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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (42603)	4/6/2010 11:41:40 AM
From: TimF	1 Recommendation Read Replies (2) \| Respond to of 71588

Reagan proved that lowering taxes raises government revenue. Not exactly. Revenue went up, but it would have gone up anyway. Cutting the top tax rate at the time (70%) may have increased revenue, but cutting the lower rates (while a good thing for multiple reasons) probably didn't. The issue is rather complex, because cutting different taxes from different rates, by different amounts, at different times, and in different places, produces different results. Also you have to consider the time frame your measuring to see if revenue goes up. For example imagine their are high capital gains tax rates. Cutting the capital gains tax rate will tend to increase revenue almost right away as people cash in their investments, than in an intermediate state it might reduce revenue as new investment cashins pay lower rates, and as the sales of long term investments that you pushed forward don't happen now (since they've happened in the past), then revenue tends to go back up in the longer run as the lower rates promote more economic growth and create more taxable transactions since people see less need to avoid the tax. For ordinary income tax cuts, from levels that aren't so high (say a cut from 35% rather than 70%), the tax cut probably will reduce revenue at least in the short and medium run. In the longer run it would promote economic growth, but the extra borrowing (assuming we are running large deficits like we are now) would have an effect in the other direction. Also tax rates don't stick around for the long term at least in the last several decades. From Reagan on, every president has changed tax rates, some of them multiple times. So you don't get "the long run" for tax cuts. If you did then I would say that absent large deficits, and ignoring tax cuts to such low levels that the government can't provide security or provide important basic public goods (goods that are non-excludable and non-rivalrous, its not a term that means anything provided by the government), then tax cuts should increase economic growth and so in at least the very long run increase revenue as well. If you do have a large deficit things get more complex. Both taxing and borrowing amount to pulling money from the private sector. Taxes have the advantage of not being directly harmful to the fiscal situation, borrowing has the advantage of likely not being as distortive of incentives (taxes have breaks for this, penalties for that, and all sorts of ways to push people to change what they do, borrowing can increase interest rates, but generally is less distortive). But if you borrow now you will probably have to tax later, and thus impose the distortion (unless somehow you are later going to have an extremely simple, and fairly neutral tax system rather than the mess we have now and that seems unlikely). The key is to get a control of spending. Government spending pulls resources from the private sector any way its funded.

To: Peter Dierks who wrote (42603)	4/8/2010 4:03:33 AM
From: RMF	Read Replies (1) \| Respond to of 71588

Reagan TRIPLED our National Debt. It took 200 years to get to the debt we had when Reagan got in there and only 8 years for him to TRIPLE it. If Carter had been reelected in 1980 we would ALSO have seen revenues INCREASE tremendously by the end of his term in 1984. And I'm pretty SURE that he wouldn't have run up our National Debt the way that Reagan did. A BLIND MONKEY could have increased revenues tremendously after the FED had squeezed out inflation and started lowering rates around 1982. The AMAZING thing with Reagan is that he had all those EXTRA revenues yet STILL increased our National Debt so much.