Skip to comments.Sowell: Prophets and Losses: Part II
Posted on 02/04/2013 1:13:06 PM PST by jazusamo
People on both sides of tax issues often speak of such things as a "$300 billion tax increase" or a "$500 billion tax decrease." That is fine if they are looking back at something that has already happened. But it can be sheer nonsense if they are talking about a proposed increase or decrease in the tax rate.
The government can only raise or lower the tax rate. Whether the actual tax revenues that the government will collect as a result will go up or down is a matter of prophecy. And these prophecies have been far too wrong far too often to base national policies on them.
When Congress was considering raising the capital gains tax rate from 20 percent to 28 percent in 1986, the Congressional Budget Office advised Congress that this would increase the revenue received from that tax. But the Congressional Budget Office was wrong, not simply about the amount of the tax revenue increase, but about the fact that the capital gains tax revenue actually fell.
There was nothing unique about this example of tax rates and tax revenues moving in opposite directions from each other and also in opposite directions from the predictions of the Congressional Budget Office. Reductions of the capital gains tax rates in 1978, 1997 and 2003 all led to increased revenues from that tax.
The Congressional Budget Office is by no means the only government agency whose prophecies have been grossly unreliable. Anyone who looks at the history of the Federal Reserve System will find many painful examples of wrong prophecies that led to policies with bad consequences for the whole economy.
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Democrats will look right into the camera and tell the public that lowering taxes to increase revenue is a lie...never happened....a Republican myth.....etc.
The media will never correct the speaker(s).
We have exactly two brilliant people in this country who should either be in office or be shaping policy for those in office: Thomas Sowell and Newt Gingrich.
Needless to say, neither one of them is popular with the GOP-e. Personally, I think it’s because the latter group can’t understand a word they say (despite the fact that they are both excellent writers and everybody here on FR can certainly understand them).
“Democrats will look right into the camera and tell the public that lowering taxes to increase revenue is a lie...never happened....a Republican myth.....etc”
You are exactly right. They have been telling this lie for decades - “TRICKLE DOWN ECONOMICS” they call it. The media repeats the lie and the masses lap it up. Facts don’t matter when the lie is told over and over again.
I wonder if the Laffer Curve is even a footnote in Modern Monetary Theory as presented in macro econ courses in today’s college classrooms:
I may expect too much from Dr. Sowell, he definitely knows better.
No, the CBO has no authority to correct Congress; as a result, they are "wrong" more often than not.
The CBO is obligated to analyze what they are given by Congress, including assumptions made, with double counting and absurd projections.
They may question only the math, not the absurd assumptions and future projections made.