Good post. It's no surprise the Bush tax cuts have had little stimulative effect. Keynes believed excess savings was bad because it was stagnant money; money needs to change hands to stimulate production and jobs. Before anyone jumps on me and says the savings rate is at an all-time low, we have to remember that the top 1% of wealth-holders have considerable savings. When these people are given large tax cuts, the primary effect is to enlarge their savings and does not necessarily flow into capital investment, production and jobs. It's probably the least efficient place to put government funds to work. Targeted tax cuts to the middle and lower classes would be far more efficient, as well as targeted stimulus that encourages production, services and investment. If you give the rich a $1 tax cut, it gets squirreled away in one of many savings accounts. Give a $1 tax cut to the working poor, it gets spent immediately, and stimulates the economy immediately and boosts aggregate demand. This nation's finest hours and highest prosperity came largely under Keynesian-style economics. The record under supply-side economics has been spotty and much less impressive.
Where did the blue line come from? How was it created? The deficit is a function of the number of jobs filled. Less workers paying taxes can also lead to higher taxes. By the logic of the graph, we could just tax everyone double what the blue line is indicating, and then we'd be running a surplus. But it doesn't work that way. Sometimes you need to stimulate the economy to create more tax payers. The amount of tax collected is revenue per tax payer TIMES the number of tax payers. To maximize that function, sometimes it makes sense to lower taxes. Some fast food restaurants find they make more revenue by selling the food cheaper. Though they make less money per food item, the greater sales more than makes up for it... In summary, its not something static that you can just extrapolate. Where the blue line is located is a function of job availability, and I want to meet the man, or the group, that can accurately put that line anywhere on the graph. Especially for the year 2012? Come on! SM
I know, I know. Since taxing the rich obviously is bad, why don't we eliminate their taxes, and get all the necessary money for government functions by a flat tax on everybody else---we don't call them poor, they are the 'pre-rich'. Make them pay $100k per year. Those who are unable and unwilling to pay because of insufficient supply-side enthusiasm may lease their citizenship rights via a work-unit-contract for a certain number of years (called "slavery" by traitorous liberals), and upon certification for good political behavior, they may have their debt reduced by combat service in military ranks.
Anyone wanna bet we'll get an inverted tax curve by 2010? If the rich wanna cry about taxes why not move to Communist China. At least they'll be closer to their manufacturing plants.
Why can´t government operate on only a low flat income tax rate? Have you ever thought of that? Why should success be penalized? If the politicans had less money to work with they would be forced to use it for things that truly do benefit EVERYONE. When the tax cuts were initiated all tax brackets were lowered by 2%, except for the top rate which was lowered from 38.6 to 35. This is FACT. The reason you always hear in the media that 40% of the tax cuts went to the rich is because those same people were paying 40% of the government total revenue from the income tax. The attached pdf shows the breakdown for 2003, 40.79% of tax revenue from 2.74% of the returns with over $200k in AGI. And the estate tax & gift taxes only amount to 1.13% of govt revenue in fiscal year ending 9/30/2005. Phasing it out is not a big deal because the truly wealthy are already able to circumvent it anyway.
Income tax is only part of the tax burden that people have, and is the most progressive towards higher incomes. All the other taxes which are very important to most, namely Social Security/FICA (recall the tax you see on a W2 is only HALF the actual tax), sales taxes, etc are regressive. The Feds have pushed more liability onto the localities which have less progressive tax schemes, being dominated by sales and property taxes. Focusing only on one tax distorts the entire picture. "success" isn't being penalized by any imagination---it's being given a blowjob. More specifically, economic forces are making a few people in developed world very very wealthy and many others are having more problems. Government policy should not exacerbate that, and should ameliorate it, because otherwise the breakdown in society would be bad for everybody. Yes, government could do less but you have to convince people to go without the services and benefits thereof. That's harder than you think. If you're not willing to do that, then just screwing the many---either by taxing them or throwing huge debt onto them---is a bad idea.
This is great news... Budget deficits will force budget cuts. The more the better. America is better off sending huge interest payments to China and Japan than interfer with the American economy. Anything outside of defense, education, health, and justice needs to go!