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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Peter O'Brien who wrote (347921)	1/25/2003 11:49:30 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 769670

Good post. What would you say about the importance of 'fairer' taxes, more economically neutral taxes? A tax code not riddled with loopholes and special preference items... that doesn't distort economic performance in furtherance of some ill-defined 'national industrial policy' that has built up - almost without thought - by process of 'loophole accretion'. A tax code with drastically lower compliance costs.... Wouldn't saving business and individuals something on the order of $300 - $400 billion in annual compliance costs allow for an additional lowering of overall tax rates?

To: Peter O'Brien who wrote (347921)	1/26/2003 12:44:07 AM
From: Steve Dietrich	Read Replies (1) \| Respond to of 769670

<<Yes, tax rate cuts may not always lead to revenue increases,>> Laffer never said what the optimal rate was, but he guessed it was around 30% to 33%. Another CBO document (http://www.cbo.gov/showdoc.cfm?index=3089&sequence=0) which argues in favor of the 2000 Bush tax cut puts the effective tax rate on the upper quintile of households at 22.8%. It's virtually impossible to argue we're too high on the curve. <<I also think that the optimal tax rate is different in the long-run versus the short-run.>> That's an opinion. I'd point out that economic growth has historically been much stronger during high tax times (like FDR) than low tax times (like Reagan). <<Thus, regarding Reagan, I think it is unfair to judge the effectiveness of his tax cut on just the results of the first two years after its enactment.>> But it took four years (1985) for revenues just to recapture their pre '82 levels. Far from being a success story, that's a failure. <<I had already demonstrated to you in an earlier post that real revenues fell in 1980 (Carter's last full year) despite repeated annual tax increases caused by very high inflation and un-indexed tax brackets (i.e., "bracket creep"). So, we were clearly on the wrong end of the curve at that point in time.>> It's only clear if the Laffer curve is the only effect involved. And clearly it is not. <<The economy was also in extremely dire condition in 1980.>> So it's not at all clear where we were on the curve. <<I still believe that Clinton's top marginal rate is too high, and the damage has shown up in the last three years.?? I've already shown that the effective tax rates, according to the Republican CBO, on the upper quintile in '97 were just under 23%. And many would argue that the recession during the first Bush presidency was the result of (or at least aggravated by) Reagan's failed tax and budget policies. It wasn't until Bush and Clinton raised taxes that the economy really got going again. And this time we had collapsing deficits instead of exploding deficits which leaves this Bush in relatively good economic shape for a recession: low debt, low interest rates, low inflation, low unemployment. So far it's a pretty tame recession. <<One piece of empirical evidence I've noticed by looking at data over a long period of time is that the total amount of Federal tax revenue can't seem to rise much above 20% of GDP>> One thing we've discussed before is that since tax revenue comes from Capital Gains but Capital Gains don't count when calculating the GDP, that percentage is artificially high, especially at the end of a long bull market, like we just had. Of course the percentage will be coming down in this bear market. <<why not just make life simpler and fairer and have a 20% (or slightly less) flat tax rate that never changes?>> How do you propose we tax 20% of GDP? Or are you trying to pull the old switch-a-roo on me? There's a lot to be said for some version of a flat tax. The corruption inspired by funding and dividing up that giant federal pie is virtually the only thing government is about. Exempt a lot of money at the bottom (say the first 25k or so) and then tax every dollar at the same rate, no deductions, no exemption, no loopholes, all the way up. That could make a lot of sense. But it will never happen. The middle and upper income people would never give up their deductions, loopholes, and exemptions. Steve