{Editor’s note: this is a discussion of fiscal and tax policy. Let’s leave namecalling at the door, ok?}
Various people in the US, discussing the upcoming (yet again) budget battles of the federal governments and various states, come up qith various slogans. “We don’t have a funding problem, we have a spending problem” is one of the most common ones. Over at LoOG, the comment:
It’s the old “government is out of money” fallacy used to cut off funding to any number of vital services, from education to healthcare to pensions. Interestingly enough, those pushing this fallacy never want to consider actually raising revenue to tackle the ‘out of money’ problem. Only cuts will do…
But what if the problem is that taxes are too low instead? That tax revenue - moreover, tax RATES - have endured such a systematic hack-and-slash for the past decade that they could safely be raised and, for the common good, perhaps they should be?
The question of an appropriate tax rate is an odd thing to consider. On the one hand, the idea of putting people below the poverty line via taxation is problematic. On the other hand, there is an odd phenomenon in America where many poor or lower-middle-class people will resist raising taxes on even the ultra-wealthy because they might, someday - if lightning were to strike them three times in the same spot - be catapulted into the ranks of the ultra-wealthy. They have been convinced by certain media personalities that upward socioeconomic mobiity is still at home in the US, while the reality is quite the opposite and upwards mobility in the US seems almost dead. “Trickle-down economics”, the catch-phrase of Ronald Wilson Reagan and of the people who’ve turned him into a posthumous cult figure, turns out not to work, if only because those at the top are amazingly good at hoarding for themselves and ensuring that nothing but the barest trickle ever escapes their grasp.
Had you come to me 5 years ago, and said that tax rates needed raising, you might have found me an unwilling listener. Today, I do believe I’m coming around. To turn around the catchphrase of the “cut government” crowd - we don’t have a spending problem. We have a taxes-are-too-low problem.
Maybe instead of raising taxes they should just cut spending.
Comment by Abel — February 14, 2011 @ 10:30 am
Abel,
Did you read even a single bit of the linked source?
Taxes are lower today than they were in the 1950s. Tax revenue, today, is through the floor. It is lower than it was during the 1990s, it is lower than it was during the 1980s, far lower than it was in the “too onerous” days of the incompetent Jimmy Carter even.
It is highly unlikely that we have a “spending problem” in the way that many pundits have proposed. What we have is insufficient revenue - because revenue as a percentage of national income is down to 9% today from 15% in the year 2000 - to cover the spending that the public has voted for.
What do you think. Could we handle year-2000-level taxation today? In the year 2000 we were paying down the debt and not running a deficit. On that basis, I submit that tax rates (especially with all the loopholes) are simply too low today.
Comment by web — February 14, 2011 @ 10:46 am
See Bruce Bartlett (conservative economist) on the undertaxed American Middle Class: http://thehackensack.blogspot.com/2009/04/undertaxed-american-middle-class.html
Liberal blogger Matt Yglesias is honest enough to agree with him. He’s made a good point that his fellow American liberals are often too obsessed with keeping federal income taxes highly progressive than funding the sort of government services they want, and he’s noted that the Scandinavian countries he and other liberals admire levy heavy taxes on everyone, not just the rich, to pay for their social welfare system.
Comment by DaveinHackensack — February 14, 2011 @ 11:06 am
…to cover the spending that the public has voted for.
Really? I don’t remember voting for any spending increases. They must not appear on the ballot in my state. If anything the 2010 election was a sign that people want budgets cut.
Could we handle year-2000-level taxation today? In the year 2000 we were paying down the debt and not running a deficit.
I’ll trade 2000 levels of taxation in exchange for 2000 levels of government spending.
Comment by Abel — February 14, 2011 @ 12:31 pm
I’ll trade 2000 levels of taxation in exchange for 2000 levels of government spending.
Alright. Let’s adjust for inflation.
From 2000 to 2010, inflation had an effect of 28.31%.
Federal spending in 2000 was $1.789 Trillion.
Federal spending in 2010 was $3.456 Trillion.
The numbers are intriguing. If we compare the federal budget, it’s gone up 93.18% over the 2000-2010 timeframe.
Intriguingly, it went up rather steadily, reaching $2.655 Trillion by the year 2006 budget.
On the flipside, let’s give you a chart: budget deficit for the past sequence of years 2000-2010.
Now compare that to the taxes as a share of income graph. What do we see? The lower taxes go as a share of income, the higher the deficit tends to go. Not 100% precisely, but a definite correlation.
Now, what is it you propose to cut? And why is it you seem to feel taxes are not too low? Please present the alternative case.
Comment by web — February 14, 2011 @ 12:51 pm
Dave,
Liberals are often obsessed with keeping taxes highly progressive, but let’s face it - the top 1% control more than 42% of the wealth in the US. If you go to the top 5%, then they collectively control 67% of the wealth in the US. Go to the top 10%, and they control 93% of the country’s wealth.
This is what one might term a major problem. If only because a highly non-progressive taxation scheme, or a tax scheme that pulls from the lower 90%, amounts to increases that might be termed “chicken feed.”
In the same way that the old saw about “banks are where the money is”, if you need to raise tax revenues, you need to target taxes on those who can actually afford to pay.
Comment by web — February 14, 2011 @ 12:57 pm
I would be willing to pay higher taxes for “the common good” if the endless influx of tax-consumers were shut off.
As we are today, it is very hard to argue for “the common good” as we do not have any “common” any more. “Which common good” are you talking about? How can you talk about “the common good” when anybody can move here, whether legally or illegally, and say, “hey, give me money, I’m a member of the common good!”
You can’t have high taxes and open borders. End of. I’d rather let the whole place go to hell so that the people who believe in this oxymoron can finally understand the point of finite resources and finite umbers of people willing to pay to fund the privilege of their own cultural, demographic, and economic displacement.
Comment by Maria — February 14, 2011 @ 2:02 pm
Web,
You are confusing assets and income. You can raise income taxes as high as you like and you won’t get much more money from Bill Gates or Steve Jobs. Raise them to 60% and you’ll take a full 60 cents of Steve Jobs’s $1 per year salary.
You’re also wrong about the revenue potential of raising taxes on the bottom 98%. The CBO estimated that 2/3rds of the deficit impact of extending the Bush tax cuts (which Obama and Congress recently did) would come from extending the Bush rates on the bottom 98%. Remember, the bottom 40% of earners have negative effective federal income tax rates (i.e., they receive more in transfer payments such as the EITC than they pay in income taxes).
Comment by DaveinHackensack — February 14, 2011 @ 3:29 pm
Maria,
As per Will’s previously stated policies on the blog - let’s try to keep the vitriol to a minimum.
If you argue that taxation is a problem when there is an “open borders” mentality and people who are illegally here get to draw on public assistance programs, I agree. That is a monetary problem that should be addressed.
Dave,
See, here’s where your discussion and mine are crossing positions.
I argue that taxation needs to hit primarily the top 10%, since the top 10% controls 97% of the wealth in the country.
You counterargue that “2/3rds of the deficit impact of extending the Bush tax cuts … would come from extending the Bush rates on the bottom 98%” - which is a different statistic. Both of our statistics are true.
Remember, the bottom 40% of earners have negative effective federal income tax rates
While I’m all for eliminating negative effective federal tax rates, quite honestly it doesn’t really matter. The fact that someone got even $100 back at the end of the year is tiny, collectively, compared to the impact of tax-sheltered loopholing.
Comment by web — February 14, 2011 @ 3:43 pm
Web,
You’re muddying the waters by bringing up a one-off example of a particular corporation minimizing its taxes using loopholes. Let’s take a step back and look at the big picture.
There are dogmatists on the tax and the spending side, but fortunately, President Obama empaneled a bipartisan commission of thoughtful people to study the challenge of reining in our deficits. And that commission, co-chaired by Bowles & Simpson, came up with some rational suggestions that included both spending cuts and broadening the tax base while eliminating loopholes. Unfortunately, their report is going unheeded.
You’re also muddying the waters with your concerns about wealth inequality. The reasons why wealth accrues to some and not others has little to do with taxes, and if you wanted to minimize that inequality, the tax system wouldn’t be the most effective way to do that.
Comment by DaveinHackensack — February 14, 2011 @ 4:17 pm
The reasons why wealth accrues to some and not others has little to do with taxes,
Not quite true. The theory of “trickle-down economics” was that if we gave massive tax cuts and loopholes to the rich/ultra-rich, they would turn around and “spend” that money employing people, stimulating the economy and making things better all around.
Prior to the 1980s and “trickle-down economics”, the wealth disparity statistic held relatively steady.
In the three decades following the advent of “trickle-down economics” as public policy, however, wealth and income disparities have increased at an alarming rate. The “middle class” has begun to vanish. And a large amount of it has to do with the fact that wealth, instead of being spent or transferring into the government (where it would be used both on public infrastructure, which both sides of the debate admit is crumbling and in massive need of repair projects, and on debt/deficit reduction), is squirreled away and hoarded into “tax shelters” and loopholes.
Comment by web — February 14, 2011 @ 4:31 pm
Web,
Your focus lack of revenue remindes me of a guy I knew who made $100,000 a year but spend $200,000 a year. One day he did the book and realized he was $100,000 in debt. His soluiton? Ask his boss for more money. After all, if had an extra $100k a year, he wouldn’t have all this debt. Cutting spending never entered his mind.
Why is it you seem to feel taxes are not too low?
Because over 40% of my income ends up going to the government. Maybe that level of taxation doesn’t bug you, but it bothers the hell out of me.
Comment by Abel — February 14, 2011 @ 4:49 pm
If you argue that taxation is a problem when there is an “open borders” mentality and people who are illegally here get to draw on public assistance programs, I agree. That is a monetary problem that should be addressed.
I didn’t think that I was especially “vitriolic” in what I wrote–just honest.
I live in a highly politicized state, where the foreign born population is around 34 percent of the total population.
Every year I’m asked to fund things I disapprove of and which I consider harmful are actually harmful to the common good. These would include the “ethnic studies” departments at public-supported colleges and universities, most of which are thinly disguised ethnic grievance propaganda programs that stir up resentment and hatred against people who look like me (not to put too fine a point on it.) Now these ethnic grievance studies are infecting public secondary schools and soon, even, middle and elementary schools.
Things that are important to me are being eliminated in my bankrupt state, such as funding for public libraries, funding for maintaining state wilderness parks, and funding for maintaining historical sites. The foreign-born don’t care about any of those things, so they get what they want, and I pay for it. Cut Fourth of July municipal fireworks? Sure. But don’t dare touch the Aztec Dancing in the public square.
We had an incident at UC-Irvine recently where Muslim students harassed and bullied the Israeli ambassador, who was trying to deliver a speech at the college, to the point where he could not continue. The UC faculty and establishment backed this appalling behavior up to the hilt.
Yet the UC system keeps coming hat in hand to the long-suffering native tax base (because us natives DO pay most of the taxes here), crying poor mouth, and demanding more and more money from us.
I just don’t care anymore. Sorry, but why should I pay for this? I believe in building social capital and I believe in paying for it. But we do not have a “common good” anymore and as anybody who has read Garret Harden’s treatise on the Tragedy of the Commons knows, it’s idiotic and irrational for one party to take actions to benefit the “common good” when nobody else is doing the same.
Spend my money wisely, and truly in the interest of the “common good,” and I’ll gladly pay up to the best of my ability. But pay money for Muslim students to shout down a speaker just because they don’t like his views? No, not willing to do it. See my local Fourth of July celebration eliminated so the state can pay for a few more “free” social services for people who shouldn’t be here in the first place? No, not interested.
Maybe our political masters should consider why paying taxes has become so unpopular nowadays? Could it be that no one wants to pay for the crap causes and social experiments and other collective stupidities that they continually spend our money on?
Comment by Maria — February 14, 2011 @ 5:04 pm
Maria, the issue isn’t so much whether you are right or wrong, but my personal discomfort with blaming the problems of the many on select groups (particularly racial/ethnic groups and, to a lesser extent, religious ones). Such blame allocation may actually be entirely correct, but it leads to conversations that raise my blood pressure (particularly when less thoughtful and more vitriolic commenters join in). One of the things that I set out to do for HC is that, unlike my previous blog, it wouldn’t go there to the extent I can avoid it.
It’s a personal thing. For some reason reading blogs the “go there” doesn’t bother me, but hosting one does. It’s a personality quirk that I ask to be indulged even if not entirely understood.
Comment by trumwill — February 14, 2011 @ 5:56 pm
I may have more to say on the subject later, but in short I think we’re beyond the point where we can say that it’s EITHER that we’re taxing too little or spending too much. To get our bills in line I think we really have to look at both sides of the ledger (and look at taxes for more than just the super-rich). Tax-cutters need to get more serious about where the cuts would be from and tax-raisers need to get more serious about who thay are going to raise the taxes on and making taxation rates more easy to deipher and less easy to dodge.
Comment by trumwill — February 14, 2011 @ 6:06 pm
Web, I think you are apple/oranging a bit with your numbers up there. I had some trouble with the government spending website. In particular, I can’t figure out whether the numbers are inflation adjusted or not. I think they are not, but it should have been easy to do.
Anyway, 28.13% inflation on the 2000 spending is (1+.2831)*1.789 = $2.3 trillion. That’s what spending would be if it kept up with inflation only, rather than $3.456 trillion (your 93%). That’s misleading, because population has increased over time, as well - you would want to adjust the 2000 number for inflation plus population change, probably.
Instead of comparing that to budget deficits and taxes as a share of income, let’s compare that to tax revenues. Revenue in 2000 was 2.025 trillion. In 2010, Fed revenue was 2.162 trillion (both from usgovernmentrevenue.com which seems to be a sister site to the one you used) or under 7%.
Now, there are lots of issues here. In particular, two leap to mind. First, 2000 was a high tax year (relative to GDP) because of the NASDAQ bubble - tax policy is only one of many determinants of tax revenue. Second, this ignores state taxes and revenues, which is a big deal, and the uses of those funds seem to annoy people like Maria more than Federal spending. I’m pretty sure CA has a spending problem, not a tax problem.
Also, I would be wary of making sweeping statements the charts from the trickle-down page of faireconomy.org. Eyeball regressions can be pretty misleading.
A 4
By the way, I was talking to someone just last night who’s property tax bill is higher than their mortgage payment. Mine is close, but not quite.
Comment by A 4 — February 14, 2011 @ 6:17 pm
Will,
that’s about where I sit as well. I don’t doubt that there are things that can be cut, though I think the cuts that can be made are not nearly of the magnitude that the “cut cut cut everything and don’t you dare raise taxes” crowd have convinced themselves.
At the same time, the fact remains that federal tax revenues have been negatively impacted by tax cuts which are hard to justify. Especially irritating was the claim that the Bush-era tax cuts were “giving back” tax money that was “ill-gotten” after the US finally generated a budget surplus in the late 1990s; the truly fiscally responsible use of that money would have been to pay down the national debt.
The phrase “starve the beast” was used by strategists of this sort in the 1980s to describe their goal; crash the US’s fiscal income and then use the resulting “budget crunch” to justify cuts to programs they didn’t like. I submit that today, that ruse has come to fruition - we don’t have a budget crunch because of a budget crunch. At least primarily, we have a budget crunch because those writing the budgets for the vast majority of the past decade were determined to cause one.
We still, primarily, have a tax revenue problem - e.g. tax revenues have been engineered to be far less than they should be - and not a spending problem.
Comment by web — February 14, 2011 @ 6:24 pm
Take a look at this analysis that I did several years back, here and here.
Tell me again how spending isn’t the issue?
Comment by Brandon Berg — February 14, 2011 @ 6:25 pm
Brandon,
#1 - “several years back” - you mean 2006, and your data only goes to 2004.
#2 - “As a country grows wealthier, it should be possible to provide a constant level of government services with a smaller and smaller percentage of GDP” - Except that for the figures you quote, government was NOT providing “a constant level of services”; government services were moving and changing constantly.
Hell, even Bush pushed through his prescription drug benefit for Medicare, unless you’ve forgotten about that one.
#3 - As I pointed out, the strategy of the right wing since the 1980s has been the “starve the beast” strategy. To wit, their goal was to cause a financial crisis by deliberately cutting federal revenue and driving the deficit upwards, to the point where people would be “forced” to agree with them to cut various programs that they didn’t like.
Had tax revenues remained at the same percentage of national income that they were in the year 2000 all the way through this year, and if we still had a deficit problem and heavily increasing national debt at that time, then we could honestly say we had a “spending problem.” As it stands, our only “spending problem” is that instead of being fiscally responsible (as we had 1995-2000) and taking the overage to pay down the national debt, our elected leaders passed a bunch of ill-advised tax cuts and ever-more-revenue-draining tax loopholes in a cynical ploy to cause a financial crisis for political gain.
Comment by web — February 14, 2011 @ 6:42 pm
“Not quite true. The theory of “trickle-down economics” was that if we gave massive tax cuts and loopholes to the rich/ultra-rich, they would turn around and “spend” that money employing people, stimulating the economy and making things better all around.”
The Reagan era tax policy called lowered rates but it actually closed loopholes. Pre-Reagan, tax rates were high, but there a lot more loopholes, and a lot of energy went into exploiting those rather than productive investment.
Again, you should read Bruce Barlett. He was one of the architects of Reagan tax policy and now advocates higher taxes — not because he thinks Reagan’s tax policy was bad; on the contrary, he stands by it — but because he thinks different circumstances call for different policies.
“Prior to the 1980s and “trickle-down economics”, the wealth disparity statistic held relatively steady.”
Reagan left office in 1989. It seems a stretch to pin all of the increase in inequality since 1980 on him.
“The “middle class” has begun to vanish.”
True, but it’s not the result of Reaganomics, parts of which started getting rolled back after Reagan left office. It’s the result of a few trends:
1) An immigration policy which has lowered wages and increased unemployment among lower income Americans (Reagan deserves some blame for this, as do subsequent Presidents).
2) A trade policy that has allowed millions of manufacturing jobs to get outsourced to a mercantalist competitor.
3) Technological advances that eliminated some categories of jobs (typists, clerks, some manufacturing jobs that were lost to automation), consolidated some businesses into a few large companies (e.g., Wal-Mart versus local variety stores), and dramatically increased the earning and wealth-accumulation power of a relatively small group of tech-savvy entrepreneurs and employees.
“And a large amount of it has to do with the fact that wealth, instead of being spent or transferring into the government (where it would be used both on public infrastructure, which both sides of the debate admit is crumbling and in massive need of repair projects, and on debt/deficit reduction), is squirreled away and hoarded into “tax shelters” and loopholes.”
Nonsense. First, the federal government’s spending isn’t limited to what it receives in tax revenues — it can borrow, which it has done plenty of, hence our enormous deficits and debt. Second, take a look at last year’s budget, the product of a President and Congress who were decidedly not advocates of Reaganomics. How much infrastructure spending do you see? In reality, most government spending goes to social spending/transfer payments and defense, and most of the rest of it goes to salaries and benefits for federal employees at the various departments. Hardly any of it goes into actual infrastructure projects.
Comment by DaveinHackensack — February 14, 2011 @ 6:51 pm
Some of the insurance policies my company sells requires the applicants to submit tax records to substantiate their incomes. It’s amazing how many self-employed people and small business owners will look uncomfortable and say “Uh, I work mostly for cash” when presented with this request.
Comment by Peter — February 14, 2011 @ 7:46 pm
Web:
“several years back” - you mean 2006, and your data only goes to 2004.
You’re talking about the ’80s and complaining that my charts don’t cover the last six years?
Had tax revenues remained at the same percentage of national income that they were in the year 2000 all the way through this year….
Two problems here. First, due to the stock bubble, federal government receipts were anomalously high in 2000—20.6% of GDP. There were only two other years in which federal receipts exceeded 20% of GDP: 1944 and 1945. The average from 1960-1980 was—just eyeballing it here, so I could be off a bit—about 18%: less than one percentage point above the average for the Bush years. It is true that federal revenues were anomalously low in 2009 and 2010, but that’s because the stock market and corporate profits tanked, not because we went nuts cutting taxes in 2008.
More importantly, “percent of GDP” is the wrong metric to be using here. Why should government get progressively more expensive over time? Between 1960 and 2004, per-capita government spending, adjusted for inflation, increased nearly fivefold. Both spending and revenues have increased dramatically; the reason we have a deficit is that spending has increased more.
Except that for the figures you quote, government was NOT providing “a constant level of services”; government services were moving and changing constantly. Hell, even Bush pushed through his prescription drug benefit for Medicare, unless you’ve forgotten about that one.
Yes, exactly. We shouldn’t be adding all these new spending programs, and if we hadn’t we wouldn’t have a deficit.
Also, you’re making the starve-the-beast thing out to be far more sinister than it actually is. The idea wasn’t to engineer a crisis, it was that politicians wouldn’t be so irresponsible as to spend trillions of dollars that they didn’t have.
This was, granted, a grave miscalculation. But there was nothing sinister about it.
Comment by Brandon Berg — February 14, 2011 @ 7:47 pm
To be fair, these solutions are not mutually exclusive, i.e. you can raise taxes while lowering government spending.
Web, is STU a public university? If so, then that fact should be brought up in your post.
Comment by Mike Hunt — February 14, 2011 @ 8:05 pm
I wonder why the Democrats ever let Republicans call their tax deferments “tax cuts.” It is fundamentally dishonest. Lenders like to be paid back. Crazy, I know. A tax cut without a right then and there concomitant cut in spending is a delay in collecting the revenue. The Federal government has delayed lots of taxes for a long ass time. Anyone who doesn’t like the current level of federal spending, if the (mostly) Republicans had not deferred taxes for so long, federal spending would be like 2/3 of the current level. Too bad Republicans are never down with paying today for the hamburger they want today.
You can raise income taxes as high as you like and you won’t get much more money from Bill Gates or Steve Jobs. Raise them to 60% and you’ll take a full 60 cents of Steve Jobs’s $1 per year salary.
Dave, are you suggesting a wealth or net assets tax? There is precedent in property taxes.
Web is exactly right on “starving the beast.” It is not a whacky conspiracy theory: There were Wall Street Journal editorials lauding the strategy. The phrase was coined, or at least readily adopted by those who wanted to starve it.
As for Maria’s Issue That is Not To Be Named at Hit Coffee (totally reasonably) that was deliberate as well, and promoted by a mix of evil and delusional people. I’m sure pretty much everyone on this blog would be pretty annoyed if their taxes went to Ulan Bator. Doesn’t mean anyone here hates Mongolians. Further, a government that refused to take care of the ITiNTBNaHC is not a government. It’s just a band of thieves. They elected a new people. Let the new people pay for it.
I don’t say it very often even on the interwebz because I don’t want to seem (too much more) crazy, but I’m pretty sure there’s another depression coming and the US will rip apart within 20 years.
Comment by rob — February 14, 2011 @ 8:06 pm
More importantly, “percent of GDP” is the wrong metric to be using here. Why should government get progressively more expensive over time?
Because there are more people.
Because there is inflation.
Because people - through their elected representatives - keep asking for government to do more and more and more.
Both spending and revenues have increased dramatically;
Going by the numbers listed above, that is absolutely not the case.
Federal revenue in 2000 was 2.025 trillion.
Federal revenue in 2010 was 2.162 trillion.
Sorry. Federal revenue wasn’t even close to an inflation+population rate.
the reason we have a deficit is that spending has increased more.
Au Contraire. The reason we have a deficit is that federal revenue has been artificially suppressed.
I offer you a contrary analysis to your claim that “starve the beast” is non-sinister, as well. It is at best disingenuous and the product of inferior minds, and at worst a raw and sinister plan to cause - and then capitalize on - an engineered disaster.
Comment by web — February 14, 2011 @ 8:11 pm
The reason we have a deficit is that federal revenue has been artificially suppressed.
Ugh. BOTH! The reason we have a deficit is BOTH. I don’t think that you can look at the spending patterns of the last decade and say “Gosh, if we just hadn’t cut taxes in 2000 then we would still have a surplus.”
In order to avoid a deficit without changing spending habits, we would have to not only have to have kept taxes at Clinton levels, but would have had to raise them. Keeping tax levels the same is not “artificially suppressing revenues” unless we have an evaded mechanism to automatically raise taxes to match spending increases and/or GDP dips/stagnation. Which we don’t.
On the other hand, you can, in theory, say that if we had just kept spending at 2000 levels we would not have a surplus, but this ignores inflation, population increases, and perhaps as well the number of people taking advantage of programs that existed prior to 2000 (and therefore, while technically increased spending, is less an increase in government than an increase of utilization by the populace).
Revenue isn’t “artificially low” (nor taxes “artificially high”) in anything but the ideological sense. In the former case, it assumes that taxes must be raised in order to meet spending. In the latter case, it assumes that spending has to be curtailed to meet preferred taxation level. Neither is inherently true. Neither road to a deficit (cutting taxes or expanding government) is more artificial than the other. The question depends largely on whether you think the road to a balanced budget should more taxation or less government spending.
Comment by trumwill — February 14, 2011 @ 9:23 pm
“Dave, are you suggesting a wealth or net assets tax? There is precedent in property taxes.”
I wasn’t suggesting we should have one, but there is a clearer precedent in Florida’s asset-based tax. I do think it’s interesting that left-leaning billionaires agitate for higher income taxes (which wouldn’t really affect them), but don’t call for an asset-based tax. But then again, liberals often seem more inclined to advocate higher taxes for others and less inclined to pay them themselves.
Comment by DaveinHackensack — February 14, 2011 @ 10:18 pm
Incidentally, the New York Times offered a cool interactive feature a few months ago where you can fix the budget yourself. Here was my solution.
Comment by DaveinHackensack — February 14, 2011 @ 10:23 pm
Will,
The problem with what you’re saying is that taxes are lower than any point since 1950, yet there are still people out there claiming that taxes are “too high” and that somehow cutting taxes will make things better.
It doesn’t make sense. Government debt has been shown to have a deleterious effect upon the economy; therefore, whether you believe that spending cuts need to be made (and again, I’m certainly willing to entertain reasonable cuts!), to insist that taxes cannot be raised or that they are “too high” is simply folly.
In order to avoid a deficit without changing spending habits, we would have to not only have to have kept taxes at Clinton levels, but would have had to raise them. Keeping tax levels the same is not “artificially suppressing revenues” unless we have an evaded mechanism to automatically raise taxes to match spending increases and/or GDP dips/stagnation. Which we don’t.
But we didn’t even keep taxes at Clinton levels. We dropped taxes considerably - from 16% of national income, to a mere 9%.
but this ignores inflation, population increases,
That is why the percentage of national income figure is so important; it is self-correcting for both inflation and population increases.
Comment by web — February 14, 2011 @ 10:25 pm
The problem with what you’re saying is that taxes are lower than any point since 1950, yet there are still people out there claiming that taxes are “too high” and that somehow cutting taxes will make things better.
Yes there are. And if you limited your argument to countering that assertion, I wouldn’t have said anything.
But we didn’t even keep taxes at Clinton levels. We dropped taxes considerably - from 16% of national income, to a mere 9%.
I know we didn’t. But even if we had, I am thoroughly unconvinced that we would have a balanced budget in light of the increased spending. Just as I am unconvinced that we can realistically lay the deficit at the feet of increased spending.
Comment by trumwill — February 14, 2011 @ 10:47 pm
Ricardian equivalence would suggest that it’s the spending, rather than the financing that matters. That may be a little esoteric here, but certainly for the states, spending unfunded by tax increases (http://reason.org/news/show/1007039.html) can be a problem.
California may be a special case, where projects like $3 billion in funding for stem cell research are voted on by taxpayers.
Comment by A 4 — February 14, 2011 @ 11:54 pm
The US has the highest corporate tax rate in the world, and a number of blogs (Captain Capitalism is one, the American magazine is another) do a good job of showing how this directly harms employment levels and wages.
Sorry Trumwill, but I’ve gotta say it: Maria makes a great point - universities actively promote inter-ethnic separatism/hostilities, using public funding. They also promote lefty political views and have a number of _very_ highly paid bureacrats, which makes me skeptical of their alumni donation panhandling.
Comment by Escapist — February 15, 2011 @ 12:03 am
“But we didn’t even keep taxes at Clinton levels. We dropped taxes considerably - from 16% of national income, to a mere 9%.”
Tax receipts as a percent of GDP are actually closer to 15%, but this number fluctuates with the economy as well as tax rates. For example, see the drop off in the graph at the link: tax receipts as a percentage of GDP were over 18% as recently as 2005, when tax rates were pretty much the same as they are now.
“The US has the highest corporate tax rate in the world, and a number of blogs (Captain Capitalism is one, the American magazine is another) do a good job of showing how this directly harms employment levels and wages.”
One of the nice features of the Bowles-Simpson plan was that it proposed lowering corporate income taxes to more competitive levels (while eliminating some deductions). It proposed something similar on income taxes: e.g. lowering the top rates, but eliminating the mortgage interest deduction.
Comment by DaveinHackensack — February 15, 2011 @ 12:26 am
Sorry Trumwill, but I’ve gotta say it: Maria makes a great point - universities actively promote inter-ethnic separatism/hostilities, using public funding
I wasn’t saying that it wasn’t a good point. The conflict between multiculturalism and the welfare state is real and an interesting topic of conversation. And I may actually have some things to say on the subject (largely in agreement). But not here.
Comment by trumwill — February 15, 2011 @ 12:37 am
Dave,
Quoting “The Heritage Foundation” is kind of silly - at best their numbers are highly distorted. Try going right to the source instead.
Here’s another excellent analysis of the problem.
When you analyze tax policy further, you find that as a percentage of income, most of the burden is already on those in lower income brackets, through regressive tax schemes such as FICA and sales taxes.
William Gale had another excellent analysis on the Bush Tax Cuts and proposed plan to sunset them for the higher end here.
Comment by web — February 15, 2011 @ 7:49 am
The Heritage Foundation got their numbers from the White House. The White House spreadsheet (Table 1.2) says the same thing: 14.8%.
Comment by trumwill — February 15, 2011 @ 10:07 am
We’re crosstalking again.
“Percentage of GDP” is not the same as “Percentage of Americans’ Income paid as taxes.”
Comment by web — February 15, 2011 @ 11:06 am
“Quoting “The Heritage Foundation” is kind of silly - at best their numbers are highly distorted. Try going right to the source instead.”
Actually, the White House’s numbers are slightly higher (14.9% versus 14.8% for the Heritage Foundation, which was estimating the 2010 figure). See line 81, column I of Table 2.3, or see line 85, column C of the table 1.2, to which Trumwill referred.
So the actual number turns out to be more than 65% higher than the original number you trotted out (9%).
Ironically, your criticism of the Heritage Foundation (that “at best their numbers are highly distorted”) would seem to apply more accurately to you.
Comment by DaveinHackensack — February 15, 2011 @ 11:14 am
Web, the White House site does not seem to provide the statistic to which you refer. Or if I am overlooking it, which table does it provide it on?
Comment by trumwill — February 15, 2011 @ 11:23 am
Will,
The Bureau of Economic Analysis (BEA.gov) calculates and releases those numbers. The graph I refer to is the USA Today article above, a visual representation of BEA data.
Comment by web — February 15, 2011 @ 1:33 pm
The problem with the numbers in that article* is that it is looking at income taxes and only income taxes. That may be somewhat** useful as a measure in determining whether we can afford to pay more in income taxes. But it’s only a part of overall revenue. Most local governments don’t have income taxes. A number of states don’t, choosing instead to levy sales taxes or have higher property taxes. And even at the federal level, income taxes only comprise of something like 2/3 of overall revenue.
It appears to me to be a rather incomplete metric. No metric is perfect, but I think revenue as a percentage of the GDP as well as Per Capita revenue, adjusted for inflation (or compared to per capita income), are better ones. At the very least, they account all types of taxation.
* - From the article: “Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports.”
** - I say “somewhat useful” because, by failing to account for sales and property taxes, it’s overlooking the overall tax burden. Especially when considering local and state revenue, which can have substantially different collection methods.
Comment by trumwill — February 15, 2011 @ 2:16 pm
You know what’s neat? You can get pretty much any conclusion you want with tax numbers, depending on the metric you use (compare to inflation or share of income, or share of total revenues, etc., etc.)
For revenue numbers that include state and local revenues, you can go here:
http://www.usgovernmentrevenue.com/numbers#usgs302
Comment by A 4 — February 15, 2011 @ 4:03 pm