want to get into a discussion of the potential association between reducing marginal tax brackets and increased revenue or increasing them and less revenue. From what I have seen, the left has their arguments, the right has its arguments. This issue is far from settled and is highly political, though I think a common sense argument can be made that human nature will lead most to work less where there is less reward. Is this triggered simply with an increase in rates? Perhaps? Does it harm marginal businesses? I think so, as indicated possibly in the recent business study I referenced, though not specifically addressing fed rates.
With that said, as repeated before, however, the aggregate impact of these discussed taxes and regulations (yes, if they are enacted) will cause American businesses to export jobs to less regulated areas and states and cause additional layoffs.
Unfortunately, as I have also mentioned before, American businesses and government, I don’t think have truly appreciated the monumental shift that globalism has brought about, endangering whole sections of our economy. Intense government regulation and taxes, as proposed by some Democrats, will as a whole increase this decline in our business infrastructure. Accordingly, using California as a leading example, these businesses will downsize, outsource, and move, leading to significantly decreased revenue for government programs.
I think the Democrats are playing with fire. I appreciate their passion to pass these new social programs, but I don’t think they have adequately addressed the tremendous demographic and global economic threats to the American economy. Their first mission should have been job creation, but it is like they assumed it would come simply with a new president and government spending. It hasn’t and I don’t think much has changed, other than additional debt.
Without addressing the job issue, I think the Obama administration may unravel and die on the hill of cap and trade and healthcare reform.
