Higher taxes does NOT equal higher revenues: PROOF

Unless there are other variables involved in the equation.

Well said, you are correct. The Laffer Curve really only begs the question. We already know it's "nutty" to be operating at either end, so we're still left with the question, what is the "sweet spot"? And is the sweet spot the same for all entities involved, whether laborer, rentier, sole proprietorship, small corporations, big corporations, international corporations, etc.?

 

Again, Jem, unless we can determine that the tax cuts and the revenue increases were related as cause and effect we can' t draw the conclusion you have. Unfortunately the picture is clouded. All of these cuts were immediately preceded and/or accompanied by large increases in government spending, which also results in revenue increases. Remember Kennedy was deceased by the time his cuts went into effect. The Kennedy years were years of deficits that eventually skyrocketed as we got further into Vietnam under Johnson and Nixon. (Also be careful that FICA revenue doesn't get included, particularly if there is a FICA rate increase during the period your looking at.)

I found this on the net. Pretty interesting. http://www.econdataus.com/taxcuts.html

 

I noticed in reading the article I gave the link for above, that the Kennedy cuts, which took the top rate from 91% to 70%, may have actually increased revenue, and this would seem to be consistent with Laffer. There is no evidence at least that the cuts were counter productive in terms of revenue. I would tend to think that those cuts were productive and likely did minimally increase revenues, whereas the Reagan cuts seem to have only exacerbated the monstrous Reagan deficits.

I have not met anyone yet who is in favor of high taxes, but we are only fooling ourselves to champion low taxes in an atmosphere of fiscal profligacy.

Expenditures we don't pay for directly via direct taxation we will pay for indirectly via inflation and lowered living standards. I'm fed up with politicians preaching increased defense spending and lower taxes. They are either intentionally misleading or they are nuts.

 

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You can always find excuses because markets have many variables. But, if after Bush, Reagan, Kennedy, and Mellon tax cuts revenues went up.

There seems to be pattern. Could it be the tax cuts change activity towards business and investment?


"As the Wall Street Journal’s Stephen Moore illuminates in his 2008 book “The End of Prosperity” (Threshold Editions), Mr. Bush’s 2001 tax cuts failed to revive an economy still staggering from the bursting of the dot-com bubble. Mr. Bush’s strategy had been to adopt a demand-side, Keynesian stimulus, hoping that putting a few extra dollars in Americans’ pockets would jump-start the economy through increased consumption. This approach faltered, not just because Americans opted to save their rebates, but because it neglected the importance of business investment to overall growth. Predictably, the economy lagged and government revenues stagnated. What the United States needed then (and needs now) was to stimulate investment, not consumption.

By 2003, Mr. Bush grasped this lesson. In that year, he cut the dividend and capital gains rates to 15 percent each, and the economy responded. In two years, stocks rose 20 percent. In three years, $15 trillion of new wealth was created. The U.S. economy added 8 million new jobs from mid-2003 to early 2007, and the median household increased its wealth by $20,000 in real terms."


http://www.washingtontimes.com/news/2010/feb/3/bush-tax-cuts-boosted-federal-revenue/

 

You can always find excuses because markets have many variables. But, if after Bush, Reagan, Kennedy, and Mellon tax cuts revenues went up.

There seems to be pattern. Could it be the tax cuts change activity towards business and investment?


As the Wall Street Journal’s Stephen Moore illuminates in his 2008 book “The End of Prosperity” (Threshold Editions), Mr. Bush’s 2001 tax cuts failed to revive an economy still staggering from the bursting of the dot-com bubble. Mr. Bush’s strategy had been to adopt a demand-side, Keynesian stimulus, hoping that putting a few extra dollars in Americans’ pockets would jump-start the economy through increased consumption. This approach faltered, not just because Americans opted to save their rebates, but because it neglected the importance of business investment to overall growth. Predictably, the economy lagged and government revenues stagnated. What the United States needed then (and needs now) was to stimulate investment, not consumption.

By 2003, Mr. Bush grasped this lesson. In that year, he cut the dividend and capital gains rates to 15 percent each, and the economy responded. In two years, stocks rose 20 percent. In three years, $15 trillion of new wealth was created. The U.S. economy added 8 million new jobs from mid-2003 to early 2007, and the median household increased its wealth by $20,000 in real terms.


http://www.washingtontimes.com/news/2010/feb/3/bush-tax-cuts-boosted-federal-revenue/

By the way, I am for cutting taxes and cutting spending more.

 

They do if there's crowding out.

 

why is it so hard for a leftist to understand... that net after taxes profit is a major factor in investment decisions?

Even Buffet's Charlie Munger says so.

If the net goes up more investment is made. Which stimulates the economy and should increase tax revenues, jobs, take people off the dole. Houses start, cars get purchased. its a massive virtuous circle.

10 percent of a thousand is better than 80% of 100.

Which is basically what capitalism illustrated over the last half of the 20th century. Why is that lesson so difficult to see.

 

Not if cash is plentiful, credit is cheap, and inflation and demand are zip.

 

you are seeing it from an existing company stand point.
I am talking about the formation of new businesses or investment in current ones.

If a company is generating a lot of cash, investors will wish to start a competing company if the net is high enough... creating more jobs and better prices for consumers.

Regarding demand. Lower prices, lower taxes create demand. there is always demand for new better, more useful products and projects.

You sense of demand right now is correct. The threat of obama care, the threat of higher taxes, the threat of 4 more years of wasteful spending... is drying up everyone's appetite for risk and investment.