LOL. Ben Stein ($R) busts Repub tax cut myths (NY Times):

[pinto]

In an "open letter" to Sen. McCain, Ben Stein takes his party to task for perpetuating their own myth that cutting taxes raises revenue and makes the case for increasing the tax on the wealthy or live chained to our deficit. Although he side steps the issue of *where* we spend our tax dollars, this makes for a fun read - pinto

Let’s start with the obvious. Almost everyone dislikes taxes. No sane person enjoys writing out a big check to Uncle Sam when he could spend that money or bank it for retirement. By the same token, almost everyone likes the phrase “tax cuts” for the same reason.

The problem, and it’s a killer, is that over the years we have obligated ourselves as a nation to spend truly staggering sums. These sums are growing rapidly. They consist mostly of entitlements, like Social Security and Medicare; fixed obligations like interest on the national debt, pensions for federal and military employees and various subsidies that have already been enacted; and morally mandatory expenses like those for national security.

<snip>

That is the first thing you need to know. The next thing is that the Republican Party (my party and yours) has for the last 30 years or so been operating under a demonstrably false and misleading premise: that tax cuts pay for themselves by generating so much economic growth that they replace the sums lost by tax cutting.

This would be a lovely thing if true, and the best of all ideas, the “something for nothing” idea. In fact, tax cuts lower federal revenue and generate federal deficits. It is also true that they do stimulate the economy and after a long period of years, federal tax receipts go back to where they were before the tax cuts.

<snip>

http://www.nytimes.com/2008/03/09/business/09every.html?scp=1&sq=Ben+Stein&st=nyt

[nels25]

1. I saw George Will in the mid 80's

on C-Span and he was asked about tax cuts and spending in general.

He stated IIRC "The dirty little secret about Americans is that they want more services from their government than they are willing to pay for. Solve this deli-ma and you solve your problem."

He may be a righty but I always have thought that he was on to something.

:shrug:

[gravity]

2. Wow, I actually agree with Ben Stein

I hate the republicans who think that cutting taxes will solve all of our problems.

It's refreshing to see that some actually have reasonable views when it comes to taxation.

[pinto]

3. Yeah, same here. (aside) I've always thought the (R) tax cut mantra was a bribe in reverse -

"Vote for me and I'll cut your taxes..." - only they forget to mention that someone *will* pay, down the road.

[ticktockman]

4. Effect of the Reagan, Kennedy, and Bush Tax Cuts on Revenues

That is the first thing you need to know. The next thing is that the Republican Party (my party and yours) has for the last 30 years or so been operating under a demonstrably false and misleading premise: that tax cuts pay for themselves by generating so much economic growth that they replace the sums lost by tax cutting.

This would be a lovely thing if true, and the best of all ideas, the “something for nothing” idea. In fact, tax cuts lower federal revenue and generate federal deficits. It is also true that they do stimulate the economy and after a long period of years, federal tax receipts go back to where they were before the tax cuts.

I agree. When I heard about the touted rise in revenues after the Reagan tax cut, I went and looked at the numbers myself. After all of the bragging that I'd heard from supply-siders, I really expected to find something. Instead, the numbers were pretty much what one would expect. When taxes are cut, revenues go through a quick drop and then continue to grow with the GDP as before, just at their new lower level. Hence, tax cuts are not a free lunch. They require us the weigh their benefits versus their costs, just like most things in the real world.

I've posted the results of my study of the numbers at http://home.att.net/~rdavis2/taxcuts.html . For years, I've asked supply-siders to tell me any specific numbers or conclusions in my analysis that they disagree with. Alternately, I've asked them to post a link to one serious economic study that purports to show evidence of any income tax cut that has ever paid for itself. None have. In any case, the following graph shows the real growth in receipts, outlays, and GDP since 1950:



As can be seen, real individual income tax receipts actually declined slightly from 2001 to 2007 and GDP growth has been no faster than usual since 2001. There is a further discussion of this at http://usbudget.blogspot.com/2008/03/effect-of-bush-tax-cuts-on-revenues.html .

[Lasher]

5. This is good work!

Supply side economics has never been much more than an attempt to find moral justification in taking from the poor and giving to the rich.

Have you thought about incorporating results of the Clinton tax increase on top marginal rates into your study?

[ticktockman]

7. Incorporating results of the Clinton tax increase

Supply side economics has never been much more than an attempt to find moral justification in taking from the poor and giving to the rich.

Have you thought about incorporating results of the Clinton tax increase on top marginal rates into your study?

Yes, I have. In the graph in message 4 above, it's hard to miss the huge increase in individual income tax revenues that occurred after the Clinton tax increase. If the data is available, I had thought of looking at revenues minus those from capital gains (which were likely inflated by the tech bubble). In any case, the graph also shows that GDP growth held up very well after the Clinton tax increases. Hence, when and if I expand the study to look at a tax increase, the Clinton one will be first on my list. I had simply wanted to start with the tax cuts since the myth that tax cuts pay for themselves seems to be the bigger problem at the moment.

[seasat]

8. What's also interesting is that the revenue ticked up when Reagan raised taxes.

He raised SS taxes, user fees, and corporate taxes. He also raised capital gains taxes at the end of his term. The IRS has a spreadsheet you can download that breaks out all the revenue streams due to different tax categories for each year. As each tax increased, so did the revenue. However, you can clearly see the decline in revenue when Reagan initially lowered income taxes for the wealthy. The income tax revenue didn't recover for years. It was great posting that data on non-partisan boards and watching Repubs go into fits.

[mainegreen]

6. An interesting and honest article.

Thanks.