Posted on 03/28/2004 9:19:33 PM PST by remember
In fact, I think that the "starve the beast" policy is just as irresponsible as the "feed the beast" policy followed by some Democrats in the past. They would undertake the "difficult" task of raising spending and leave it to others to raise the taxes to pay for them. Likewise, Bush came in and undertook the "difficult" task of cutting taxes and is evidently going to leave it to others to cut the spending to pay for them. Like Democrats that raised spending, Bush did gain a great deal of political capital from cutting taxes. If he's not going to use it to cut spending, then who is? The answer is nobody.
That is the reason why we need PAYGO that applies to both spending and taxes. Those who cut taxes or raise spending need to take responsibility to keep our finances in balance. "Starve the beast" and "feed the beast" are both forms of political cowardice used as an excuse for leaving the hard work for others to do.
In fact, the CBO has started including dynamic models in its forecasts. Following is the first paragraph from Appendix B of the CBO forecast at ftp://ftp.cbo.gov/51xx/doc5151/03-08-PresidentsBudget.pdf:
The Congressional Budget Office (CBO) used three models to estimate the supply-side effects of the President’s budget from 2005 to 2014: a “textbook” growth model, a life-cycle growth model, and an infinite-horizon growth model. (The estimates resulting from those models are presented in Chapter 2.)
Following is a summary of the results from the beginning of Chapter 2:
For the years 2010 to 2014, under the baseline’s economic assumptions, the President’s budgetary proposals would increase the cumulative deficit by $822 billion. When the budgetary effects of the economic changes resulting from those proposals are also considered, the projected increase in the cumulative deficit over that period ranges from as much as $818 billion to as little as $716 billion.
It's like saying Exxon would have made even more money if they just charged more for gas but ignore the changes in the market and buying. Wal-Mart keeps lowering prices and doesn't go bankrupt, do they?
The Wal-Mart analogy goes only so far. We do not have numerous governments, competing at the same point in time. It is true, of course, that a tax cut of X dollars does not translate into a revenue decrease of X dollars. If nothing else, that tax cut will reenter the economy in some form and some of it will return in taxes. However, I have never seen a serious economic paper claim that tax cuts pay for themselves. If you can provide a link to such a paper, I will be more than happy to look at it. You, in turn, might want to check the analysis at http://home.att.net/~rdavis2/taxcuts.html.
Embicile, Imbicile...tomato or tomatoE...the point was made so sue me if I forgot to spell check the dang thing.
I don't always spell check myself. I was just having fun with you. The fact that the words that you happened to misspell were imbecile and erroneous were just too much for me to pass up! However, I am serious that, if you can provide a link to a serious economic paper that claims to show that tax cuts pay for themselves, I'll take a look at it. I have never seen such a paper.
So you're calling me a Socialist for suggesting that we should reinstate PAYGO on spending and tax cuts? On the contrary, I would call the idea of leaving the costs to the next generation to be true generational socialism.
And leave my money alone, unless YOU want to come take it.
I'm waiting.
I'll drop the subject when the government passes a bill that absolves me and my descendants of any responsibility for the debt that you and your drunken sailor friends run up.
I'm waiting.
Actually receipts went from $617.77 billion in 1982 to $991.19 in 1989, an increase of just 60 percent (see the table at http://home.att.net/~rdavis2/recsrc.html). However, I have looked very closely at the claim that revenues doubled during the eighties due to the tax cuts. This particular claim is extremely flawed. First of all, revenues have doubled during every decade since the Great Depression. Secondly, this doubling of revenues included revenues from the FICA tax which increased from 6.13% to 7.65% during the eighties. I went on to correct the numbers for inflation and separate out income tax revenues. You can see the full analysis at http://home.att.net/~rdavis2/taxcuts.html.
But I will agree it is a combination...and not just lowering rates. The Laffer Curve doesn't always apply unless the tax code is simplified.
In 1980 (and all through the 1970's), the high tax rate on upper income was only applied, as today, to taxable income. But there were all kinds of things in the tax code (put in there by lobbying Congress by special interest - some codes applied to only ONE industry or even one company) to offset Gross income and turn taxable income to near zero. So a tax rate of 70% on a lower taxable income generated no revenue. It was common to read in the paper and watch on TV about millionaires that paid no income tax.
I do very much agree that the tax code should be simplified as much as possible. I remember losing at least a couple of deductions back in the eighties. One was the $50 deduction for political contributions. I suspect that many people cheated on this deduction so I think that dropping it was a very good idea. The other deduction was for state sales tax. You could either keep all of your sales receipts or apply some formula to estimate the total sales tax paid. In theory, it may have seemed like a good thing to avoid this double taxation. But the effort required, at least for those who kept all of their receipts, was very high. The point is, even if a provision of the tax code has a good rationale, it also has a cost in terms of administration and cheating. Too often, that cost has been overlooked. Of course, many of the provisions do not even have a good rationale but are the result, as you said, of lobbying.
Reagan said that was crap. He also recognized the fact that the tax tables were not adjusted for inflation and result in bracket creep that really hurt lower income earners. In an economic class, I calculated that, in the year 1979 it wasn't worth working at minimum wage (about $2.35) over 38 hours a week. Any more hours and the tax creep put you in a bracket that would raise the federal withholding tax to the point you'd lose net pay. It was insane to work overtime.
This resulted in lower productivity because even a moron could figure out his check was less at 39-45 or more hours in take home as working 38 hours or less.
Likewise, I agree that the brackets should have been automatically corrected for inflation to avoid bracket creep. However, I don't really understand your point about someone making more gross pay ending up with less net pay. The way the brackets work now, the first $6000 of taxable income for everyone is taxed at the lowest rate of 10 percent. The drop in this rate from 15% to 10% is where the $300 tax rebate that everyone received came from (5% of $6000). Having $6001 of taxable income just means that the additional dollar is taxed at the next bracket's rate (15%). Did the brackets previously work differently?
Now, the dynamic scoring takes more time than CBO allows. And we are still at low enough rates that it is correct to say that much lower rates will lose some revenue because the economy won't grow enough to compensate. So, in my opinion, we are at the fine line and after 1991 and 1993 we've crossed over into unfair rates again that lower taxable income in the higher brackets.
This is where I have to disagree. As I say in the previously linked analysis, the top marginal rate of 91% that existed before the Kennedy tax cuts does seem exceptionally high and it seems very possible that those tax cuts were beneficial, at least in reducing this oppressive top marginal rate. However, all of the numbers that have looked at indicate that the Reagan tax cuts decreased revenues from what they would have been otherwise. Even Reagan predicted this and he backed off some of the tax cuts when the revenue loss was greater than predicted. Of course, it's nearly impossible to say what the effect was many decades later. However, I have never seen a serious economic paper that claims to show evidence that the Reagan tax cuts have or will totally pay for themselves. As I said, I'll look at such a paper if you can provide a link to one. Until then, I'll just have to go with those numbers that I have seen.
First of all, just as there is a rationale for a tax on income, there is a rationale for a tax on wealth. Those who have wealth benefit from the existence of the police, military, and courts in the task of protecting their wealth. In a country without those services, they would have to at least hire their own police force to guard it. In any case, the wealthy derive a greater benefit from some of these services than do the poor. It only makes sense that they pay more of the cost.
If wealth is to be taxed, the easiest time to do that is usually at the time of death. If there is more than one beneficiary, then there will have to be an accounting of the estate at that point anyhow. However, I do support a reasonably high limit below which estates are not taxed. For someone who is handling a relatively small estate, it can be quite a burden to have to handle the estate taxes as well as the final year's individual taxes of the deceased. For a large estate however, someone can be paid to do it. In addition, the beneficiaries are compensated with a larger inheritance in whose creation, in most case, they played little or no role.
If the limit (I think it's currently over a million dollars) is too small to handle some small farms an business then the law can be changed to handle them. For example, the taxes could be deferred to if and when the business or farm is sold. In any case, I don't have a major problem with raising the limit or changing the tax rate, as long as the lost revenues are made up and not just passed on as a debt to the next generation. However, totally abolishing the estate tax seems especially foolish. If a later Congress should conclude that an estate tax is justified, it will be much more difficult to reinstate it than to simply modify the rates or limit.
Estate taxes do not pay for police and fire departments. Those are covered by local taxes, not the federal estate tax.
Mighty kind of you to defer the tax on a farm until it is sold. If the farm is passed down from generation to generation, does the tax simply accrue each time until there is a huge debt hanging over the farm? In three generations you could effectively prohibit the family from selling, since the tax at each death would be added to the total debt. Or do you intend that at some point the federal government can simply confiscate the property?
The estate tax is a bad idea based on envy.
Explain to me again why it is necessary that I pay more taxes. You said something about funding your next generation?
The point is not to tax for the act of earning money, it's to tax for the government services that help make that earning of money possible. Likewise, the point of a tax on wealth is to tax for the government services that help to protect that wealth.
Estate taxes do not pay for police and fire departments. Those are covered by local taxes, not the federal estate tax.
That does not change the fact that the police help to protect wealth. In addition, the courts also help to provide law and order and the military serves to protect wealth from outside invaders. The fire department is likely best paid for by property taxes. In any case, we obviously don't have a pure fee-for-service system nor would one work for all services (such as the military). But the services consumed by various sectors is worth considering in the general allocation of taxes.
Mighty kind of you to defer the tax on a farm until it is sold. If the farm is passed down from generation to generation, does the tax simply accrue each time until there is a huge debt hanging over the farm? In three generations you could effectively prohibit the family from selling, since the tax at each death would be added to the total debt. Or do you intend that at some point the federal government can simply confiscate the property?
What is this "mighty kind of you" stuff that I keep hearing? I am simply proposing that we pay for the tax cuts and spending that we see fit to award ourselves. I think it would be mighty kind of all of us not to leave a huge debt for the next generation.
The estate tax is a bad idea based on envy.
No, it's based on the need to pay for government services. In any case, the chart in the National Review article on which this thread was based assumes that the tax cuts expire as scheduled. If you are against that expiration of tax cuts, then you need to propose another way to pay for the tax cuts or toss out the chart and any claim that the deficit will disappear by 2014. Following is a summary of the tax cuts that are scheduled to expire:
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
CAPITAL GAINS RATE ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
10% and 15% bracket 10% 5%* 5% 5% 5% 5% 0% 10% 10% 10%
Other brackets 20% 15%* 15% 15% 15% 15% 15% 20% 20% 20%
DIVIDENDS TAX RATE
10% and 15% bracket NA 5% 5% 5% 5% 5% 0% NA NA NA
Other brackets NA 15% 15% 15% 15% 15% 15% NA NA NA
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
INCOME TAX RATE ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Top bracket 38.6% 35% 35% 35% 35% 35% 35% 35% 35% 39.6%
Fifth bracket 35% 33% 33% 33% 33% 33% 33% 33% 33% 36%
Fourth bracket 30% 28% 28% 28% 28% 28% 28% 28% 28% 31%
Third bracket 27% 25% 25% 25% 25% 25% 25% 25% 25% 28%
Second bracket 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
Initial bracket 10% 10% 10% 10% 10% 10% 10% 10% 10% NA
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
MARRIAGE PENALTY RELIEF-% OF SINGLE FILERS AMOUNT
Standard deduction NA 200 200 174 184 187 190 200 200 NA
15% Bracket Size NA 200 200 180 187 193 200 200 200 NA
CHILD TAX CREDIT ($)
Per child 600 1000 1000 700 700 700 700 800 1000 500
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
EXPANSION OF 10% BRACKET ($1000)
Joint filers 12 14 14 12 12 12 14 14 14 NA
Single filers 6 7 7 6 6 6 7 7 7 NA
CODE SEC. 179 EXPENSING ($1000)
Deduction amount 24 100 100 100 25 25 25 25 25 25
Investment limit 200 400 400 400 200 200 200 200 200 200
ESTATE/GIFT TAX
Exemption ($million) 1 1 1.5 1.5 2 2 2 3.5 0^ 1
Top Rate 50% 49% 48% 47% 46% 45% 45% 45% 35%^ 55%
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
AMT EXEMPTION ($)
Joint filers 49000 58000 58000 45000 45000 45000 45000 45000 45000 45000
Single filers 35750 40250 40250 33750 33750 33750 33750 33750 33750 33750
* = post-5/5/03
^ = estate tax repealed, 35% for gift tax only
NA = not applicable
Note: 2001 changes shown in bold, 2003 changes shown in bold and underlined
Source: http://tax.cchgroup.com/news/10-year2003.pdf
http://www.nyl.com/NYL2/Article/0,1234,11416,00.html (estate tax)
It's hard to believe that "adults" actually passed this mishmash of sunsets. The abolishment of the estate tax in 2010, simply to bring it back in 2011 is especially ill-conceived. It's been called the "Throw Mama from the Train Act of 2001".
No, I said something about not leaving the next generation a huge debt to pay for the tax cuts and spending that we see fit to award ourselves. If we were "funding the next generation" we would have a surplus accruing. On the contrary, we've borrowed and spent all of the Social Security and Medicare surpluses and are leaving them an additional multi-trillion dollar debt.
By the way, unless you earned much more than the average amount of dividends, your tax cuts were much less than average. It's no coincidence that the six tax cut examples released by the Treasury did not include any single adults without children. You can read an analysis of those examples at http://home.att.net/~rdavis2/tax03ex.html.html.
In addition, the tax forces farms and small businesses to alter their business practices and costs them money in legal paperwork and accounting fees.
It is a tax based on envy, nothing more.
That was not its one stated purpose. There is a paper titled "THE FEDERAL ESTATE AND GIFT TAX: Description, Profile of Taxpayers, and Economic Consequences" that was put out by the Office of Tax Analysis of the U.S. Treasury Department in December, 1998. You can access it online at http://www.ustreas.gov/ota/ota80.pdf. Following are four excerpts from it:
First and foremost, the estate tax was enacted for its revenue yield. As revenues declined following the outbreak of World War I, the tax was enacted to help finance the looming deficit in fiscal year 1917 and the “war-readiness” campaign.
:
A second objective, which is very much related to the first, is that these taxes act as a backstop to the income tax and offset the erosion of its base. The gift tax was enacted in 1924 and re-enacted in 1932 to curb estate and income tax avoidance. Much of the capital income that escapes the income tax is subject to the estate tax.
:
A reduction in wealth concentration is a third objective. By taxing the wealth holdings of the wealthiest estates, estate and gift taxes are expected to reduce the size of bequests, which reduces the wealth accumulated over several generations.
:
Ensuring that the wealth of each generation is taxed is another objective. When the GSTT was enacted in 1976 and expanded in 1986, Congress was concerned that estate and gift taxes were avoided by the wealthy through generation skipping arrangements, such as gifts to grandchildren.
Your "stated purpose" shows up as the third of four purposes. If you have a credible source that lists it as the only purpose, please post the link. In any case, that does not change the fact that the preservation of wealth does benefit from certain government services.
In addition, the tax forces farms and small businesses to alter their business practices and costs them money in legal paperwork and accounting fees.
As I said before, I support a reasonably high limit below which estates are not taxed. As of now, that limit is at $1.5 million. If necessary, that limit could be raised for farms and small businesses and/or the taxes could be simplified.
It is a tax based on envy, nothing more.
And that idea is based on a simplistic view of the world, nothing more. In any case, how would you pay for the cost of repealing the estate tax? Or do you favor just tacking it on to the debt that we're leaving the next generation?
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