Help me Debunk the Repuke Mantra

[maxrandb]

Unfortunately, after years of driving a beer and wine delivery truck and listening to Rush for 15-18 hours a week, my brother is now a rabid Repuke. I love him, so please no jokes about "must of been hitting the beer and wine as he drove".

Anyway, he is living proof of what can happen to someone that was raised in a Democratic, grandson of a coal miner, pro-civil rights catholic family, and has now been overexposed to talk radio. We argue all the time, and he is convinced that Dems are weak on defense, even though his own brother (me) is a 20 year active duty military man.

Anyway, this is what I need rebuked. He says repeatedly that "when taxes are cut, government tax revenues increase". Not only do I not buy it, but if that is the case, then wouldn't a tax cut basically be a tax increase? I mean if cutting taxes results in more revenue going to the government, then what the hell is so great about a tax cut, especially to all these phony "limited government" nuts who claim we need smaller government?

[arcane1]

1. "when taxes are cut, government tax revenues increase"

I'm not even sure what that means... are the taxes the bloody source of "government revenues"?

when payroll is cut, employee revenues increase too? :shrug:

[denverbill]

2. Show him these stats.

FYI
US Budget Receipts - Individual Income Taxes
Fiscal Year to Date
FY 2004 - $117.3 billion
FY 2003 - $122.7 billion
FY 2002 - $134.3 billion
FY 2001 - $136.5 billion
FY 2000 - $121.0 billion
FY 1999 - $111.6 billion
FY 1998 - $107.3 billion


Sure, eventually, receipts will increase, because of inflation.

However, even the rosiest predictions of the Bush administration admit that 5 years from now, the budget deficit will still be $250 billion/year.

You might also ask him at what point it ends. If cutting taxes raises revenues, then shouldn't eliminating taxes give us infinite revenues?

[Buffler]

4. You can't just look at income tax revenue

which is on the rise currently by the tinest of amounts. But all revenue must be discussed.

[denverbill]

5. No, that's stupid.

Because that is not the Republican argument. Their argument is that cutting income tax rates increase income tax revenue.

One other point of note is that Clinton increased taxes in 1993, and government revenue increased sharply in every year of his Presidency.

If cutting taxes increases revenue, then raising them must decrease it.

[Buffler]

6. Again, ALL tax sources must be considered

Clinton also reduced the capital gains tax rate by a large amount and capital gains tax revenue went through the roof.

And I am not making a republican argument.

[zbird]

10. However, that was in a booming economy.

I'm no economist, but when you have a booming economy, more people who are now reporting capital gains because of successful investments, the gross capital gains are increasing, therefore, even with a lower tax rate, tax revenue will increase, no?

[Buffler]

14. Yes

increased economic activity will cause an increase in tax revenue at a lower rate. And to suggest that the lowering of captial gains taxes had no effect on capital markets is to ignore reality.

And the bogus internet boom was a major factor as well.

[snippy]

33. Taxes on capital gains ARE income taxes.

[Buffler]

3. He is right

It has been repeatedly proven that Arthur Laffer was right. When taxes are in the "prohibitive zone" and tax rates are reduced, revenue increases.

Infact, after Bush's tax cuts the revenue to the federal government for the first 2 quarters of fiscal year 2004 (oct. and nov.) is higher than the previous year.

However, tax cuts do NOT always increase revenue. If tax rates rates are below the "optimum rate" and rates are cut, revenue will go down and a rate increase would increase revenue.

[pnziii]

8. Are you sure?

Are the increases in Revenue from the tax cuts or are there just more people paying taxes from a year ago.

Check out Klugman's op/ed pieces in the NY Times.

He states that when Reagan cut the taxes the Revenues looked like they increased, but they were not because of tax cuts it had to do more with population growth and accounting.

He states that in reality when you take all the economic variables into account revenues actually decreased.

Clinton raised taxes and revenues increased and along came a surplus.

Even Bush's own economists say long term defeceits are bad.

[Buffler]

11. I am mearly talking of the basis for which

the repugs often make their claims. The Laffer Curve. I firmly believe the Laffer Curve to be 100% true, and any honest person would conclude the same.

[maxrandb]

13. I'll buy that, but

It seems that the argument the Repukes are always making is that government is too big, we need smaller government, or when they are really feeling "froggy" like Newt was they tell the truth about "letting Medicare rot on the vine".

But if big government is bad, why would you want to give it more money? Their argument is disingenuous in that they make this argument to convince people that a tax cut won't hurt the basic services Americans expect. Tell that one to the next person killed in a fire in CA because the people decided they needed an extra $10 a month instead of a new fire-truck.

Thank Gawd for spell-check.

[Buffler]

15. I can't believe you are making me do this

like Newt was they tell the truth about "letting Medicare rot on the vine".

I can't believe you are making me do this. Newt never said that. The ad that the DNC ran with him saying that was one of the biggest hatchet job edits I have ever heard.

He was talking about HICFA, and that if people were given some options they would opt out of medicare for other services thus medicare would eventually wither on the vine as people left it.

On Edit: I am not defending Newt here, but when a falsehood is presented I have no choice but to correct it. I strive for the truth.

[many a good man]

40. HCFA IS Medicare!

HCFA is the government agency that administers Medicare. Letting it rot on the vine is THE EXACT SAME THING as saying let Medicare rot. Newt wants taxpayer money to go straight to the HMOs, where administrative costs are 15% higher, not including profit-taking. The right wing rebuttal to that old AFL-CIO ad is just BS.

BTW, HCFA is now called CMS, Centers for Medicare and Medicaid Services. http://cms.hhs.gov/medicare/default.asp

[Printer70]

16. Max- here is my thought on this

I agree with Laffer's theory that there is a point at which reducing taxes increases federal revenues by unlocking productivity, etc. (Should be noted that beyond this point, revenues decline so Laffer's theory cannot ALWAYS be a justification for tax cuts). You point out that why would Republians think it's a good thing for federal revenues to rise. When federal revenues rise, a few things can be done with it: pay down the debt, give another tax cut (which may or may not lead to more federal revenues depending on where you are on Laffer's curve). Ultimately, I don't think Repub's are against big government (as we are currently witnessing), but they want to pay a lower fraction of income to government. Hope that helps.

BTW, I wouldn't get too hung up on this one but would debate him on security. Your brother says Democrats are weak on defense. Well, who won Two World wars? It wasn't Republicans.

[Buffler]

29. 60 years ago

Your brother says Democrats are weak on defense. Well, who won Two World wars? It wasn't Republicans.

If he takes this tact he could face some problems with his argument. That was 60 years ago. 60 years ago the democratic party was also the party of segregation, racism, and anti civil rights. It is wrong for one to use these former positions of the party in todays debate just as the GOP can't use its anti slavery founding and past support of civil rights legislation (without which it wouldnt have passed) to say it is the party of civil rights.

[papau]

17. Arthur Laffer was right - that was funny - check the Reagan stats!

Reagan pulled in about 75% of what Carter tax rates would have pulled in - all the while barely matching Carter's GDP growth rate of 3.25% over 4 years (Reagan got a GDP growth rate of 3.33% per year over 8 years).

Indeed the main driver of increased tax revenue under Reagan was the "scare" about SS that Bush is selling these days - in Reagan's time it was SS runs out of assets in 33 years and now it is SS runs out of assets in 40 years - that lead to un=necessarrily ligher payroll tax on the middle class (but not on the rich! because of the wage cap) ans payroll tax surplus paying for tax cuts for the rich.

The GOP is a little John'y one note as they kiss the ass of the rich and corporate.

[Buffler]

19. Regardless, Laffer is right

Regardless, Laffer is right.

There is an "optimum rate" that will produce the most revenue possible. A rate above this is in the "prohibitive range" and produces less revenue so reducing the rate, when it is in this range will increase revenue. And when the rate is below the "optimum rate" it is producing less revenue and a rate increase in this range will increase revenue.

Every one can agree that a tax rate of 100% will produce no revenue because it will extinguish the taxed activity. And a rate of 0% will also produce no revenue for the obvious reason. So, somewhere between 100% and 0% is the "Optimum Rate". Above this is the prohibitive zone. I can not recall the name for the range below it.

[jab105]

20. I'm not a fan of Laffner...

but regardless, we are way below that so called top point...

Reagan was blessed to have Volker cutting interest rates right about the time that his miracle (cough...sorry, hairball!)tax cut was going through...the Fed got the economy going again, not Reagan...and the economy did NOT increase above the normal level, it went from slowdown back up to normal growth, which of course seemed larger since we were coming from a slowdown...

Supply-side econommics is bullshit...oh sorry, voo doo...

[Buffler]

24. Again

I have not once mentioned Reagan or Supply Side. Only the Laffer Curve. Fan or not, he is right.

[Capn Sunshine]

36. No he wasn't

and the specious statement "there is an "optimum rate" would open doors for you at my bank. The exit doors.

[Capn Sunshine]

35. No one proved anything of the kind.

and Laffer is a Keynesian fraud.
This is a HUGE load of crap and please cite a serious economist who believes this to be true. Ben Stein doesn't count. No one who served with Reagan for that matter.

[zbird]

7. Ah, the old "supply-side economics" aka "voodoo economics".

Here are a couple of links discussing.

http://www.huppi.com/kangaroo/L-taxcollections.htm

http://www.nationalreview.com/nrof_luskin/luskin032803.asp

[Printer70]

21. Why times 8

Read huppi.com and don't get why you have to multiply the baseline by 8. Is this arbitrary? It seems the tax cut in the 80's increased fed revenues even in constant terms. If someone could quantify why exactly it's times 8 that would be helpful.

[many a good man]

9. Rush Lies

Practically everything that comes out of Rush's mouth can be proven as a lie. Some people may find him entertaining, but they are fooling themselves if they think his information is reliable. Check out Franken's "Rush Limbaugh is a Big Fat Idiot" sometime.

Taxes: are part of fiscal policy. Tax cuts can put more money in people's pockets to stimulate the economy. But by itself it has never stimulated the economy enough to recoup the lost revenue. Government spending can also stimulate the economy through the multiplier effect. Think of a military base and all the stores, restaurants, houses and other businesses that benefit from the spending of government money there.

GOP tax policy has made fools out of middle class Republicans (and the rest of us). The tax cuts of the last 20 years go mostly to the ultra-rich and corporations while the middle class gets little. I guess a little is better than nothing, but look at the cumulative effect. After 20 years the middle class is paying a substantially higher proportion of the tax burden than the rich and corporations. Government is forced to reduce services (or raise property taxes) and its the little guy that pays.

[Buffler]

12. That is demonstably false

After 20 years the middle class is paying a substantially higher proportion of the tax burden than the rich and corporations.

Facts are facts, and in regardes to income taxes the middle and lower class are paying far less a % of the total income tax burden than they were 20 and 30 years ago.

[jab105]

18. True enough, yes...

this is my argument to the republican talking point (see article)...mods, I'm pretty sure this is 4 paragraphs with a title:))...

http://www.cbpp.org/4-10-02tax.htm

Increased Concentration of Taxes among High-income Households Not a Sound Justification for Reducing Their Taxes

Some have argued that the increased concentration of taxes among high-income individuals — and especially among the top one percent of the population — means their taxes need to be reduced sharply. Recent income and tax trends do not support this contention.

A recent paper from the National Bureau of Economic Research shows that in 1998, the top one percent of the population received a larger percentage of the before-tax income in the nation than in any year since 1936. (This finding includes capital gains income. If capital gains income is excluded, the share of before-tax income the top one percent of the population received in 1998 was the largest since 1941.)(9)
CBO data show that the top one percent of the population holds an exceptionally large share of the national income even after federal taxes are taken into account. In 1997, the last year for which these data are available, the top one percent of the population received a larger share of the national after-tax income than in any other year for which these data are available. These data go back to 1979.
Table 1 Average after-tax income gains, 1979-97
Top 1% $414,200
Middle fifth $3,400
Bottom fifth -$100
The CBO data also show that after-tax income rose tremendously among the top one percent of the population in the 1980s and 1990s, with the gains that high-income individuals made far outpacing the gains of other Americans. From 1979 to 1997 (the years CBO studied), the average after-tax income of the richest one percent of households climbed 157 percent, or $414,000. Among the middle fifth of households, average after-tax income rose a much more modest 10 percent, or $3,400. (The figures in this paragraph are adjusted for inflation and expressed in 1997 dollars.)
CBO has not yet released comprehensive data for the years after 1997, but the CBO study concluded that the "rapid rise in the share of income going to the top of the distribution" continued at least into 1998 and 1999.(10)

[papau]

23. Well said - as the % of income going to the rich increases the % of the

tax should also increase

seems obvious unless you are GOP and paid to kiss rich ass.

[papau]

22. Bull - it is easy to show that that is not true - where the hell do you go

to school or did go to school?

When the income tax was introduced tax rates on investment income/capital gains had no preference -

indeed cap gains rates were higher than wage tax rates.

The the rich note that most of their income was what wasa earned on the assets their parents had stolen.

So the GOP game has always been to redefine the income of the rich and corporate as not part of the calculation.

You can see the game better if you just note the Gross National Income of the US - subtract the wage income and subtract the tax on wage income from total taxes - and see that the tax on the other income is in low single digit rates.

Indeed the numbers are easy to model.

say the income tax brings in 600, and SS brings in 400. and the rich pay 80% of the FIT - and the tax cut went 75% to the rich so they pay more of the remaining FIT tax as a percentage. Meanwhile SS goes into surplus and puts an additional 200 into the budget. With the tax cut worth 200, 150 to the rich, the rich now pay 480-150 or 330 of the 400 - more than the 80% they previously paid

While out of pocket costs of gov have moved to the wage earner via the SS being used to patch up the budget shortfall - but the rich can say theuy now pay a higher percentage of the remaining FIT TAX.


And in Bush's case he has increased the birth tax - the national debt - with a forever increase and disaster as soon as the 04 election is over.

Good grief you think the lousy growth rate in the Bush 41 years had nothing to do with Reagan's destroying us with the national debt?

What BULL - please - talk to an econ person - do not take Rush at his word!

peace

:-)

[0007]

26. Very good!

Some are just easily fooled by Rush and his fuzzy math.

[Buffler]

27. What?

The the rich note that most of their income was what wasa earned on the assets their parents had stolen.

Who stole what and from whom?

[papau]

28. That was a test - seems you can relate to the poor rich! :-)

I shouldn't tease you - sorry.

:-)

:toast:

:-)

[Buffler]

30. A test?

Either you believe it or you don't. If you do, answer the question.

[papau]

37. my family has been rich - then poor - then rich - then poor -and the usual

reason the become poor was it was stolen under cover of war and/or law.

And the way they got wealthy (actually of better than average means) was war and /or luck and/ or ability that was under the radar of the then current members of the club.

So yes - few get rich on merit.

Most inherit - indeed the Fortune 500 seems to have a wealth parent requirement (did you know that microsofts bill GATES was handed his fortune via his mother being on the board of IBM - it is all in the book he wrote - granted he made the second and latter billions by knowing that stealing ideas and programs was the way to go as the legal cost is always a small percentage of the profits to be had - and he does know how to market to members of the club!).

[snippy]

25. Those are distorted statistics.

The Tax Cut Monkeys like to cite the fact that the bottom 50% of taxpayers (those with adjusted gross income of less than $28,500) pay only 4% of the income taxes. However, their numbers include all students working part time jobs and many elderly with very small incomes. In 2001, 36% of the bottom half of taxpayers had adjusted gross income of less than $9,000 and 13% had adjusted gross income of less than $3,000.
http://www.irs.ustreas.gov/pub/irs-soi/01in03at.xls

The distortions of the Tax Cut Monkeys are further revealed when one looks at the average tax rate of those taxpayers paying 50% of the income taxes. In 2001 it was 24.35%. The top 0.1% of taxpayers (adjusted gross income of over $1.3 million) had an average tax rate of 28.2%. Not quite as onerous as the Tax Cut Monkeys would have you believe.
http://www.irs.ustreas.gov/pub/irs-soi/01in03ts.xls

[papau]

32. 28.2% on the adjusted taxable income - and you can choose whatever

you want to report as adjusted gross income when you are rich.

I used to set up the items needed to defer forever what ever they did not want to report that year - defer forever and around the world - all very legal.

the fellow that was NPR - the tax writer for the Times - who wrote "Perfectly Legal: The Secret Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else" namely
David Cay Johnston

knows about as much as I do on this dull topic - and writes much better - a good read! Also Krugman's book is to be recommended.

[snippy]

34. Very true.

[many a good man]

39. "Perfectly Legal" by Johnston

I caught part of an interview with the author, David Cay Johnston, yesterday on CNN. It sounds like a fascinating read...

I was most struck by the point he made that our tax system is anachronistic. It was designed for a manufacturing-based, wage earning society. Today we live in an econonomy based on Finance and we do not tax much of the enormous wealth in assets, which have replaced wages as the most substantial component of wealth.

He doesn't give recommendations for change, but I'd love to hear about any ideas that have been bandied about to modernize our broken and corrupt tax system...
:kick:

[Capn Sunshine]

38. why bother with this

You are a conservative ideologue pushing voodooo economics that have been conclusively demoinstated as false.

Are you really so smug you think there are no economically sophisticated people who are democrats? It would seem so.

Tombstones await........

[snippy]

31. The increases in income tax revenue in the 1980's was the smallest

percentage increase of any decade since the depression. The Reagan tax cuts did not increase revenue. However, the Reagan tax increases did.
http://home.netcom.com/~rdavis2/taxcuts.html

Income tax revenues normally increase because the economy normally grows. When the economy goes into recession income tax revenue declines. When the economy comes out of recession revenue increases.

[kentuck]

41. A very simplistic example:

Suppose we cut taxes by a trillion dollars on the very wealthy but at the same time, we increase defense spending and spending across the board. Much of the spending will be on the credit card - deficit spending. Say, for example purposes, that you give defense contracts worth $500 billion to several contractors, such as Halliburton, GE, McDonnel-Douglas, etc... Now understand that you have 'borrowed' that $500 billion and increased the deficit... But, a defense contractor must pay all their employees and new scientists, etc. These new employees must pay taxes on their new paychecks and increased paychecks that they have received because of the government contract which was given to them on borrowed money. So, the revenues in our Treasury increase. Voila!

[onecitizen]

42. You might like.........

Conceptual Guerilla's website. Gives you some verbal ammo to fight back with.

www.conceptualguerilla.com

[pasadenaboy]

43. Here is a relatively easy response.

Your brother is referring to the Laffer curve, a discredited economic idea that as taxes are cut, revenues increase.

Reagan cut taxes twice in his administration. Revenues did not go up.

Bush has cut taxes twice. Revenue has not gone up.

If tax cuts meant higher revenue, wouldn't every politician be in favor of it? It would mean more money for government programs, which democrats would love, and lower taxes, which republicans would love, and would make all incumbent politicians look like geniuses, and be reelected over and over. What incumbent politician would be opposed to this? If this were true, there would be no reason for anyone to be opposed to it. But it simply isn't true.

Another example is say this were true, and the government takes in more revenue from taxes with a tax rate at 10% than it does at 20%, would it then take in more at 5%? and 2%, what about 1%? What about 0%? According to that thinking, the government would take in the most tax revenues if it didn't charge any taxes. We all know this is ridiculous.

Now, to be fair, there is a law of diminishing return with taxes, meaning at a certain point the tax burden becomes so much it hurts economic activity at a greater rate than the return you get in taxes. However, our tax rates are no where near that point.