Let's say you have a money making opportunity. Would you decide not to make money because in the future the taxes might go up slightly? Remember that you get taxed on profits.

Obama has already lowered taxes and wants to keep those tax cuts in place. The Republicans don't want to give him credit for this, and of course they aren't going to acknowledge that the tax cuts apparently haven't done anything for the economy.

So the only thing for them to do is trot out the canard about "uncertainty."

It's disingenuous to say that Obama has lowered taxes. Obama has been responsible for trillions of dollars in government spending. Obviously that spending must be paid for, either by taxing now, borrowing now and taxing later, or inflating - which is just a different type of tax. There's nothing free - when government spends money, it must therefore also tax. Since Obama has not cut government spending you cannot honestly say he cut taxes .

This thread is a perfect example of why Dems should take a cue from Repubs and not bother engaging their opponents' arguments on the "merits." They're arguing against a tax cut because it's not permanent. Well, no tax cut is permanent. The whole argument is one of complete intellectual dishonesty.

When someone is being handed what they ostensibly want (i.e., tax cuts), and then turns up their nose at it, that tells you all you need to know about whether they have been arguing in good faith all along.

It's a fair point that the types of tax cuts matter. However, the mortgage credit, for example, did attempt to target an area of weakness.

Of course, the tax cuts likely did make a difference, just as the stimulus spending made a difference. Neither were large enough to make an obvious impact because of the depth of the recession. Unemployment surely would have been worse if the stimulus had not passed.

The main take away is that for government policy--whether it be spending or tax cutting--needs to be properly scaled to be truly effective.

Reagan increased taxes to epic proportions.

Ah, so NOW we have to take spending into account!

I mean, now that I think about it, I remember all the Repubs scoffing at the 2001 tax cuts because we just kept spending. They just wouldn't shut up about it!

Well no, if I could just choose to make money out of thin air. But you're neglecting the opportunity cost of foregone leisure, which is not counted as an expense for taxation purposes. Maybe I could make $100 for an hour's work which I value at $99, but a 2% tax means I would only get $98 and so elect to take the leisure.

Which specific taxes for what years are you referring to?

Wasn't the whole premise of this thread "Republicans say the stimulus (which contained tax cuts) didn't work, but they say tax cuts are a stimulus! el oh el the hypocrisy!"? Now you're trying to shift the goal posts to "but like, really, it actually did work!"

Payroll taxes.

http://mises.org/freemarket_detail.aspx?control=488

Yeah... he increased the FICA rates from 6.13% to 7.15% on individuals while slashing Fed Income taxes across the board:

http://www.taxfoundation.org/files/f...y-20080107.pdf

An average schmoe making 30k in the 1979 under Carter paid 44% on his 30k income to the feds. He paid 28% to the Feds under Reagan in 1988.

So under Regan, he paid $300 more in FICA taxes, but $4,800 less to federal income tax for a nice crisp $4,500 net gain.

Is it any wonder the average American of working age remembers Reagan fondly?

Reagan created an increase in tax revenue by broadening the base and removing tax shelters from the rich while slashing tax rates across the board, forcing capital into productive enterprises rather than having capital move to avoid taxes in less productive ways.

Hence the explosion of the economy in 1983.

That's how prosperity is created, by widening the tax base and increasing the efficiency of the system. Bradley and Gephart went along with this notion in the 80's just as Bradley and Freidman trumpet this path today.

Friedman is dead bro.

Reagan was the 1st of 4 post WWII presidents to increase the National Debt as a percentage of GDP. The others being Bush I & II & Obama.

http://en.wikipedia.org/wiki/File:USDebt.png

We are now shelling out 290 billion in interest payments less the IOUs we give the SS Trust Fund for the 2.7 trillion it is owed, if you assume all bonds are yielding 2% and the total debt is 14.5 trillion.

I am only 56 years old & I can remember when the total National Debt was less than 290 billion dollars.

http://www.wisegeek.com/what-is-the-...ted-states.htm

Look at the total debt for 1970, when I was a junior in high school. That 283 billion in debt is the equivalent of approx. 2.3 trillion in 2010 dollars (see the 1st chart).

If you multiply the 283 billion by 9, you get about 2.3 trillion. So that's inflation. In 1972 when I graduated from H.S., if you were lucky enough to get a union job with the Hershey plant (where I lived in PA) as a maintenance apprentice, you made approx $5.00 an hr.

$5.00 per hr * 9 = $45.00.

I would like to wish a H.S. grad the best of luck finding a job starting at $45.00 an hr.

Kinda explains why Ron Paul turned against Reagan when he started spending like there was no tomorrow & it is common knowledge that wages have not kept up with inflation over the last 30 years.

Let's examine the evolution of the major republican hammering points since Obama took office.

Obama is a socialist
DEATH PANELZZZ!!!
Obamacare wants to rob from your medicare
lol stimulus
When are you going to talk about jobs Mr. president?
Obama is obsessed with raising taxes
Most business unfriendly president ever
Obamacare has all businesses scared to invest or hire
Regulations are out of control
Oh *now* you're talking about jobs?


All perfectly quantifiable and verfiable.

There was also significant bracket creep under Reagan.

Your like a guy fussing over the sea shells placement on the shoreline at a beach that is known to have daily sunami's.....

LOL...maybe if the deficit was "temporary" like the tax cuts are. Small businesses need certainty/stability. Temporarily cutting taxes with the implied effect that they will be raised eventually certainly does not stimulate businesses to hire.

Its all that Obama talks about...and there's a chance he could be here thru 2016. Way too much uncertainty here.

This is a way overly simplified view on Reagan's tax policies. In 1982, less than a year after cutting the marginal tax rates, he rolled back about a 1/3 of those with the Tax Equity and Fiscal Responsibility Act by closing loopholes and eliminating various deductions. He raised the gas tax in 1983 and rolled back deductions for businesses amounting to another $50B over three years in 1984. In the Tax Reform Act of 1986, he passed the largest corporate tax increase in history amounting to around $120B plus another $300B in deduction and loophole rollbacks. There were also the payroll deductions that were mentioned before.

The effect of tax cuts is a complicated one and is often difficult to decouple from various economic factors that are occurring simultaneously. It's generally a specious argument to say that lowering taxes raises revenue. The Laffer curve has some academic merit, but the peak is dynamic with ever changing with economic conditions. Taxes are at 50 year lows with respect to per capita income, so it's highly unlikely we're on the right side of the Laffer curve and the left side trends down to zero, not up to infinite like Republicans seem to think. Cutting rates from 90% to say 70% probably has revenue increasing potential. Cutting from 35% to 28% likely doesn't.

Tax receipts grow nearly every year regardless of the tax environment as does GDP. The Bush tax cuts hurt revenue the first few years, then it finally came back toward historic averages. There was no real growth during this time, and it appears the tax cuts simply slowed receipts. Additionally, most of the "growth," which was really a return to normal receipts, was derived directly from corporate taxes, which were spurred by record corporate profits and certain corporate deductions expiring. [Link]

Here is some historical information at specific instances of tax cuts and tax increases. It shows expenditures and revenue as a percent of GDP, the measure that actually matters. At each major tax cut point on the graph, you can see that revenue as a percent of GDP is significantly reduced each time. It's not accurate past 2005 and shows a projected increase in revenue as the Bush tax cuts are supposed to expire, but we now know they didn't.



This whole reducing tax thing is one of the symptoms of the supply side economics proponents. However, when reviewed historically, it is clear that this approach has only allowed one sector of the population to benefit.

Here is a good accounting of the implications of supply side economics and their results over the last 30 years. The only group who has significantly benefited from these policies is the top wage earners. Median income has nearly stagnated, while the top 1% has seen their income increase nearly 3 fold.

This chart shows the extreme disparity in income growth of the various quintiles as compared to the top 1% since the 80's.



This chart shows the current wealth gap is unprecedented in the last 100 years and even larger than it was just before the Great Depression. If supply-side policies continue to erode the middle class, the primary economic driver from the demand side, there will likely be a violent correction at some point. We should make some changes to correct the course.



The effective tax rates after taking all this into account actually changed very little through the 80's, making Reagan's reputation as the great tax cutter a significant distortion of the truth.


However, there is another component here that needs to be addressed. That is, how has the total effective tax burden been shifted over that time period. In general, just looking at federal income tax rates, the burden would appear to have shifted towards the wealthy. However, this is incomplete. The percent income tax paid by the wealthy did increase, but that was due to the tax pool increasing. The average tax payment by millionaires who didn't get caught by the alternative minimum tax fell by 27% between 1986 and 1989. The total effective tax burden actually shifted down as seen in the following table:


Additionally, during that time, a large portion of the burden was shifted to state and local taxes, which are nearly all regressive in nature (this includes state income tax, sales tax, property tax, etc). Again, this disproportionately hurt the poor. The Republicans love to throw out the line that nearly half of Americans don't pay taxes. They're referring to federal income tax (the only progressive tax we have), but disingenuously leaving out the myriad of regressive taxes that the poor pay, such that their effective burden is high. The top 10% control over 70% of the wealth in this country and 93% of financial wealth, so they are certainly not being overtaxed.

Economic prosperity beginning in the 80's is also a complex system with many variables that are difficult to decouple and isolate their individual contributions. Some of the contributing factors include the massive and unprecedented deficit spending that began under Reagan, something Republicans are now claiming is detrimental, yet undoubtedly contributed to the economic rebound.

Another factor was the massive bull market that began and continued mostly unabated (save for some missteps along the way like the October 1987 crash) until 2000. A big contributing factor to this was the 401k system that was introduced in 1978 that people truly began taking advantage of in the early 80's. This led to an increase in stock ownership, directly or indirectly, from ~16% in 1983 to ~30% in 1989. However, this economic expansion came at a price for a large section of the population as the top quintile had an income increase of 14%, while the bottom quintile's income declined by 24% in real dollars. The remainder was essentially constant.

I know this was a long post, but if you have any desire to learn of actual effects of tax cuts and supply side economics, you'll take the time to read it, and do your own additional research. My research has led me to the conclusion that this theory has only really benefited one sector of society, while the rest falls further behind. Once the robust middle class, the primary economic engine of this country, is eroded sufficiently, we revert to essentially a form of feudalism with two distinct classes and the country as we know it will be finished.

Nice post cd. It was especially nice of you to respond in such detail to someone who doesn't even understand tax brackets.

+1

Sometimes you show people how the rabbit comes out of the hat, yet they still think it's a magical hat.

b

These cuts didn't 'fail' for the people they were given to though I'll bet...

Wat? "making a difference" is different from "working."

But Republicans don't even acknowledge that the stimulus did create jobs.