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| 4/3 |
| 2009/2/27-3/6 [Politics/Domestic/California, Reference/Tax] UID:52655 Activity:low |
2/27 CA unemployment increases from 9.3% to 10.1% for Jan
\_ Good thing the legislature passed the biggest tax increase in
history! That should solve it.
\_ because cutting taxes has done such a great job so far!
\_ it has.. giving mortgages to poor folks did us in
\_ 100% horseshit.
\_ Find me an economist who thinks raising taxes will help
grow the economy.
\_ States can't run a deficit AND because of our fucked
up initiative system CA spending is pretty locked.
There's not much choice.
\_ I guess States need some of the stimulus money then
because the Feds can run a deficit. Raising taxes
right now is stupid.
\_ Raising taxes might hurt the economy less than cutting
services would.
\_ Those are not the only two choices.
\_ Once again, 100% horseshit.
http://blogs.bellinghamherald.com/politics/?p=845
"Drawing upon economic theory, we believe
reducing government spending will have a more
deleterious effect on Washington s economy than
would increasing revenue. Although both cuts in
government spending and tax increases have the
potential to slow economic growth, cutting
government spending would likely have the most
immediate impact by directly reducing
consumption. Tax increases are less problematic
because individual consumers, especially those
with higher-incomes, are unlikely to reduce
consumption by the full amount of the tax
increase." (First hit on Google.) -tom
\_ You do realize that all but a small handful
of the economists who are urging for higher
taxes rather than reduced government spending
in that letter are government employees,
right? 100% horseshit indeed.
\_ You asked me to find you an economist who
thinks raising taxes will grow the economy,
and I found you 20+ on the first Google hit,
\_ Uh, no. Those 20+ economist merely *said*
raising taxes would grow the economy. Whether
or not they actually *think* it will is
completely different. As I pointed out, they
were arguing for raising taxes in favor of
cutting state spending. Just casually looking
at where these people worked, all but 3-4 of
them were easily identifiable as state employees.
Do you want me to spell it out for you?
\_ Well, gee, pretty much all the economists
who say that raising taxes is bad are
wealthy taxpayers, so I guess we can ignore
their opinions. -tom
\_ Before you were just dense. Now you're
making imaginary arguments.
\_ How is it any more imaginary than the
argument that we should discount
economists who work for the
government? Economists who don't
work for the government directly
benefit from lower taxes; by your
"logic," we should discount their
opinions due to conflict of
interest. -tom
including several who are not government
employees. So, yes, 100% horseshit. Want to
try moving the yardsticks again? OK, here are
some more:
\_ These economists are comparing raising
taxes versus cutting spending, which is not
really the issue. Cutting spending right now
would be suicide. The alternative to raising
taxes is not cutting spending. It's running
a deficit, which makes sense to do during
lean economic times. During a Depression is
not the time to balance the budget.
\_ Nice job moving the yardsticks again. -tom
\_ You have a really low hurdle for
success if you want to take the
original statement literally.
http://www.nationaljournal.com/njmagazine/socialstudies.php
\_ This article says nothing at all about taxes versus economic
growth, but it does point out that federal spending as a % of
GDP is higher than historical levels.
http://www.nytimes.com/2009/02/25/business/economy/25leonhardt.html
Please discount those, too. -tom
\_ The guy in this article notes that the economy grew the fastest
in the late 1990s when Clinton "briefly took federal taxes to
20% of GDP". There is no correlation between the taxes being
high and the <DEAD>dot.com<DEAD> growth. I think raising taxes during boom
periods is a smart idea, but the taxes were not the cause of the
boom. At the article points out, when you raise taxes on
cigarettes, consumption decreases. When you raise taxes on oil,
consumption decreases. You think raising income taxes will not
decrease consumption? Herbert Hoover raised taxes during the
Depression and it was a horrible blunder. Read up about it.
Let's not do that again.
http://www.heritage.org/Research/Taxes/wm1835.cfm
\_ Do you understand the difference between income tax and
sales tax?
\_ Do you understand the similarities? |
| 4/3 |
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| blogs.bellinghamherald.com/politics/?p=845 again State economists: Raise taxes, please From the Washington Policy & Budget Center, a letter from economists asking Gov. Chris Gregoire, House Speaker Frank Chopp and Senate Majority Leader Lisa Brown to raise taxes. The Capitol Record Blog, six more economists added their names to the document initially signed by 22 economists in the state. Part of the letter reads: Drawing upon economic theory, we believe reducing government spending will have a more deleterious effect on Washington State's economy than would increasing revenue. Although both cuts in government spending and tax increases have the potential to slow economic growth, cutting government spending would likely have the most immediate impact by directly reducing consumption. Tax increases are less problematic because individual consumers, especially those with higher-incomes, are unlikely to reduce consumption by the full amount of the tax increase. Tax increases are ok because the rich can still buy things? Is that what this line is saying, "Tax increases are less problematic because individual consumers, especially those with higher-incomes, are unlikely to reduce consumption by the full amount of the tax increase." Wouldn't me and mine having more money let me spend more and thus more tax funds? If you cut Government spending, that means that you lay people off and they are no longer able to spend. If you raise taxes, you take money out of people's pockets and they are no longer able to spend at the same rate. Now let's imagine a fiscally prudent government who never hired so many people in the first place. Would these people now be employed in the private sector, or would they be on welfare? February 21st, 2009 at 8:43 am Let's just look at one little part of our state government, the state liquor board, you would think they could make money selling booze, but did you know that there is $421,000,000 unaccounted for? Geting out of the liquor business is a no brainer on saving money but the unions will not allow it, and that folks is just one of many examples of why this state is broke! The special interest are driving our decision makers, it ain't about what is best for the state or the tax payers, it is ALL about what is best for the special interests! February 22nd, 2009 at 10:19 am Sure that's fine citizen, but what are the taxes spent on and how much are they going to take? The answer to that will either make people sad or happy. February 23rd, 2009 at 7:43 am The employees of the state liquor stores are union employees! When you cut government you cut union employees, guess who gives a bunch of money to politicians so that government won't be cut? If you want to get re-elected or elected in this state, having the money of the unions behind you instead of against you is a good idea, if you as a politician is mainly concerned with your future! THERE ARE POLITICIANS WHO ARE MAINLY CONCERNED WITH THEIR FUTURE AND NOT THE STATE'S! February 23rd, 2009 at 3:11 pm Most companies don't expand or locate in states with uncertain tax futures. Any good economist knows that market psychology is a key factor. As a co-owner of a business, I certainly won't expand if I can't predict costs. My concern with the post is Paul doesn't provide any evidence at all about his claims. My next question would be what those professors specialties are. Those historians could focus on economic policy of the past and they could very well have economics degrees. I'd like to know more, but he doesn't provide any other info and he's the only one saying this as far as I can tell. Apparently I was pretty right on the mark with my initial questions. Paul simply looked at their titles and didn't really look at what their degrees are or what their research expertise is actually in. Of course Sound Politics took the post at face value, but I think it's safe to say that there was little to no research done in trying to figure out actually who these people are, he simply looked at their titles and made assumptions. By Sam Taylor Sam Taylor has covered government and politics since coming to The Bellingham Herald in 2006. He is a graduate of the University of Idaho School of Journalism and Mass Media, and interned at four other newspapers prior to moving to Western Washington with his wife, Kathryn. |
| www.nationaljournal.com/njmagazine/socialstudies.php Reprints * Tools Sponsor: * SOCIAL STUDIES Real Reaganites Raise Taxes Conservatism may need to abandon the anti-tax dogma that it adheres to in Reagan's name. Conservatives suspected that something irreversible was happening: that the sheer immensity of President Obama's fiscal and financial interventions may permanently change the size of government and the shape of post-Reagan conservatism. One conservative who understands the potential implications is a curmudgeonly visionary named Bruce Bartlett. In today's Washington, he is something of a voice in the wilderness. Liberals mistrust him because in the 1970s, as an aide to then-Rep. Jack Kemp, R-NY, he helped fashion the original supply-side revolution. Conservatives mistrust him because in the 2000s he broke publicly with President Bush, in a book called Impostor: How George W Bush Bankrupted America and Betrayed the Reagan Legacy. To reclaim President Reagan's legacy in the Obama era, conservatism may need to abandon the anti-tax dogma that it adheres to in Reagan's name. Conservatives and liberals have spent the past 40 years arguing about the size of government. But the size of government has not, so to speak, been arguing about them. As a share of the economy (gross domestic product), federal spending has remained curiously stable. Wars ended and began, double-digit inflation came and went, defense was cut, entitlements swelled, and outlays fluctuated as a share of GDP. Yet, as the chart shows, spending always returned to about 21 percent, almost as if regulated by an internal thermostat. Over the same period, meanwhile, revenues had a comparably strong homing instinct, but the set point was lower: a little above 18 percent. This budgetary stability, or stalemate, or whatever you call it, has been the greatest policy surprise of the last quarter-century. Liberals (and Bush, who expanded Medicare) discovered that, up to a point, a growing economy would let them grow government without destabilizing spending as a share of GDP. Conservatives discovered that, up to a point, a growing economy would let them dig in against tax increases, and periodically cut taxes, without destabilizing revenues as a share of GDP. For decades, everyone pretended to have a profound ideological disagreement about the size of government, but the reality was a comfortable standoff between 21 percent liberalism and 18 percent conservatism. In the end, both sides got what they most wanted: 21 percent spending for liberals, 18 percent revenues for conservatives -- at the politically tolerable cost of a deficit averaging 2 to 3 percent of GDP. This result was handy for politicians and acceptable to the public. In Washington now, the obvious question is: Has Obama ended the 21 percent era? In January, the Congressional Budget Office forecast outlays at 25 percent in fiscal 2009. That was before enactment of the latest stimulus, which increases outlays by more than $500 billion through 2012; and the forecast didn't account for further financial bailouts. Unofficial estimates take 2009 spending to 26 percent or higher. But CBO is required to make some unrealistic assumptions. The analysts I interviewed believe that spending is likely to be well above 21 percent in 2012. "I'm going to say spending is never going to go below 21 percent again in this country," says Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. At the Brookings Institution, Isabel Sawhill, an economist and a former Clinton administration budget official, says, "My best guess would be 24 percent in 2012." In the short run, of course, the stimulus increases spending. In the medium term, many economists expect a deep recession and a slow recovery. That would increase the spending-to-GDP ratio by suppressing growth in the denominator. In the longer term, intense upward pressure on spending will be generated by the combination of Baby Boom retirements -- which begin during the current administration and accumulate rapidly -- and soaring health care costs. The Baby Boom fiscal shock would have arrived anyway, but the recession, the stimulus, and the bailout will have the effect of pulling it forward -- more or less to the present. In which case, the end of the 21 percent equilibrium may already have arrived. In American politics, the dissolution of a 40-year equilibrium is likely to be a pretty momentous event. If they don't get serious about reforming and restraining Medicare, Medicaid, Social Security, and other entitlements, many of the other programs they most care about will be squeezed out of the budget. With his promise of a fiscal responsibility summit and his warnings about the need to confront long-term entitlement spending, Obama seems to grasp what liberalism must try to do, though whether he can deliver is another matter. Many conservatives insist that structural reforms of entitlement programs -- benefit cuts, means-testing, privatization, and so on -- could keep spending at or even below 21 percent of GDP going forward. "We're looking at a massive expansion of government spending," he says. "I became convinced in November of 2003, when a Republican president and Congress instituted a massive expansion of Medicare, at a time when the program was already badly broken and needed to be fixed, that there was absolutely no hope of restraining the growth of spending on those programs." Permanent deficits at 6 percent of GDP would be unsustainable, and the creaky, inefficient income tax is barely able to raise even today's inadequate revenues. The only really workable option, Bartlett argues, is a value-added tax or its equivalent: a broad-based tax on consumption. "It's the only way of preserving incentives and keeping the economy alive." Because it taxes spending rather than saving or investment and is inhospitable to market-distorting loopholes, this kind of tax raises a lot of money at relatively low economic cost. Reaganites hate the value-added tax precisely because it is such an efficient cash cow. Reagan was a conservative who admired FDR, and what he conserved was FDR's welfare state. He understood that the most practical way to make government less economically burdensome was to grow the economy. By taming inflation, restructuring the tax code, and thinning regulatory undergrowth, Reagan made the welfare state sustainable, something liberals had proved unable to do. He wooed middle-class voters away from liberalism by stabilizing the modern entitlement state, not shrinking it. If the 21 percent era is over, then the challenge for conservatives today is to give up on 18 percent government, which the public doesn't want and which conservatives can't deliver. Instead, as Bartlett wrote recently in Politico, "Conservatives would better spend their diminished political capital figuring out how to finance the welfare state at the least cost to the economy and individual liberty." |
| www.nytimes.com/2009/02/25/business/economy/25leonhardt.html Kent Conrad stood up and produced a little bolt of honesty. "Revenue is the thing almost nobody wants to talk about," said Mr Conrad, the chairman of the Senate Budget Committee. "But I think if we're going to be honest with each other, we've got to recognize that is part of a solution as well." Excerpt from "The Tyranny of Dead Ideas" Mr Conrad's frankness was delivered in the cryptic language of budget experts, and many people might have missed the point. They will probably go up in the coming decade, and the increase will be permanent. Yet we are not paying nearly enough taxes to maintain those programs. Even major changes to the health care system -- the single most important step for closing the budget gap -- will not close it entirely. This is a point on which serious Democrats and serious Republicans agree, even if they do so with euphemism. Fortunately, the coming tax increase does not have to be economically ruinous. Despite all the scary stories you've heard, the evidence that higher taxes necessarily cripple an economy is somewhere between thin and nonexistent. When over the past 60 years did the American economy grow fastest? Bill Clinton briefly took federal taxes to 20 percent of the GDP The real uncertainty is how, in the current political climate, Mr Obama will manage to persuade people that taxes must go up. Otherwise, they will begin demanding much higher interest rates. "Something that's unsustainable, like a dysfunctional relationship, can go on longer than you expect," Mr Orszag has said, "and then end faster and messier than you think." Matt Miller nicely lays out the history of American taxes. He begins the story with Adolf Wagner, a 19th-century German economist who predicted that taxes would rise as societies became wealthier. writes Mr Miller, a journalist and a consultant for McKinsey & Company, "they'd want more of what only government could provide -- a strong military, public order, good schools and assorted welfare benefits, services that private citizens would have trouble arranging for on their own." The tax increases to pay for these activities do bring a cost: they reduce people's incentive to work. Taxes rose sharply in the first half of the 20th century, starting from just a few percentage points of the GDP, and the country still prospered. So long as the government spends the money well, the benefits from taxes -- security, education, health -- can far outweigh the costs. To be sure, the federal government is not currently spending its tax revenue very well. wasting billions of dollars each year on health care that doesn't make people healthier. Unless Medicare's policies are changed, this waste will lead government spending to rise to 32 percent of the GDP over the next three decades, from 20 percent in recent years. But an overhaul of the health care system won't be enough to bring that number down to the current level of taxes. Over time, societies will spend more of their resources on services like medical care, since they can already afford basic material comforts. And these services are precisely the sort of service that fall to the government. Think of it this way: A tax increase isn't so much a barrier to a society becoming richer as it is a result of a society becoming richer. To the extent that Mr Obama has talked about raising taxes, he has focused on households that make at least $250,000 a year. But the problem can't be solved just by taxing the rich. That top 1 percent pays only about one-quarter of federal taxes. Once the recession ends, taxes on the not-so-rich will need to rise, too. subsidies for housing, which create an incentive to overinvest in housing. In the end, the ideas aren't just about "tax simplification" or a "flatter, fairer system." The best bet, I think, is a jujitsu strategy: someone will figure out how to convert weakness into strength. We find ourselves facing long-term budget deficits largely because we don't pay enough heed to the future. Leaving our children with a solvent government is less so. But this same short-sightedness can be turned on itself. |
| www.heritage.org/Research/Taxes/wm1835.cfm JD Foster, PhD WebMemo #1835 When pressed about the harmful effects on the economy, proponents of higher taxes often fall back on what can be called the "Clinton defense." President Bill Clinton pushed a major tax increase through Congress in 1993, and, so the story goes, the economy boomed. The inference is even stronger: that higher taxes actually strengthened the economy. The Clinton defense is superficially plausible, but it fails under closer scrutiny. Economic growth was solid but hardly spectacular in the years immediately following the 1993 tax increase. The real economic boom occurred in the latter half of the decade, after the 1997 tax cut. The Clinton Tax Defense A growing body of literature and experience indicates that higher taxes are associated with a smaller economy. It is generally axiomatic that the more one taxes something, the less there is of the item taxed. There is surely no reluctance among proponents to argue that higher taxes on tobacco materially reduce tobacco consumption or that higher taxes on energy would appreciably reduce energy consumption. Yet, somehow, the argument persists that raising taxes on labor does not diminish the supply of labor or that raising taxes on capital does not appreciably reduce the amount of capital in the economy. In both cases, tax hikes weaken the economy and reduce the amount of income earned by American families. The Clinton defense of higher taxes rests largely on a cursory review of the economic history of the 1990s. Whatever the theoretical debates, the proof, as they say, is in the pudding: President Clinton raised taxes, yet the economy grew, and grew smartly in the latter half of the 1990s. Economists have occasionally been accused of seeing something work in practice and then proving that it cannot work in theory. History suggests that the economy performed reasonably well in the years immediately following the tax hike, but history is not causality, and history sometimes needs a more careful examination to tell its story faithfully. Following the tax hike, the economy performed reasonably well, but not as well as one would expect given the conditions at the time. The real economic boom came later in the decade, just when the economy should have slowed as it made the transition from a period of recovery to normal expansion. Further, this acceleration coincided to a remarkable degree with the 1997 tax cut. Contrasting the period immediately after the tax hike and the period immediately after the tax cut, the evidence strongly suggests that the tax hike likely slowed the economy as traditional theory suggests, and that it was the tax cut that gave the economy renewed vigor--and gave history the real 1990s boom. In other words, the Clinton defense of higher taxes does not hold up. This provision made the 29 percent Medicare payroll tax apply to all wage income. Like the Social Security payroll tax base today, the Medicare tax base was capped at a certain level of wage income prior to 1993. According to the original Treasury Department estimates, the Clinton tax hike was to raise federal revenues by 036 percent of gross domestic product (GDP) in its first year and by 083 percent of GDP in its fourth year, when all provisions were in effect and timing differences associated with near-term taxpayer behaviors had sorted themselves out. In 2007, the fourth-year effect would be roughly equivalent to an increase in the federal tax burden of about $114 billion. Background The economic environment at the time of the tax hike is important in assessing its consequences. In January 1993, the economy was entering its eighth quarter of expansion after the 1990-1991 recession. The recession had been relatively mild by historical standards, with a net drop in output of 13 percent. Yet even at the start of 1993, the economy was operating below capacity. Capacity utilization in the nation's factories, mines, and utilities was running at about 81 percent, whereas it had been around 84 percent through much of 1988 and 1989. The unemployment rate in January 1993 was 73 percent but had averaged 53 percent as recently as 1989. At the time of the tax hikes, the economy was recovering but still far from healthy. Tax policy aside, much in the context of the 1990s was conducive to prosperity. The end of the Cold War brought a new sense of hope and greater certainty to the global economy. The price of energy was astoundingly low, with oil prices dropping to about $11 per barrel and averaging under $20 per barrel compared to prices above $90 per barrel today. The Federal Reserve had finally succeeded in establishing a significant degree of price stability, with inflation averaging less than 2 percent during the Clinton Administration. And, of course, a tremendous set of new productivity-enhancing technologies involving information technologies and the World Wide Web burst on the scene. Absent a major negative shock, one should have expected a period of unusually strong growth from 1993 onward as the economy more fully employed its available capital and labor resources. In the four years following the Clinton tax hike (from 1993 through 1996): * The economy grew at an average annual rate of 32 percent in inflation-adjusted terms; and * Total market capitalization of the S&P 500 rose 78 percent in inflation-adjusted terms. These statistics indicate a solid, but not spectacular, performance in the overall economy. Job growth was strong, as one would expect coming out of recession. Real wage growth remained almost non-existent, and the stock market performed well. But the real question is this: Altogether, did the economy perform better, or worse, because of the tax hike? The year 1997 was a watershed for both tax policy and the economy. By 1997, the economy had entered into a sustained expansion. The unemployment rate was 53 percent, a level thought at the time to be roughly consistent with full employment. With a mature expansion and the economy running at what was believed to be about full capacity, growth would normally be expected to ease back as the economy makes the transition from recovery to normal growth. It was not a moment when one would expect growth to accelerate. The 1997 Tax Cut: The Economy Unleashed In 1997, the Republican-led Congress passed a tax-relief and deficit-reduction bill that was resisted but ultimately signed by President Clinton. The 2007 bill: * Lowered the top capital gains tax rate from 28 percent to 20 percent; According to Treasury's original estimates, the 1997 tax cut was relatively modest, amounting to just 011 percent of GDP in its first year and 022 percent of GDP by its fourth year. In 2007, the fourth-year effect would be roughly equivalent to a reduction in the overall tax burden of about $30 billion. Despite its modest size, tax cut advocates had high expectations for the tax cut's effects on the economy because the reduction in the capital gains tax rate was expected to unleash a torrent of entrepreneurial and venture capital activity. In 1995, the first year for which these data are available, just over $8 billion in venture capital was invested. Venture capital is especially critical to a vibrant economy because high-risk/high-return investment permits promising new businesses to blossom, rapidly spreading new technologies and new ideas into the marketplace and across the economy. Such investments, when successful, generate returns to investors that are subject primarily to the tax on capital gains. By 1998, the first full year in which the lower capital gains rates were in effect, venture capital activity reached almost $28 billion, more than a three-fold increase over 1995 levels, and by 1999, it had doubled yet again. The explosion in venture capital activity cannot be credited entirely to the cut in capital gains tax rates, as the cut fortuitously coincided with technological developments that gave rise to the Internet-based "New Economy." However, the rapid development and application of these new technologies could not have occurred at such a rapid clip absent the enormous investment flows made possible largely by the reduction in the capital gains... |