Posted on 01/06/2007 7:32:37 AM PST by Santiago de la Vega
This is not just our opinion. Harvard's N. Gregory Mankiw, an economic conservative who served as chairman of Mr. Bush's Council of Economic Advisers, has tested the hypothesis on which Mr. Bush's claim is based: He looked at the extent to which tax cuts stimulate extra growth and the extent to which that growth generates extra tax revenue that offsets the initial loss of revenue from the tax cut.
(Excerpt) Read more at washingtonpost.com ...
These are static arguments, suggesting that behavior doesn't change when tax rates are lowered. This is wrong.
The whole point of tax cuts is that behavior changes and thus the models used - and the coefficients representing the share of income going to taxes - are also wrong.
Further, the change in composition of output, from non-taxable activities to taxable ones, has a powerful added effect.
These models are the bogus thinking of Dinosaur CBOers, looking for ways to get their snoots in the government spending trough. It's a disgrace.
The whole point of the tax cut exercise is to get the money out of the hands of the government, which will piss it away on crazy health schemes, Katrina relief, and other vote-buying plans, and put that money back in the hands of the productive sector of the economy.
This is another example of idiot economists and the WissyPoo rallying the Democrats back to their old tax-and-spend ways.
Keep your hands on your wallets and look for some real Republicans to elect in 2008.
We got rid of Chafee, now it's time for Specter and Hatch to walk the plank.
FH in 2008.
Mark this as the beginning of the campaign by the Dems to raise taxes. Some Dem committee staffer probably gave this information to the WaPo.
You can usually tell right off where an article is coming from when they use "Mr. Bush"...
I hate to say it, but as a conservative, I see times when tax increases actually make sense.
When the economy is booming, a slight increase can result in huge revenue increases and the impact on the economy may be equivalent to turning down the burner on a boiling pot.. the pot will still boil, but not quite as vigorously.
When the economy is starting to soften though, that is when tax cuts are critical to keep the boil going.
The problem though, and the reason most conservatives would disagree with tax increases, is that the government will only spend the increased revenues and grow the base of spending such that later, when the economy softens, it will deepen deficit spending and that cannot be sustained. If the government were to pay off debt during those good times, it would work, but they never will.
We don't need an academic using theoretical models to give us the answer to what happens when taxes are cut. We can just look at the revenue stream following this administration's tax cuts.
http://www.heritage.org/Research/Budget/wm794.cfm
The 2003 tax cuts also returned many Americans to work. Since the passage of the 2003 tax cuts, 4 million new jobs have been created. Today’s 5-percent unemployment rate—the lowest since September 2001—means that many Americans left unemployed by the 2001 recession have now returned to work and become taxpayers.[3]
Overall, tax revenues declined slightly between 2001 and 2003, then increased 5 percent in 2004, and are now on pace to gain 15 percent in 2005.[4] This is not to suggest that tax cuts fully pay for themselves. Rather, the right tax policies can remove barriers to economic growth and sufficiently expand the tax base to replenish many (but not necessarily all) of the revenue losses from lower tax rates. Revenue estimates based on static models that do not look at how taxes affect employment or business behavior will diverge significantly from real-world results. The failure to use dynamic modeling is why government projections of tax revenue have been too low.
a slight increase can result in huge revenue increases
This is assuming that our political leaders can determine an optimum increase and agree upon it.
Yet we know that many of the polital leaders on the left regard taxes not simply as governmental revenues but as a way of punishing rich people.
Mr. Mankiw should study the Laffer Curve.
I agree. It is ridiculous to use hypothetical arguments when real, current numbers are available.
"When the economy is booming, a slight increase (in taxes) can result in huge revenue increases and the impact on the economy may be equivalent to turning down the burner on a boiling pot.. the pot will still boil, but not quite as vigorously."
This is precisely the reason the Fed raises interest rates. We don't want to try controlling economic temperature, on a quarterly basis, through tax policy. Its not the purpose of tax policy. Besides, don't the politicians screw with taxes enough as it is?
Maybe so, but only after revenue already confiscated is spent wisely and to maximum effect. Most conservatives don't have a problem with taxes per se, but with the massive waste and fraud within the current system. Not one more dime until that cesspool is cleaned out.
Even if what he is saying is true, then a 100 dollar tax cut only costs the government 50 dollars. I still say do it. Also is he taking into account that with more people employed there are fewer sucking up welfare and unemployment?
There is a bit more to the equation too. When tax rates get over 50%, taxes become a serious drain on the economy, so a tax cut from 50% to 35% is a great stimuluous. As tax rates get lower you get to the point of diminishing returns. That is why Kennedy's and Reagan's tax cuts were extremely effective because tax rates were obscene.
Yeah, 2.5 trillion is just never enough. Let's make sure that the government's budget always grows faster than the nation's GDP. Brilliant! /sarc>
This is picture thinking. It bears no resemblance to reality.
GO to Hell ,when was the last time the government shrunk one dime ,you idiot The freaking budget is 2 trillion dollars you freaking morons .there is to much freaking government spending PERIOD!
didja read the whole post.
I agreed with your point at the end.
It has to do with "how to adjust the pot so it boils continously with the least amount of gas", but the politicians are going to waste the gas anyway and we know it.
There is never a time when tax increases make sense.
I'm sorry to flatly contradict this position, but it's true.
Taxes distort consumption, production, income, and employment, unless the revenues are used to directly benefit those activities.
Unfortunately, this is rarely the case. Instead,the money is spent buying votes for the most powerful members of Congress.
Leave the tax system alone.
Here're two simple rules.
1. Tax the activities that most benefit from government protection, and let the rest of the economy alone.
2. Stop spending public money buying votes. Only spend money on real public goods.
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