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Politics : Liberalism: Do You Agree We've Had Enough of It? -- Ignore unavailable to you. Want to Upgrade?

To: RMF who wrote (72372)	9/21/2009 3:55:54 PM
From: TimF	1 Recommendation Respond to of 224722

If you cut taxes by two trillion you cut revenues by two trillion That's true but meaningless. We don't typically cut taxes by $X we cut tax rates by percentages. If you have $2tril in revenue, and you cut taxes rates by 25% you normally will cut revenue by less than $500bil. Sometimes much less (and in some situations, if your cutting from very high rates, or cutting or eliminating rather perverse taxes you can increase revenue) I've heard all that "laffer curve" crap before and it's supposed to support the revenue increases during the Reagan years The laffer curve does not imply "tax cuts increase revenue". It implies that tax cuts decrease revenue less than a static projection would imply, and that from sufficiently high rates (which are probably higher than our current rates) tax cuts increase revenue. Cutting income taxes from 95% to 80%, will almost certainly increase revenue, probably by a lot. Cut taxes again to 65% and you probably increase revenue again. Cut taxes (at least taxes not specifically targeted at investment) from 21% to 14% and you probably decrease revenue, but not by the third that a simple calculation would suggest. Typically any tax cut will produce less revenue loss than a static projection would suggest, but probably at some point it produces more. Either you keep spending a lot and you get a fiscal crisis, which harms the economy and thus future revenue, or with sufficiently low taxes (which would have to be very low) you don't have enough revenue to fund the most important and clear cases of public goods, or perhaps even to just keep basic order and deter foreign enemies. What's the revenue maximizing rate? There really is no answer. Its different for different taxes, at different times, and in different situations, and its impossible to calculate with any serious accuracy in most situations. Also the point shouldn't be to get the most possible revenue. A tax increase may increase revenue, but it also decreases liberty and probably long term economic growth.