- Jul 28, 2006
Ok Bowfinger, read the followingOriginally posted by: Bowfinger
More misdirection, I'm afraid. The FACT is that federal tax revenues increase virtually every year, and have consistently done so for at least the last 50 years. Even ignoring inflation, tax revenue is at an "ALL time high" almost every year, after tax cuts, after tax increases, after taxes are left unchanged. Why? Because the American economy keeps growing. The inevitable, obvious result is that tax revenues rise by default, interrupted only by major economic downturns (or extraordinarily incompetent tax policies).Originally posted by: ProfJohn
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And nice of you to ignore the fact that right now revenue is at an ALL time high, and this is after tax cuts. Bush cut taxes and the amount of money coming in is higher than it has ever been.
Obviously we are not going to agree on this topic.
The only meaningful question is how much did tax revenues increase compared to the increase we would have seen under different rates or policies? Unfortunately, that falls out of the realm of solid science and into the realm of partisan speculation. Just bear in mind, when someone spouts Pollyanna claims about how good tax cuts are for increasing federal revenue, he's speaking as a true believer, not as an objective observer.
Look at what the CBO predicted would happen to revenue and what actually happened after TAX cuts.
In 2003 proir to the tax cuts the CBO estimated that over 2 years $125 billion would be raised via capital-gains
After the 2003 tax cut the actual revenue was $151 billion... we cut tax rates and ended up with a LOT more money that we had expected before cutting taxes.
Next look at the 1997 capital gains tax cut, after cutting the tax rate by 28% we ended up with 11% more revenue than had been expected before the rate cut.
On the other side, the CBO made a estimation of revenue in 1992. In 1992 Clinton passed a HUGE tax increase, depite increasing taxes by 16-28 % we only saw 1% more money than what the government had expected before the tax increases.
FinallyJanuary 2003, before the tax cut was enacted. Table 3-5 on page 60 in CBO?s Budget and Economic Outlook published in 2003 estimated that capital-gains tax liabilities would be $60 billion in 2004 and $65 billion in 2005, for a two-year total of $125 billion.
Now let?s move forward a year, to January 2004, after the capital-gains tax cut had been enacted. Table 4-4 on page 82 in CBO?s Budget and Economic Outlook of that year shows that the estimates for capital-gains tax liabilities had been lowered to $46 billion in 2004 and $52 billion in 2005, for a two-year total of $98 billion. Compare the original $125 billion total to the new $98 billion total, and we can infer that CBO was forecasting that the tax cut would cost the government $27 billion in revenues.
Those are the estimates. Now let?s see how things really turned out. Take a look at Table 4-4 on page 92 of the Budget and Economic Outlook released this week. You?ll see that actual liabilities from capital-gains taxes were $71 billion in 2004, and $80 billion in 2005, for a two-year total of $151 billion. So let?s do the math one more time: Subtract the originally estimated two-year liability of $125 billion from the actual liability of $151 billion, and you get a $26 billion upside surprise for the government. Yes, instead of costing the government $27 billion in revenues, the tax cuts actually earned the government $26 billion extra.
Using the same kind of analysis, we can see that attempts to raise tax revenues by raising tax rates simply doesn?t work. Consider the massive increase in personal income-tax rates imposed by President Clinton and a Democratic Congress in 1993. Compare actual total tax revenues for the four years from 1993 to 1996 to what had been estimated by CBO in 1992 before the tax hikes took effect. Despite increasing the top tax rate on incomes by 16 percent to 28 percent, actual revenues only beat the 1992 estimate by less than 1 percent.
So what led to the gusher of tax revenues in the late 1990s that helped to put the federal budget into surplus? Simple: It was the capital-gains tax cut engineered by a Republican Congress in 1997. Compare actual total tax revenues for the three years from 1997 to 1999 to what had been previously estimated by CBO in January 1997. Despite cutting the capital-gains tax rate by 28 percent, actual total revenues beat the 1997 estimate by more than 11 percent.