Laffer and taxes.

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Soneone on my regular hangout posted this WSJ article by Laffer.

http://online.wsj.com/article/SB1000142405274870397700457539388211267459...

Seems to Laffers arguments make conclusions while disregarding alot of relevant info. Anyone here care to dissect?

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Comments

It's been discussed many times here. Kind of an old boring subject for me now.

Unless there's something new to add to the conversation?

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Sorry Im new here so I'm not familiar with your past conversations. This particular article is dated from today on the WSJ.

Maybe I'll spend a little time paging through the threads to see if the content of this article is addressed many times as you assert.

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Quote Murkfish:

Sorry Im new here so I'm not familiar with your past conversations. This particular article is dated from today on the WSJ.

Maybe I'll spend a little time paging through the threads to see if the content of this article is addressed many times as you assert.

Oh, not saying the article has been discussed, rather the concept of the Laffer Curve.

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In particular this.

"Since 1978, the U.S. has cut the highest marginal earned-income tax rate to 35% from 50%, the highest capital gains tax rate to 15% from about 50%, and the highest dividend tax rate to 15% from 70%. President Clinton cut the highest marginal tax rate on long-term capital gains from the sale of owner-occupied homes to 0% for almost all home owners. We've also cut just about every other income tax rate as well.

During this era of ubiquitous tax cuts, income tax receipts from the top 1% of income earners rose to 3.3% of GDP in 2007 (the latest year for which we have data) from 1.5% of GDP in 1978. Income tax receipts from the bottom 95% of income earners fell to 3.2% of GDP from 5.4% of GDP over the same time period. (See the nearby chart)."

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Hey Murk

The reason why these discussions don't get very far in Thomland is that Progressives see the tax code primarily as tool for social equalization, and secondarily as a way to fund government.

Pretty much every economist accepts the concept of an optimal tax rate for producing revenues. Laffer's article cites lots of evidence that lower tax rates caused exploding revenues in US in the last fifty years. This evidence means little to Thomlanders.

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Quote Murkfish:

In particular this.

"Since 1978, the U.S. has cut the highest marginal earned-income tax rate to 35% from 50%, the highest capital gains tax rate to 15% from about 50%, and the highest dividend tax rate to 15% from 70%. President Clinton cut the highest marginal tax rate on long-term capital gains from the sale of owner-occupied homes to 0% for almost all home owners. We've also cut just about every other income tax rate as well.

During this era of ubiquitous tax cuts, income tax receipts from the top 1% of income earners rose to 3.3% of GDP in 2007 (the latest year for which we have data) from 1.5% of GDP in 1978. Income tax receipts from the bottom 95% of income earners fell to 3.2% of GDP from 5.4% of GDP over the same time period. (See the nearby chart)."

And this statistic is supposed to "prove" that cutting taxes on the top end results in the wealthy actually paying more taxes. Well, if your tax rate is cut in half at the same time your income quadruples, then your tax bill will double.

All this really demonstrates is how much the income disparity has widened over the years. Not good news.

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Quote BadLiberal:

And this statistic is supposed to "prove" that cutting taxes on the top end results in the wealthy actually paying more taxes. Well, if your tax rate is cut in half at the same time your income quadruples, then your tax bill will double

All this really demonstrates is how much the income disparity has widened over the years. Not good news.

I think BadLiberal just underscored my earlier point about Progressives not really being interested in optimal tax rates.

In the example that BL just explained for us, the government clearly ends up with more revenue. The taxpayer ends up with more money too, which is what irritates him.

To Progressives, the tax code is meant to be some kind of tool to administer social justice not to fund government.

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Well you definitely get what you pay for. The US has low taxes, and you have poor public education, crap infrastructure, and decent health care only if you have top quality (private) insurance.

Its funny, how limited the conservative world view is, which is why it becomes rather boring to have these discussions.

Why debate with someone who has no idea how other people in other places really live. Better to see everything through those American tinted specs.

Keep the Fox news blaring...;)

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Quote meljomur:

Its funny, how limited the conservative world view is, which is why it becomes rather boring to have these discussions.

Why debate with someone who has no idea how other people in other places really live. Better to see everything through those American tinted specs.

You know Mel, this European self righteousness of yours is really getting tiring.

I've been a visitor to Europe several times, most recently to the Czech Republic. And you're right, most Americans would benefit from a broader world view. But to continually assert that life in Europe is in all ways superior to the US is tiresome.

My Czech friends rave about their health care system. The mass transit in the major cities is clean and efficient. You are surrounded by history and culture. However, housing is expensive and cramped. Traffic is unbearable. Taxes are high and wages are low. European Union unemployment is higher than the US.

And yes, I am a mere tourist, you live there, blah blah blah blah blah. No place is perfect; the US isn't a shithole. Save it.

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Are wages low? I read somewhere that the higher taxes in Europe and Canada are offset by higher wages.

Denmark in particular has seen solid growth lately and wages are quite good. Europe, is a little too diverse to use it as a sweeping example of good or bad.

Also I found this link that seems relevant to the conversation.

http://krugman.blogs.nytimes.com/2007/10/16/failing-to-pass-the-laffer-t...

"So everything you’ve heard about how revenues have boomed since the Bush tax cuts is wrong. What really happened was that revenue plunged, as a percent of GDP, in the early Bush years, then staged a partial, but only partial, recovery. And that recovery seems to have run its course.

UPDATE: Aha, I forgot to point out that GDP growth has not been exceptionally strong under Bush, so that I’m not cheating by looking at revenues as a percent of GDP. Check out Figure 2 here.

Yet on the basis of this experience, both Bush and his would-be Republican successors are proclaiming that tax cuts actually increase revenue."

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And I don't think I have ever heard one single progressive say "Europe is superior in all ways"

That would be way too general...and to use that phantom statement in your argument is a pretty blatant strawman

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PeeWee wrote: And yes, I am a mere tourist, you live there, blah blah blah blah blah. No place is perfect; the US isn't a shithole. Save it.

poly replies: True. It's taken 30 years to dig the hole for the septic tank. We are in the process of filling it with poop..

Maybe giving free reign to the top so they can speculate in financial paper could work out if the tax revenues from their gambling exceeded the bailouts.

Economies that push the bulk of a nation's wealth into few pockets ultimately impoverish the majority...and collapse. Tax policy is one way to address that. Money is spent on real stuff...mass transit, highways, bridges, electric grids and the like...rather than bidding up the prices of paper.

Mexico is a trickle down success story. 38 families own more than 50% of the countries wealth. The majority are destitute....and risk their lives crossing the desert to find a min. wage U.S. job so they can support their families back home.

I doubt Canada will let Americans utilize their country in the same manner.

Our meltdown is on-going...and the banksters are making out like....banksters. Not to worry...their billion dollar bonuses will trickle down rather than being plowed into more derivatives, currency speculation and fomenting bond collapses..

Let the good times roll.

Retired Monk - "Ideology is a disease".

polycarp2
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Quote Murkfish:

And I don't think I have ever heard one single progressive say "Europe is superior in all ways"

That comment was directed at Mel, who is compelled to constantly remind us that she is an expat living in the UK. She regularly scolds us about how backward the US is and how blissful Europe is.

Quote Murkfish:

That would be way too general...and to use that phantom statement in your argument is a pretty blatant strawman

I wasn't arguing. I was pre-empting her usual response. There's not much point in arguing - there are few open minds around here. Maybe you'll be different.

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Mel, do you believe Europe is better in "all ways"?

I'm not convinced this isn't a strawman argument against her. Most people don't speak in such sweeping terms.

I

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Well, the U.S. is backward. I wouldn't say Europe is blissful...and going by any happiness index I know of, they are ahead of the U.S.

The 1/6th of the U.S. population that can't afford enough food to stay healthy probably aren't very blissful. The 45,000 Americans we kill off every year by denying medical treatment probably aren't very blissful either. But hey, look at all the floral displays that will be purchased for the funerals. Trickle down works! 45,000 extra caskets every year creates a lot of jobs.

Retired Monk - "Ideology is a disease"

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Also, you were arguing.

An argument doesn't have to be contentious. It's simply putting forth an opinion statement and supporting premiss'

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No PeeWee, the US isn't a complete s**thole. Most third world countries have very nice areas. I mean they have to for the wealthy to live in.

But the US is heading down the toilet quickly. You can hide from that fact all you want, but denying it isn't going to change the reality of the situation.

I mean come on, you live in Michigan. If you ever leave your little enclave, I would imagine you must see some of the most destitute parts of America in your state.

Britain has its problems, I don't dispute that fact. And I am a bit uncertain what direction this new coalition government is going to take. However it's just a MUCH fairer place to live. That is a fact.

But you see that is what higher taxes gets you. A better place for everyone.

Or you can have lower taxes and have your country slide further and further down the hole?

It's a no brainer, really.

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PeeWee.

Okay I have a personal challenge for you. Let's each exchange a book we would like the other to read, which will address the other's POV. If possible could it be a book about current events (I have read Ayn Rand and that book, The Forgotten Man- on Dave M.'s suggestion).

My suggestion for you is, The Spirit Level (Why more Equal Societies almost Always do Better).

I am open to hearing your argument for why you believe low taxes are better for society, and how that actually works in real life.

I do apologize if you think I come off as a know it all (I suspect its an oldest sibling trait to some extent), but I just grow very weary of the right wing argument that America is best, and that no where else can compare.

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Mel, that is the most refreshing thing I've ever seen you post. I would be delighted to take your challenge. I just ordered the book from Amazon and I'll have it before the weekend.

In the meantime, let me give some thought to the book I'm going to pick for you. I'll post something later on today.

Jason and I did this a few years ago, and it was a fruitful exercise. I think he had me read David Korten. Not sure we changed each other's minds, but I think we each have a little more respect for each other's ideas.

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Mel, that is the most refreshing thing I've ever seen you post. I would be delighted to take your challenge. I just ordered the book from Amazon and I'll have it before the weekend.

In the meantime, let me give some thought to the book I'm going to pick for you. I'll post something later on today.

Jason and I did this a few years ago, and it was a fruitful exercise. I think he had me read David Korten. Not sure we changed each other's minds, but I think we each have a little more respect for each other's ideas.

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Why did my post appear twice?

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Quote PeeWee Returns:

Mel, that is the most refreshing thing I've ever seen you post. I would be delighted to take your challenge. I just ordered the book from Amazon and I'll have it before the weekend.

In the meantime, let me give some thought to the book I'm going to pick for you. I'll post something later on today.

Jason and I did this a few years ago, and it was a fruitful exercise. I think he had me read David Korten. Not sure we changed each other's minds, but I think we each have a little more respect for each other's ideas.

I remember that. It was fun.

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Quote PeeWee Returns:

Hey Murk

The reason why these discussions don't get very far in Thomland is that Progressives see the tax code primarily as tool for social equalization, and secondarily as a way to fund government.

Pretty much every economist accepts the concept of an optimal tax rate for producing revenues. Laffer's article cites lots of evidence that lower tax rates caused exploding revenues in US in the last fifty years. This evidence means little to Thomlanders.

You and I had this conversation years ago. Whatever truth there is to the Laffer Curve, it's about, as you say, "optimal rate." Yet, when cons use this thing in their arguments, they always change it to "lower rate" as if whatever a tax rate, if you lower it, revenue will go up. Obviously, this is why the Laffer Curve is something I call the Laughter Curve.

Also, I demonstrated beyond the shadow of doubt, right here on this board, using the bush administration's own economic report, that revenues went down with the bush tax cuts. Additionally, when revenues did to start to rise again, it was when some of the tax cuts had expired. Look it up and read them yourself (and yes, you'll have read between the lines, because they aren't direct about it).

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Quote Common_Man_Jason:

Whatever truth there is to the Laffer Curve, it's about, as you say, "optimal rate." Yet, when cons use this thing in their arguments, they always change it to "lower rate" as if whatever a tax rate, if you lower it, revenue will go up.

I think the reason you feel that way is because Laffer's thesis goes against the conventional assumption that raising taxes will aways raise revenue. The concept of an "optimal" tax rate really makes some sense. The disagreement really begins with what you want to measure. Poly seems preoccupied with income disparity. I am preoccupied with tax revenue. Others really are interested in using the tax code to punish success.

Also, I demonstrated beyond the shadow of doubt, right here on this board,

I applaud your confidence Jason, but there is still plenty of doubt.

using the bush administration's own economic report, that revenues went down with the bush tax cuts. Additionally, when revenues did to start to rise again, it was when some of the tax cuts had expired.

It's a little more complicated than that. It's all about when you pick the start dates and end dates. Every economy is different and many other factors influence tax revenue as well. Just for fun, here is some additional information to complement your exhaustive personal study of the relationship between tax rates and revenues. Have some fun poking holes in it.

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How about a reality check. Tax rates.are the lowest they've been in decades...and all but two states are plunging into insolvency this year from loss of tax revenues.

A 30% tax on 25 bankster bonuses would balance the state budget of N.Y. I know, I know. It's better to fire school teachers and let the ageing water systems rust beneath its cities..

Maybe the Feds should cut tax rates in half...so they'll raise enough revenue to bail the states....at least that's how the story seems to go.

Retired Monk - "Ideology is a disease"

.

polycarp2
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Quote PeeWee Returns:
Quote Common_Man_Jason:

Whatever truth there is to the Laffer Curve, it's about, as you say, "optimal rate." Yet, when cons use this thing in their arguments, they always change it to "lower rate" as if whatever a tax rate, if you lower it, revenue will go up.

I think the reason you feel that way is because Laffer's thesis goes against the conventional assumption that raising taxes will aways raise revenue.

That's a staw man argument. And in any event, certainly not an argument I've ever made.

What I've always said about taxation, is that it's ridiculous to obsess about rate alone. Rather, the true measure is return on investment.

Few people ever have a genuine conversation around this stuff, because they think dollar amount means more than it does.

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Quote PeeWee Returns:
Quote Common_Man_Jason:

Whatever truth there is to the Laffer Curve, it's about, as you say, "optimal rate." Yet, when cons use this thing in their arguments, they always change it to "lower rate" as if whatever a tax rate, if you lower it, revenue will go up.

I am preoccupied with tax revenue.

Maybe you are, but I have my doubts. This is another reason the argument is tired and old. The agenda for the argument has *nothing* to do with revenue at all. It has to do with short sighted people who don't want to pay taxes.

Now, we certainly have plenty to agree on here. As I'm no fan of the way the Feds are spending, and so the tax rate is certainly too high. But that's because a large portion of income tax revenue is not spent on the people who pay it, but rather foreign interests and unnecessary foreign wars. We also pay a blood tax for that.

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Quote PeeWee Returns:
Quote Common_Man_Jason:

Whatever truth there is to the Laffer Curve, it's about, as you say, "optimal rate." Yet, when cons use this thing in their arguments, they always change it to "lower rate" as if whatever a tax rate, if you lower it, revenue will go up.

It's a little more complicated than that. It's all about when you pick the start dates and end dates. Every economy is different and many other factors influence tax revenue as well. Just for fun, here is some additional information to complement your exhaustive personal study of the relationship between tax rates and revenues. Have some fun poking holes in it.

I didn't research the bush economic report, I merely quoted it. They themselves, in their own report, admitted that the decreased tax rate had reduced tax revenue.

If you weren't listening then, you won't now, and it's quite time consuming to dig such things up, as we both know that governments hide their mistakes quite well. So I'm not going to waste my time here. However, just skimming the document you shared, I can already tell you it's in agreement with the statements I've already made, other than it's spinning them to convince people like you that they mean something that they don't.

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Jason wrote: "As I'm no fan of the way the Feds are spending, and so the tax rate is certainly too high. But that's because a large portion of income tax revenue is not spent on the people who pay it, but rather foreign interests and unnecessary foreign wars. We also pay a blood tax for that.."

poly replies: Bingo!

Include in that all of the externalized corporate costs imosed on the American people. Protection/capture of global corporate resources, pollution clean-up,,health ins. co. subsidies, drug co. subsidies, oil co. subsidies, finance subsidies, agricultural subsidies, etc., etc...

Plunder the working/professional class....fill corporate treasuries.. Usually, that's a 3rd World Country model. Updated, it's called neo-liberalism....government existing to provide the biggest profits possible for its major businesses....regardless of social cost. Americans, in general, receive very little in return for their taxes.

Retired Monk - "Ideology is a disease"

polycarp2
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I agree it would be pointless for the USA to have the tax levels of many European nations, if all the money was spent on Defense.

But considering that the US spends MORE on Defense than every other developed nation COMBINED, its fair to say most social democratic nations spend their tax revenue much more on their society.

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Quote Common_Man_Jason:

If you weren't listening then, you won't now, and it's quite time consuming to dig such things up, as we both know that governments hide their mistakes quite well. So I'm not going to waste my time here. However, just skimming the document you shared, I can already tell you it's in agreement with the statements I've already made, other than it's spinning them to convince people like you that they mean something that they don't.

Kinda cranky today, Jason?

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Mel wrote: "I agree it would be pointless for the USA to have the tax levels of many European nations, if all the money was spent on Defense.."

poly replies: It was rather difficult to get people to fund the Dept. of War. That's why it was changed to the Dept. of Defense. It's all in the presentation...the framing. It's our largest industry...totally subsidized by the taxpayer.

We should have listened to Pres./General Eisenhower....and didn't. He said it was a theft from the American people...and it is.

Retired Monk - "Ideology is a disease"

polycarp2
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Quote PeeWee Returns:

It's a little more complicated than that. It's all about when you pick the start dates and end dates. Every economy is different and many other factors influence tax revenue as well. Just for fun, here is some additional information to complement your exhaustive personal study of the relationship between tax rates and revenues. Have some fun poking holes in it.

Okay, I will. First of all it was submitted by the Heritage Foundation (could we get anymore partisan, right wing?) and second, it was written in 1991! So the material is more than a little dated.

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Quote polycarp2:

Mel wrote: "I agree it would be pointless for the USA to have the tax levels of many European nations, if all the money was spent on Defense.."

poly replies: It was rather difficult to get people to fund the Dept. of War. That's why it was changed to the Dept. of Defense. It's all in the presentation...the framing. It's our largest industry...totally subsidized by the taxpayer.

We should have listened to Pres./General Eisenhower....and didn't. He said it was a theft from the American people...and it is.

Retired Monk - "Ideology is a disease"

I don't know poly, I think the Department of War has a certain Orwellian sound to it.

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Quote PeeWee Returns:
Quote Common_Man_Jason:

If you weren't listening then, you won't now, and it's quite time consuming to dig such things up, as we both know that governments hide their mistakes quite well. So I'm not going to waste my time here. However, just skimming the document you shared, I can already tell you it's in agreement with the statements I've already made, other than it's spinning them to convince people like you that they mean something that they don't.

Kinda cranky today, Jason?

No. Perhaps you're interpreting inflection incorrectly?

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Currently Chatting

GOP Blocks Equal Pay...again.

Just in time for election season, Senate Republicans blocked legislation aimed at closing the gender pay gap. For the third time since 2012, Republicans refused to allow debate on the Paycheck Fairness Act, and reminded women that the GOP doesn't believe in equal pay for equal work.

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