Wheelan does have real point. At a low marginal tax rate, a small decrease in that rate may have little or no effect on investment decisions, particularly as compared to other possible influences outside a gov't's control.
It will probably have a small effect, perhaps a very small effect, but the effect is likely still there. Many decisions people make will not be effected at all but some will.
For a similar tiny effect imagine raising the national minimum wage from from $5.15 to $5.25 an hour. Most people make over minimum wage (and over $5.25). In some places state or local minimum wages are already higher. Most people who do get paid $5.15 an hour would not be fired or have their hours reduced, if their employer had to pay them an extra dime per hour. However it would still have some small effect. You can argue that the effect is tiny, but you can argue that again and again over a hundred raises, and certainly raising the minimum wage by $10 would have a large negative effect on low skilled employees.
Also Wheelan's statements go far beyond his real point. He doesn't say something like "in isolation tax cuts are generally good for the economy but they may have little or no effect in certain situations". He essentially calls any long term growth benefit from tax cuts "One of the Worst Ideas in Economics".
Know how long it took the Dow to attain regain the peak it reached in 1929? 25 years. And tht is by no means a record. How's that for long term in attaining a ZERO growth rate? (Actually, less than zero, because inflation ate away at the value of the dollar through those 25 years.)
1 - Zero growth in the stock market does not mean zero growth in the economy. The economy exceeded its 1929 levels, even when adjusted for inflation, well before 1954.
2 - Not only is your point incorrect its irrelevant. If there had been zero economic growth for those 25 years it wouldn't be an effective counter argument. If there is 0 growth for 25 years growth still could have been worse. Saying growth is something like .4% better, could still leave you with zero growth, which would be .4% better per year than a .4% shrink of the economy each year. Also that 25 years period had an economic decline followed by stagnation followed by recovery. Much of the drop and stagnation resulted after tax increases (including tariffs which are a form of tax). All of it occurred after the increases started to be proposed and debated. It seems to me that a series of tax increases was one of the big reasons for the lack of economic growth over those years, which strengthens my argument more than it weakens it.
Irrelevant? It's the core of the argument.
It might be the core of your argument, but that just shows the weakness of your argument. Its irrelevant to the points I raised that you disagree with -
"However the idea that all tax cuts quickly pay for themselves is largely a straw man for Wheelan to beat up on. Also Wheelan only considers the effect of tax cuts over a limited time, however there is no reason to think that positive benefits to economic growth of reducing the top tax rate from say 40% to 30% stop after a few years (unless the cut is repealed)."
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Its also irrelevant to Wheelan's false assertion that the idea that tax cuts can pay for themselves in the long run is "One of the Worst Ideas in Economics"
Suppose you achieve your tax cut by not expanding your military at a time when you need to? Easy enough to do. I'd say that's precisely what Clinton did- -and let al Qaeda grow.
Its not precisely what Clinton did. He raised income taxes.
Its an argument against underfunding the military, not against tax cuts. Yes military money comes from taxes but it amounts to only a relatively small part of total federal revenue.
It is always possible to find some part of government which probably shouldn't be cut. You can look at tax cuts, and in your mind apply them all to that one cut and says "see, look at the horrible results of your tax cuts". But while that statement might work, at least with certain audiences, as a matter of rhetoric, it isn't a very reasonable argument. The federal government spends over two and a half trillion dollars per year. You could just as easily "apply" the tax cuts to the most useless, wasteful, and or unpopular government programs. In reality while the level of income may effect the overall level of spending, it isn't the prime driver for most individual spending categories, including the military. Reagan cut taxes and increased military spending. Clinton did the reverse. |
