Tax Cut Fairy Tale -- funny political cartoon.

[Darwin333]

When there was a 70% tax on the rich, there were many more tax loopholes than there are now. They've stiffed the country for years, after all they own the people who make the rules.

So you agree that given our current system we will only be able to extract roughly 18% of GDP via taxes?

 

[Darwin333]

People always claim the the rich never paid the 70% MARGINAL rate and there's some truth to that. Guess where they got the biggest tax break from? Investing in there own damn company. Which forced them to do more R&D so they could create and market new products, keep there workforce employed and increasing employment. And guess what making there own damn selves richer in the process.

So how that works!

Instead now it's about spreadsheet magic and buying your own stock and other smoke and mirrors BS to make the next quarter look better than the last without really doing a damn thing.

A lot of companies are expanding/investing in themselves....... just not here. We can't compete with $5 a day labor, until that situation is solved then what you just said is completely irrelevant. As a double whammy we have a flood of cheaper than dirt, granted more expensive than $5 a day, labor right here at home as well.

 

[Acanthus]

Thats a very complicated question. There are so many things that go into economic growth or decline that I am not sure your questions can be answered. For example, lets pretend that Bush raised taxes on the upper bracket in 2007 and then we had the crash. Could the huge economic downturn be solely attributed to the tax increases? Knowing what we know today, do you think it would have had ANY impact on our current situation?

However lacking my response to your challenge was, I would like to offer one of my own.

Regardless of what the tax rates/brackets have been, have we been able to tax an average of more than about 18% of GDP from the economy?

What happens when your debt grows faster than your GDP (and therefor your revenue), lets say an average of 2% a year every year, over long periods of time (lets use 60 years, then 80, then 100 and a starting point of debt = 30%GDP)? What is the difference, in percentage of GDP, from year 60 to year 80? 80 to 100?

Historically, even with 70% taxes on the top brackets, have we been able to maintain a revenue of 20% of GDP over any reasonable period of time?

What is the eventual mathematical conclusion?

I specifically omitted data during extreme events like the oil embargo and S&L crisis because it screwed up any chance at getting data.

Tax cuts and hikes during periods of "normal growth" (1-4% in a quarter) didnt really show any change in the rates of increase or decrease in the 3 metrics I was looking for.

I didn't see any outliers that would support the idea that large tax cuts work either, for example the damn near 35% cut in the vietnam era.

 

[Phokus]

lol @ the OP and the people who think the cartoon is somehow "reality"

Here's your reality:

http://blogs.wsj.com/economics/2010/02/17/a-look-at-the-tax-returns-of-the-top-400-taxpayers/

In its annual update of the taxes paid by the 400 best-off taxpayers, who aren’t identified, the IRS also said that only 220 of the top 400 were in the top marginal tax bracket. The 400 best-off taxpayers paid an average tax rate of 16.6%, lower than in any year since the IRS began making the reports in 1992.

Another reality: Republicans are idiots and even a cartoon which breaks down their stupidity to it's simplest form can't change their minds.

 

[Phokus]

The fact that you're stealing from productive members of society to give to high school drop-outs is reason enough to cut taxes and spending.

Hey, speaking of stealing, maybe you shouldn't be a douchebag and steal your roomate's food. It's his private property you know. Irony much? Also, you're really really bad at covering up your crimes and you're going to get your roommate hurt or killed one day with your irresponsible behavior.

 

[Darwin333]

I specifically omitted data during extreme events like the oil embargo and S&L crisis because it screwed up any chance at getting data.

Tax cuts and hikes during periods of "normal growth" (1-4% in a quarter) didnt really show any change in the rates of increase or decrease in the 3 metrics I was looking for.

I didn't see any outliers that would support the idea that large tax cuts work either, for example the damn near 35% cut in the vietnam era.

I don't think you are getting my point. I am not really arguing in favor of the tax cuts, I am simply stating that there is an upper limit to what we can collect. I am also arguing that for the last 6ish decades or so we have, on average, spent 2ish% more than we CAN collect. The law of exponents states that our debt must mathematically runaway if we continue to increase it exponentially faster than GDP (and therefore our revenue). Remember the math joke when you were a kid "would you rather a million dollars or a penny that doubles every day for 30 days"? The penny only turns into $163 dollars at day 15 but at day 25 it starts "running away" and by day 30 you have over $5 million dollars. The longer you carry the exponential growth forward the worse it runs away from whatever you are comparing it to, my point is that time is here.

I am curious though, did you notice the inverse in any of your studies? Is there any data that correlates increase in GDP with tax increases (not revenue, but actual tax rates). You would probably have to take the spikes that were caused by bubbles out of the equation and even then I think it is way to complex of a discussion to include so few variables. Nonetheless, I would be interested in hearing your observations.

 

[Darwin333]

Here's your reality:

http://blogs.wsj.com/economics/2010/02/17/a-look-at-the-tax-returns-of-the-top-400-taxpayers/



Another reality: Republicans are idiots and even a cartoon which breaks down their stupidity to it's simplest form can't change their minds.

How much you wanna bet that they had significant losses/write offs due to the economic melt down? That is why tax receipts have plummeted.

 

[Phokus]

How much you wanna bet that they had significant losses/write offs due to the economic melt down? That is why tax receipts have plummeted.

I'm going to bet that you're an idiot and can't read. You're talking about the total tax payment. We're talking about the effective tax rate. Do you think 'significant losses/writeoffs' where someone who would have earned 300 million but now 'only' makes 150 million is going to change their effective tax rate from 30% to 16%?

To make the top 400, a taxpayer had to have income of more than $138.8 million. As a group, the top 400 reported $137.9 billion in income, and paid $22.9 billion in federal income taxes.

If they had so many losses where they got dropped to middle class tax brackets, they wouldn't be in the top 400, would they?

 

[Acanthus]

I don't think you are getting my point. I am not really arguing in favor of the tax cuts, I am simply stating that there is an upper limit to what we can collect. I am also arguing that for the last 6ish decades or so we have, on average, spent 2ish% more than we CAN collect. The law of exponents states that our debt must mathematically runaway if we continue to increase it exponentially faster than GDP (and therefore our revenue). Remember the math joke when you were a kid "would you rather a million dollars or a penny that doubles every day for 30 days"? The penny only turns into $163 dollars at day 15 but at day 25 it starts "running away" and by day 30 you have over $5 million dollars. The longer you carry the exponential growth forward the worse it runs away from whatever you are comparing it to, my point is that time is here.

I am curious though, did you notice the inverse in any of your studies? Is there any data that correlates increase in GDP with tax increases (not revenue, but actual tax rates). You would probably have to take the spikes that were caused by bubbles out of the equation and even then I think it is way to complex of a discussion to include so few variables. Nonetheless, I would be interested in hearing your observations.

No, i did not find any correlation at all. As a result i concluded that taxes should be raised on the top 1% either by creating a new bracket specifically for them, or raising the capital gains tax on individuals and corporations. My other conclusion was basically Obamas original campaign promise to "revisit the tax code line by line" and "close the loopholes."

This is to control the deficit.

 

[Atreus21]

This killed the last discussion on the same topic...

I really do want input...

So by this reasoning you should have no issue taxing whoever we call rich for 100% of their earnings, correct?

 

[Acanthus]

So by this reasoning you should have no issue taxing whoever we call rich for 100% of their earnings, correct?

Effective tax rates have never been above 50% in the united states.

I'm sure theres a threshold, but we have never reached it in recorded history in the US.

 

[Atreus21]

Effective tax rates have never been above 50% in the united states.

I'm sure theres a threshold, but we have never reached it in recorded history in the US.

But why shouldn't they be, if taxation levels do not affect GDP?

 

[Acanthus]

But why shouldn't they be, if taxation levels do not affect GDP?

You're an idiot.

Your intellectually dishonest argument doesn't get in the way of facts. The fact is, taxes can be raised significantly beyond the points they are now and not effect growth.

 

[Atreus21]

You're an idiot.

Your intellectually dishonest argument doesn't get in the way of facts. The fact is, taxes can be raised significantly beyond the points they are now and not effect growth.

To what extent?

 

[Acanthus]

To what extent?

To historically high levels.

That is all that statistical data i looked at supports.

Going outside of that range would be uncharted territory.

We are extremely far from historically high tax rates on the highest quartile.

 

[Darwin333]

I'm going to bet that you're an idiot and can't read. You're talking about the total tax payment. We're talking about the effective tax rate. Do you think 'significant losses/writeoffs' where someone who would have earned 300 million but now 'only' makes 150 million is going to change their effective tax rate from 30% to 16%?

If what you say is true then Obama has reduced the tax for the wealthy more than anyone in history since we only collected roughly 14% of GDP in 2010 compared to 18ish% in 2008.

Ever heard of something called a capital loss or depreciation on hard assets recently purchased? Might want to educate yourself just a bit on tax code before you go calling someone an idiot. Their income does NOT need to be reduced in order to reduce the taxes they pay on that income.

If they had so many losses where they got dropped to middle class tax brackets, they wouldn't be in the top 400, would they?

Again, their incomes need not drop for their taxable income to be significantly reduced.

Edit: Figured I would be nice and help ya out a bit instead of just calling you an idiot.

Effective tax rate:

An effective tax rate refers to the actual rate, i.e., the rate existing in fact.[1] Both average and marginal tax rates can be expressed as effective tax rates.

The effective tax rate is the amount of tax an individual or firm pays when all other government tax offsets or payments are applied, divided by the tax base (total income or spending).[2] If certain groups have high degrees of tax offsets compared to other groups, their effective tax rate will be different, even where their official tax rates and marginal tax rates will be equal. The effective rate of tax can often be discussed in terms of the effective marginal rate of tax - namely the amount of effective tax paid as a percentage of the last dollar earned or spent.

You see that little part about "tax offsets", that would be what I was talking about. You tend to have a lot of those when the economy crashes.

 

[Darwin333]

No, i did not find any correlation at all. As a result i concluded that taxes should be raised on the top 1% either by creating a new bracket specifically for them, or raising the capital gains tax on individuals and corporations. My other conclusion was basically Obamas original campaign promise to "revisit the tax code line by line" and "close the loopholes."

This is to control the deficit.

You still didn't address my other points, if history is any indicator (and its usually a real good one), then our revenue can't even break 20% of GDP for more than a few years going all the way back to the 30's. History states that we will be able to collect roughly 18.4% over a relevant period of time.

We historically spend roughly 20% of GDP, currently a lot more for various reasons, but you still have a rather large gap between what we can get and what we spend.

I do agree with creating a new bracket, actually I think we should make a few new brackets. A guy making $500K is not in the same league as the uber rich.

 

[Darwin333]

Effective tax rates have never been above 50% in the united states.

I'm sure theres a threshold, but we have never reached it in recorded history in the US.

20% of GDP regardless of the rates or brackets. That is the threshold and we have only been able to maintain it for a few years out of the last 80 years or so.

IF we were able to maintain that it would close the "historical" gap between revenue and spending but I doubt it would get us even close over the next 10 years or so. Especially when the interest rate on the .govs debt goes up.

I am sorry to tell ya but we have already crossed into the "runaway" part of exponential growth as far as our debt is concerned. I say we just keep borrowing until they cut us off and then void their debt (not inflate it away, that doesn't work when you consider how our entitlements are setup) but thats just me.

 

[Jhhnn]

I really think you're making false attributions wrt what % of GDP "can" be collected as taxes, Darwin333. You'd have to demonstrate that the attempt was made to do so, which you haven't. I don't think that the attempt has ever been made. Traditionally, 20% or slightly less served satisfactorily, at least prior to Reagan...

Now that a very large % of total income has been concentrated into the hands of a very few it should be relatively easy to identify and close the most commonly used loopholes in an effort to raise federal revenue, if we chose to do so...

I'd hope that those who gain the most from America would be willing to give more in return when called upon to do so...

 

[Darwin333]

I really think you're making false attributions wrt what % of GDP "can" be collected as taxes, Darwin333. You'd have to demonstrate that the attempt was made to do so, which you haven't. I don't think that the attempt has ever been made. Traditionally, 20% or slightly less served satisfactorily, at least prior to Reagan...

Now that a very large % of total income has been concentrated into the hands of a very few it should be relatively easy to identify and close the most commonly used loopholes in an effort to raise federal revenue, if we chose to do so...

I'd hope that those who gain the most from America would be willing to give more in return when called upon to do so...

I guess you are correct but everyone keeps arguing that we had 70% tax rates on the upper earners and did well. Your post kind of invalidates that point. Further, we have had pretty much a perpetual deficit so they had plenty of reason and will to raise revenues. But your right, that is my opinion.

I still don't see how you even get to equilibrium considering current spending habits, internal and external debt and interest payments that are going to explode sooner or later when the rates rise. Not to mention all of the bad paper the .gov is currently backstopping including the loans Fannie continues to purchase today (housing aint done dropping by a long shot). Just to add insult to injury we have exported a fuckload of jobs and imported a fuckload of cheaper labor to do a lot of the jobs still left here.