Posted on 05/27/2012 6:35:06 PM PDT by Libloather
Analysis: Kansas governor owns aggressive tax cuts
By JOHN HANNA | Associated Press – Thu, May 24, 2012
TOPEKA, Kan. (AP) — Plenty of Kansas legislators' fingerprints are on the aggressive income tax cuts signed into law this week by conservative Republican Gov. Sam Brownback, including those of some GOP moderates now describing it as a budget crisis in the making.
But Brownback now owns the legislation, even though it strayed significantly from the tax plan he outlined in January and he and his allies sought less aggressive alternatives in the legislative session's final days. He not only signed the bill, but he pushed for the debate making it possible and ultimately embraced what passed.
He's likely to get most of the blame if critics turn out to be right that the state will need close massive budget shortfalls over the next six years. Conversely, he'll deserve most of the credit if the plan works as intended by giving the state economy a job-generating boost.
(Excerpt) Read more at news.yahoo.com ...
income tax rate cuts
Gee, thanks! Us stoopid hicks appreciate the compliment. Of course, the media, Poly-Sci profs, and RATS all hate Brownback.
That said, I'm a big believer in starving the beast. While tax rate cuts will paradoxically increase revenue to a degree, they should be cut to the point revenues actually begin to decline and then force the government to live within its means.
People continue to forget that Sam Brownback is for amnesty for illegal immigrants, and all problems associated with amnesty for illegal immigration are very expensive!
Excellent!
Tax cuts mean less big-thug government confiscation from normal, working, taxpaying American families, and that makes the scumbag Democrats’ heads explode!
Kudos to Sam Brownback and the Kansas legislature.
Let’s hope Brownback has gotten tax cutting right, unlike Graves. The last time we had marginal rates cut in Kansas they decided to do it at the top of the business cycle when there wasn’t much stimulus effect, and without any corresponding spending cuts. The resulting budget crisis triggered by the recession of 2001 gave the ‘Rats and opening and we got the loathsome Kathleen Sibelius as our next governor.
It’s not exactly like Kansas is over-governed and cutting taxes is needed to reign in a bloated state government that’s running roughshod over the liberties of Kansans, so this had better have the expected supply-side effect, or we’ll be in for another round of ‘Rat governance here.
Cutting marginal rates has been proven to increase revenues no matter where the business cycle happens to be.
The Laffer curve has a maximum in the middle (where is unclear and dependent on other economic factors that make a good model difficult to make). For any given set of economic circumstances, there are marginal rates so low that cutting them further cuts revenue because the cut has no, or insufficient, supply-side stimulus effect.
The empirical fact that cutting marginal rates at the Federal level has always lead to increased revenue simply means we’ve always had rates higher than the rate at the Laffer maximum. Kansas under Graves seems to have had rates below the Laffer maximum: the were cut and revenue dropped.
“Cutting marginal rates has been proven to increase revenues no matter where the business cycle happens to be”
Not true at all.
People need to read the writing of Reagan’s economists instead of getting their “knowledge” from radio personalities and other such parrots of misinformation.
If rate cuts were expected to deliver an increase in revenue, why do you suppose that the Reagan rate cuts included matching spending cuts?
The answer is that they weren’t expected to deliver higher revenues and they didn’t. The Reagan rate cuts did deliver what the Reagan economists predicted that they would do, which is to recoup a large portion of the tax loss forecast by static analysis. All of this can be found in Martin Anderson, Lawrence Lindsey, Paul Craig Roberts, all of them architects or sympathetic students of supply side fiscalism.
We used to live in Kansas. Never really objected to the state income tax but the personal property tax, particularly in Johnson County, was a real budget buster, particularly if you had multiple cars and a boat. But the schools were the best. Other taxing entities will find some way to make up the difference for any shortfalls in the future.
“The Laffer curve has a maximum in the middle “
No one, Laffer included, knows what shape the Laffer Curve has. And Laffer doesn’t pretend he knows; his curve is intended as a thought experiment and nothing more. The only way it could have a “maximum in the middle” is if it is a perfect elipse, and the little evidence we do have doesn’t support that idea. If anything it appears to have a long tail to the left.
“The empirical fact that cutting marginal rates at the Federal level has always lead to increased revenue”
That’s not an empirical fact. It is nonsense that is refuted by Martin Anderson, one of Reagan’s oldest advisers and a principle architect of the Reagan economic program. Anderson titled the relevant chapter “The Myth of the Supply Siders” in his memoir “Revolution”.
Anderson’s claims about the goals and effects of the Reagan tax cuts are substantiated by Lawrence Lindsey, who ran a regression analysis of the Reagan program published as “The Growth Experiment”. The rate cuts accomplished what they were designed to do: they made the economy grow. The rate cuts weren’t intended to increase revenue to the Treasury, and they didn’t. That’s why the Reagan program included spending cuts, the cuts that Speaker Tip O’Neill reneged on resulting in increasing budget deficits.
Other than the case of capital gains cuts, the closest that the rate cuts came to “increasing revenue” was in recouping a large portion of the revenue loss predicted by static analysis; about 60% of each dollar cut was recouped, and that’s a long way from “increased revenue”.
Was there more revenue (i.e. more dollars)being collected after the Reagan cuts were implemented?
“Was there more revenue (i.e. more dollars)being collected after the Reagan cuts were implemented?”
To look at the broadest case, if you subtract the total tax revenues of 1981 from the total tax revenues of 1989 you will see a large increase (this is a commonly employed technique for a number of our radio conservatives).
The problem is that this isn’t a valid method of determining the role of the rate cuts in generating that revenue. You have to account for other factors that increase total tax revenue, such as deficit spending, the business cycle, growth of the workforce, and so forth; it is a complex problem and this is the data that the Larry Lindsey study details in “The Growth Experiment”.
Once the other factors are subtracted out Lindsey found that economic growth recouped a large portion of the revenue lost through lower rates and it was essentially what the Reagan economists had predicted it would be. Around 60% if I recall correctly.
The tax rate cuts weren’t intended to increase the tax take for the Treasury. They were intended to shift the economy’s supply curve to the right, increasing the production possibility frontier, removing the constraints that were generating inflation during the ‘70s. They achieved what they were intended to do.
Those who think that the optimum tax rate for economic growth (the Reagan goal) is the same as the optimum rate for tax revenue (the Laffer Curve) make a common mistake of conflating two different curves. It is very likely that the optimum rate for total tax revenue is much higher than the optimum rate for economic growth. Which rate you choose just depends on what your goal is, a wealthy citizenry or a wealthy government.
Do your home work and stop making a stupid twit out of yourself on a public forum. FEDGOV ™ REVENUES FROM 1982 to 1988 DOUBLED AND THIS HAS BEEN ATTRIBUTED TO MARGINAL RATE CUTS. Do a little research it is not that hard. I will not spoon feed you.
FACTOID: Revenues were 500B when Reagan took office and were approaching a Trillion when he left in 1988.
Hey go to the DU if you want to preach REVENUE enhancement. I got your revenue enhancement right here.
He did sign a Voter ID law written by KS Secretary of State Kris Kobach.
But all of us know that maximum revenue point in any instance of the Laffer curve is neither at 0% nor at 100% — by middle I meant only not at the ends of the interval (not at 0% or 100% which lead to no revenue). There are income tax rates in any given circumstance for which decreases in the rate will decrease revenue.
I’m not sure what your authors are using to claim that Federal Income Tax receipts (the relevant revenue source) didn’t increase in the wake of Reagan’s cuts, but it contradicts publicly available info. (Even the left-biased wikipedia attests, “The fact that tax receipts as a percentage of GDP fell following the Economic Recovery Tax Act of 1981 shows a decrease in tax burden as share of GDP. Total tax revenue from income tax receipts increased during this time.”) Laffer’s analysis is about tax receipts in currency units, not about tax receipts as a percent of GDP, and the tax cuts by Reagan and Kennedy both confirm there is a downward slope between the unknowable maximum and 100%.
In the case of Kansas under Graves, the marginal rate cut was followed by a drop in income tax receipts, the economic growth which accounts for the right end of the Laffer curve didn’t happen. Under Graves the Kansas income tax rates were to the left of the unknowable Laffer maximum.
I am not of the all-tax-cuts-are-good school of thought. Tax cuts are good when they reign in over-reaching government (cutting taxes and funding tyranny by borrowing is not to be preferred) or when they free the economy to grow. Cutting taxes so that the sort of minimal government we FReepers would prefer (I’ve notice precious few even theoretical anarchists on FR) must be financed by borrowing or cut is bad.
“Do your home work and stop making a stupid twit out of yourself on a public forum. FEDGOV ™ REVENUES FROM 1982 to 1988 DOUBLED AND THIS HAS BEEN ATTRIBUTED TO MARGINAL RATE CUTS. Do a little research it is not that hard. I will not spoon feed you.”
Do my homework? Oh, I’ve read a little, although it probably pales in comparison to your knowledge of the subject.
Some of what I’ve read comes from Reagan’s economic team (Martin Anderson ‘Revolution’, William Niskanen ‘Reaganomics’), from architects of supply side policy (Bruce Bartlett ‘Reaganomics’, Paul Craig Roberts ‘The Supply Side Revolution’), from a Republican expert on the effects of tax cuts (Lawrence Lindsey ‘The Growth Experiment’).
What I posted about the effects of the Reagan tax cuts comes from their writing. I hadn’t realized until I read your post that I’d been duped by these frauds into making a stupid twit of myself! You can’t imagine my chagrin.
Well this cannot stand! Your post explaining that FEDGOV ™ REVENUES doubled from 1982 to 1988 will send them all scurrying to DU where they belong, unless they retract their foolish writings that say otherwise.
You, sir, are a genius.
“I’m not sure what your authors are using to claim that Federal Income Tax receipts (the relevant revenue source) didn’t increase in the wake of Reagan’s cuts, but it contradicts publicly available info”
Tax receipts increased greatly but it’s not a simple process to isolate the contribution of tax rate reductions to that increase. Determining the effect of tax rate cuts is not as simple as subtracting the total receipts of 1982 from those of 1989.
For example deficit spending generates economic activity and higher tax receipts; there were deficit effects every year that have to be subtracted. 1982 was the nadir of a double dip recession and 1988 close to the peak of a business cycle; the normal effects of the business cycle must be subtracted out. There’s a number of such inputs that have to be accounted for, more than I can remember offhand, but they are all found in Lindsey’s “The Growth Experiment”.
http://www.manhattan-institute.org/html/critical_acclaim-growth_experi.htm
That book is a laymen’s version of a complex study that Lindsey ran when he was teaching economics at Harvard. Lindsey is a PhD with a long history of working for Republicans, including Ronald Reagan and both Bushes. Lindsey is a fan of Reaganomics and tax cuts, his study isn’t coming from the left, it’s simply an attempt to determine exactly what the effects of the tax cuts were.
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