Question for Copernicus (any any other supply-siders present):

[Jimbo]

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Is it that hard to imagine that if your goal is to maximize tax revenues the optimal tax rate will be somewhere between 0% and 100%, exclusive?


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Not for me but Quads was having trouble getting a grasp on the concept so I was trying to help him.

Jimbo

[xorbie]

[ QUOTE ]
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Is it that hard to imagine that if your goal is to maximize tax revenues the optimal tax rate will be somewhere between 0% and 100%, exclusive?


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Not for me but Quads was having trouble getting a grasp on the concept so I was trying to help him.

Jimbo

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I'm pretty sure that your post was fairly useless. Nobody really argues for 100% tax rates, whereas some do argue for 0% tax rates.

[Jimbo]

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I'm pretty sure that your post was fairly useless. Nobody really argues for 100% tax rates, whereas some do argue for 0% tax rates.


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Using you logic the world is still flat, ponder on the thought and feel free to ask for assistance.

Jimbo

[kickabuck]

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What do you mean by "optimal taxation rate"?

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That's an excellent question.

I was using kickbuck's term (that's why I put it in quotes, verbatim), but he certainly offered no definition as to what precisely he means by that term. I'd also be curious to hear him define it.

(PS: still waiting for any response from Copernicus)


q/q

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If one concedes taxation is needed and moral, there exists an income tax rate that funds the treasury sufficiently and stifles economic growth minimally. That is what I meant by 'optimal'. What society determines is 'sufficient' funding of the treasury is highly debatable and fluid, even if those desires could be accurately quantified, economists would debate what rates produce the most funds for the treasury and the economic repercussions of those rates. So I say fairness, of a sort, lies with a flat tax as all areas of taxation are highly debatable on both moral and economic grounds. Many can agree that there is fairness in all producers being charged the same percentage for what it is they have produced.

[Copernicus]

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<u>Question:</u> In your informed economic opinion, should the wealthy pay any taxes at all?

I ask this because you apparantly believe that cutting taxes for the rich universally "increases tax revenue" and "stimulates the economy" (at all times and under all circumstances).

So, my question is: should we simply eliminate ALL taxes for the rich, in the interest of the nation?

If this is your position, please say so for the record.
If this is not your position, please explain *why not*.


q/q

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27% of the income taxes paid in 2003 were paid by .6% of all taxpayers (those earning &gt;500k).

Assuming government spending requires the same income tax receipts, you would have to increase the taxes paid by the "non-wealthy" 37%. Assuming the same tax rate structure , that means you would have to increase their income by over 40% (. If you increase their tax rate that stifles spending and slows the economy.

so no, eliminating all taxes on the wealthy isnt going to increase tax revenue. There is a point where you will get diminishing returns from additional tax rate cuts.

You also mischaracterize my opinion on tax rate cuts stimulating the economy "at all times and under all circumstances". One obvious extreme is when the economy is already running at full capacity. Another is periods of high inflation, when even tax free returns wont be enough to encouraage investment over consumption.

[Propertarian]

The problem with the claims in favor of this aspect of supply-side economics is a simple but unfortunately common one: they look at only one parcel of the effect of a policy and conclude that it is a good/bad idea.

While it is true that when taxes are cut working more hours, investing more, etc. is made more attractive on one hand, cutting taxes makes additional work, investment, etc. LESS NECESSARY on the other hand.

Study after study has shown that, at the least, the latter effect which is ignored by supply siders at least cancels out the first effect. Therefore, tax cuts lead to less gov't revenue, not more. Tax cuts do not produce increased labor output or savings; in fact, when taxes are relatively low e.g. in the U.S., higher taxes have accompanied increased labor supplies. The opposite would also be true in my judgement; if the tax rate was 95%, then cutting it slightly would increase labor output.

A better question than the one found in the OP is: why does anybody believe in this absurd folly still?

Further reading: James Tobin, "The Reagan Economic Plan: Supply-Side, Budget and Inflation," Federal Reserve Bank of San Fransisco, Quarterly Review , May 1981.

James T. Campen and Arthur MacEwan, "Crisis, Contradictions and Conservative Controversies in Contemporary U.S. Capitalism," Review of Radical Political Economics , Fall 1982.

The latter paper has a review of studies and evidence.

[hmkpoker]

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While it is true that when taxes are cut working more hours, investing more, etc. is made more attractive on one hand, cutting taxes makes additional work, investment, etc. LESS NECESSARY on the other hand.

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Is this really a bad thing?

Read this statement again. You are implying that it is good that it is necessary that people must work hard. That if a man who earns his desired lifestyle on 40 hours suddenly earns more due to a tax cut and can afford the same lifestyle on 32 hours, elects to take a day off and forever gains another day of the week in which to enjoy his life, that this is somehow a bad thing.

You may look at this as producing a negative externality and correspondingly producing a downward spiral of economic stagnation from laziness, but you are only looking at one side of the issue: to the consumer, directly, this is bad as it represents a decrease in the supply of labor...but to the competition, this is good. The more people taking time off from work at WidgitCorp, the more money there is to be made for the people at WidgitBiz. The downward spiral of stagnation cannot happen, because if too many people stop working (because it is less necessary, as you've already admitted), then there is simply too much money to be made by others to make them not want to work as well.

And besides, the less money going to taxes the better. As it stands, a working man's paycheck is taxed to pay for schools that don't teach anything, policemen that stop him from doing the things he enjoys, bureaucrats that sit around deciding on new ways to limit his freedom, costly military incursions that kill innocents, and social programs that perpetuate unproductivity. Without these taxes, would-be state employees must make their living doing something that's actually useful. Cut the [censored] taxes.

[Propertarian]

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Is this really a bad thing?

[/ QUOTE ] I was just trying to refute the claim occasionally made by Supply siders in the OP; whether or not high taxes are a good thing overall is up to each person to decide; whether or not high taxes lead to increased tax revenues is not.

I'll just mention this: If we want to balance the budget we probably are going to have to increase tax revenues.

[Copernicus]

"cutting taxes makes additional work, investment, etc. LESS NECESSARY"

How does cutting taxes make investment less necessary?

there is more discretionary income, spending decisions have already been made if there is any money to invest before the tax cut, so there is more money to invest. and it is the investment aspect of tax rate cuts that is the most powerful.

what tax rate cuts also do, when designed correctly, besides increasing the amount there is to invest, is level the playing field between alternative investments. Reductions in capital gains taxes encourage equity investing by helping to offset their increased risk, reductions in dividend tax rates alleviates some of the double taxation, eliminating unnecessary hording of capital, and reduced corporate tax rates and extended depreciation schedules encourage capital investments and R&amp;D.

As far as it being "folly" there are numerous books and studies that disagree with those cited. While "correlation != causality" , the more persistent the correlation, the better the indication that the independent variable is at least a catalyst if not the cause. EVERY tax rate cut since Kennedy has DEMONSTRABLY led to increased investment and R&amp;D.

The prosperity during the Clinton years is the direct result of the increased investment from the prior administrations' tax cuts. That isnt folly.

[hmkpoker]

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I'll just mention this: If we want to balance the budget we probably are going to have to increase tax revenues.

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Or cut spending.