Frank StaheliDo Tax Rate Cuts Increase Federal Revenue or Spending?
In 1994, the Republican-majority Congress established that a 60% vote would be required to raise taxes. The Democrat-majority congress recently rescinded that rule, signaling its probable intent to raise taxes.
The Heritage Foundation states that
Lower tax rates create better economic conditions. It’s simple: lower tax rates = more robust economy = more federal revenue.
Heritage performed a study of the after effects of the tax reductions of 1981-1983. Their conclusion was
Revenues exceeded that 1980 level in eight of the next 10 years. Annual revenues over the next decade averaged $102 billion above their 1980 level (in constant 1996 dollars).
Any increase in budget deficits was therefore the result of spending increases rather than tax cut-induced revenue decreases.
In a recent editorial, the Las Vegas Review Journal stated:
According to the U.S. Treasury, federal revenue increased a whopping 11.2 percent during the first six months of 2006 compared with 2005. That includes individual income (up 10.2 percent); corporate income (up 29.5 percent); and social insurance collections (up 7.2 percent).
All this suggests that the tax cuts not only stimulated economic growth, which in turn generated wheelbarrows of cash for Washington, but that the deficit is a result of out-of-control spending rather than policies that allow Americans to keep more of their own money.
The same holds true today as it did in the 1980’s–since the tax cuts of 2003, revenues are up substantially. Any increase in deficits has again come from an increase in spending.
While revenues have increased by 3 times in the last 40 years, spending has increased nearly 4 times. A significant portion of this spending increase comes from “earmarks” or what used to be called “pork-barrel spending”.
I hope the Congress doesn’t raise my taxes. I hope they can just do a better job of controlling themselves. It doesn’t seem like it’s worked very well in the past, however. An article on about.com refers to it as the “Starve the Beast theory”, and says that reduction in tax rates results in higher government spending?
What recent evidence we have actually supports the opposing theory, that is increases in taxes lead to lower government spending, and vice versa.
…
[researchers] describe the behavior of particular lawmakers. They found that lawmakers who signed in favor of “large and permanent tax cuts” were more likely to also vote in favor of large spending bills, such as the Medicare prescription drug bill, which they describe as “the largest entitlement increase in decades”.
The statistical evidence, for the United States at least, looks particularly clear - if there is a relationship between government spending and tax levels, it works in the opposite direction of what the “starve the beast” theory would indicate.
The same article suggests possible reasons for the phenomenon. One of them which makes sense to me is
that the demand for federal spending by current voters declines with the amount of this spending that is financed by current taxes.
I still hope they don’t raise my taxes. Self-control on the part of Congress, as well as the people who elect them, is the best medicine.
January 9th, 2007 at 3:07 pm
Frank: With the Dem’s Pay As You Go policy I think a lot of things will change, especially spending. If I can remember that far back, Clinton left a nice credit in the coffers then Bushwacker and friends spent it all and then some. You can thank your Republican friends for the mess we’re in and if taxes have to be raised to get us out of this deep hole talk to your Congressman.
January 9th, 2007 at 3:14 pm
Tax increases for rich people will be needed if there is any chance to pull out of the Bush Budget Deficit Death Spiral.
January 9th, 2007 at 4:00 pm
Frank,
Quoting the Heritage foundation is sort of like asking Jessie Helms if the slaves should have been freed.
The easiest way to avoid wasting your time reading partisan crap is the check Wikipedia. They always tell you the slant up front.
As much as the right tries to discredit them (too much truth) I think you will find they call a spade a spade on both sides of the divide.
There are plenty of broadly respected non-partisan economic think tanks that are viciously non-partisan.
“Starve the beast” is a new phrase of an long discredited ruse to feed the rich. It used to be called “trickle down” or supply-side. Reagan tried it with a vengeance. It didn’t work and he had to raise taxes. Bush Sr. tried again and had to raise taxes too.
If you study economics for one hundred years, you will find out the only PROVEN way to stimulate an economy quickly is to find a way to get more money to the poor because they spend it immediately and it “trickles” right back up to the rich.
The best way to stimulate the economy in the long run is by educating/investing our youth. Works every time.
You are great!
Cliff
January 9th, 2007 at 5:46 pm
Cliff,
I put a quote from Heritage in my post, because I suspected someone would slam them. What I think would be more helpful is to explain how the quotes that I have included are partisan or otherwise incorrect.
There is something to be said about how much taxes should be cut (for example, if you cut them to zero, you get no revenue, so that would be too low). But Reagan’s tax increases were (1) a small corrective increase to a larger reduction in tax rates, and (2) an increase in payroll (FICA) taxes–which I think was a huge mistake. I didn’t agree with Bush Sr’s tax increase, and it probably was the major reason he lost to Clinton.
January 9th, 2007 at 5:54 pm
does cliff need further exposure as a sissy bitch phoney on the sltrib blogs before he stops censoring the only truthful comments on this blog?
Okay — fine, but cliff can only blame cliff.
all i want to do is arrange a charity boxing match between frank “war hero” staheli and my elderly hippie friend with the proceeds going to the girl whose family was murdered by those fag marines in haditha.
the hippie is really anxious to give frank a serious ass whoppin.
January 9th, 2007 at 6:01 pm
Anne.
In another blogging life, did you ever go by the initials WW?
January 9th, 2007 at 6:39 pm
revenues are absolutely positively NOT up substantially.
Total revenues From historical figures - http://www.cbo.gov/budget/historical.pdf
2001 1,991.4
2002 1,853.4
2003 1,782.5
2004 1,880.3
2005 2,153.9
It has taken us 5 years just to match pre-Bush tax policy revenue figures. This isn’t even counting inflation and the 30+ percent growth in government spending http://www.cato.org/pub_display.php?pub_…).
for more great economic figures check out - http://www.dailykos.com/story/2006/12/13/72111/695 and http://bonddad.blogspot.com
January 9th, 2007 at 7:04 pm
Anne, now be nice. For a start I don’t hear Frank backing away from this proposal. Second, there may be some money to be made if it were promoted just right, and third, I believe that it would not only be fair, but perhaps even bump up the take if the proceeds were given to the effort to impeach Bush, Cheney, ;and thier henchmen, then send them off to the Hague. That’s gonna take some dough. Keep after it. Old Hippy Emptor
January 9th, 2007 at 8:31 pm
no. but my old hippie friend was a yippie and fought pigs on the barricades. And he is mean mfer, except to children, women (except feminist bitches), handicapped, elderly and everyone else except punk ass military pukes who think they are bad because they kill lightly armed civilians using abrams tanks and tie muslims to the floor for a gitmo enema and/or menstrual blood torture wipe down.
You are a disgrace to this nation because you didn’t do anything to promote justice. just following orders, huh? That is why you deserve a good public ass whoppin.,
January 10th, 2007 at 9:14 am
Cliff,
Long term economic growth is more than just giving people (poor or otherwise) more money to spend. We’ll have higher long term economic growth if we have more investment in production (not just tangible goods).The poor don’t do a lot of investing in production or research.
Before you ask “what good is production if people arent’ buying the productions?”, remember that the market for our production is much more than just the U.S.
In the last recession, retail spending did not suffer nearly as much as business investment in production.
January 26th, 2007 at 10:04 pm
My money is on the mad old hippee, seen the action before in 69, I was 7,
hippee busted up both Guardia Civil in Spain at the campground we were in, after they rousted him for a beating at 2 AM, great shit, The hippee pummeled both fascists good, then split country that night, he was German hippee. I watched from the window of my families hippee volkswagen bus. Then he damaged their mopeds with a rock.
Me says it has been a while since I lived on 800 a month.
Me says, what is it we are producing that people overseas are buying? Pistachios?