Which tax cuts stimulate the economy?

• Fly4Fun

  

  Some people will write this off immediately as Owen Zidar was a staff economist on the White House Council of Economic advisers for Obama. But his "preliminary" research shows that generally.
  
  His hypothesis was that:
  

  He reasoned that “if tax cuts for high income earners generate substantial economic activity, then states with a large share of high income taxpayers should grow faster following a tax cut for high income earners.”

  
  
  However, this was his finding.
  

  The data show that tax cuts at the top, though, do not not result in faster growth in states with more more high-earners.
  
  “Almost all of the stimulative effect of tax cuts,” Zidar found, “results from tax cuts for the bottom 90%. A one percent of GDP tax cut for the bottom 90% results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10% is 0.13 percentage points and is insignificant statistically.”

  
  
  This will obviously receive a lot of scrutiny. But it is interesting to actually have numbers as opposed to just theories.
  
  Also I'm plugging this as Owen was a college friend of mine and all around great guy.
  
  http://blogs.reuters.com/taxbreak/2012/09/12/which-tax-cuts-stimulate-the-economy/
• BoatShoes

  Fly4Fun;1269452 wrote:Some people will write this off immediately as Owen Zidar was a staff economist on the White House Council of Economic advisers for Obama. But his "preliminary" research shows that generally.
  
  His hypothesis was that:
  
  
  
  However, this was his finding.
  
  
  
  This will obviously receive a lot of scrutiny. But it is interesting to actually have numbers as opposed to just theories.
  
  Also I'm plugging this as Owen was a college friend of mine and all around great guy.
  
  http://blogs.reuters.com/taxbreak/2012/09/12/which-tax-cuts-stimulate-the-economy/[/FONT][/COLOR]

  Good Post. And, your friend Owen makes a needed contribution to our political economy. Props to him. But, don't think it will dissuade the true believers as they have had similar numbers for decades.
  
  The problem is two-fold:
  
  1. The economic argument that people make for reducing marginal rates at the top is not for its "stimulative effect" but that it increases the incentive to work...that is, that high earners are going to work harder and more if their marginal tax rates go down and that will increase gdp over time. In a theoretical world this makes sense but it just doesn't bear fruit in the real world. Income taxes are indeed a disincentive to work but the reality of the world is that you've got to go to work to put food on the table and having a higher rate taken out of your pay may make you grumpier but folks are still going to go (in most cases).
  
  The real effect of tax cuts, as your friend Owen evaluated, has to do with demand and increasing the available dollars for folks who already can afford to consume as much as they want doesn't increase aggregate demand. That is why tax cuts for lower income brackets work and one's for higher brackets have little effect.
  
  2. The reality is that folks arguing for tax cuts at the top income brackets don't really, ultimately care about the economic effects on work incentives. The real argument a moral one. It is morally wrong for the government to tax generally and certainly more so for the government to tax higher income individuals more. Why should they have to pay more for government services and/or pay for programs like food stamps in which they will not participate in all likelihood?
  
  Justice requires taxing individuals in higher income brackets less but that argument doesn't really play that well to the masses so it must be hidden under a veil of dubious economic arguments.
• jmog

  The problem with "tax cuts" for the lower brackets is that most of the "lower brackets" (almost the lowest 50%) don't pay any income taxes at all. So our government typically just hands them more money in credits creating more of a negative tax burden.
  
  Tax cuts is one thing, but we need to stop with the negative tax liability cases. Get rid of the possibility of negative tax liabilities, keep whatever tax cuts/credits you want for the lower brackets, but make the "floor" or minimum being a 0 tax liability and this conservative would be ok with what you are talking about.
• BoatShoes

  jmog;1269584 wrote:The problem with "tax cuts" for the lower brackets is that most of the "lower brackets" (almost the lowest 50%) don't pay any income taxes at all. So our government typically just hands them more money in credits creating more of a negative tax burden.
  
  Tax cuts is one thing, but we need to stop with the negative tax liability cases. Get rid of the possibility of negative tax liabilities, keep whatever tax cuts/credits you want for the lower brackets, but make the "floor" or minimum being a 0 tax liability and this conservative would be ok with what you are talking about.

  I hear what you're saying but why just concentrate on tax credits/tax liability
  
  And individual who ends up with a positive from the gubmint due to tax credits just as likely gets more from the government than they contribute in the form of food stamps and/or medicaid.
  
  They are getting a windfall gain from the taxpayer in proportion to what they put in, even say a 40 hour a week gas station cashier, whether it's through a negative tax liability or other types of government assistance.
  
  In the old days, Milton Friedman and Richard Nixon floated support for negative income taxes because it really is economically as windfall transfer payments (and is probably more efficient).
• jmog

  BoatShoes;1269589 wrote:I hear what you're saying but why just concentrate on tax credits/tax liability
  
  And individual who ends up with a positive from the gubmint due to tax credits just as likely gets more from the government than they contribute in the form of food stamps and/or medicaid.
  
  They are getting a windfall gain from the taxpayer in proportion to what they put in, even say a 40 hour a week gas station cashier, whether it's through a negative tax liability or other types of government assistance.
  
  In the old days, Milton Friedman and Richard Nixon floated support for negative income taxes because it really is economically as windfall transfer payments (and is probably more efficient).

  I know you are far left BS, but I honestly can't believe you are "for" negative tax liabilities. People who maybe "pay" $1000 in federal taxes for the whole year and then get $9000 "back".
  
  My sister in law is one of them, plus she's a moron on top of it and complained she "only" got back $7000 this year. Her idea to get back more next year? WORK LESS HOURS THIS YEAR! I wish I was kidding.
• BoatShoes

  jmog;1269692 wrote:I know you are far left BS, but I honestly can't believe you are "for" negative tax liabilities. People who maybe "pay" $1000 in federal taxes for the whole year and then get $9000 "back".
  
  My sister in law is one of them, plus she's a moron on top of it and complained she "only" got back $7000 this year. Her idea to get back more next year? WORK LESS HOURS THIS YEAR! I wish I was kidding.

  Well I don't know how left can I be when a libertarian in Milton Friedman was for them??? Ronald Reagan supported the Earned Income Tax Credit which generates negative tax liability. I'm only far left in this opinion in the modern political climate that has drastically shifted to the right and holds Ayn Rand in higher regard than Milton Friedman.
  
  And like I said, it's not clear to me why a negative tax liability is so much worse than people who use Food Stamps and/or medicaid way more in proportion to what they pay in taxes.
  
  At least with negative tax liabilities it doesn't have to involve a direct transfer through a government agency.
• QuakerOats

  We have been through this debate many times, and the evidence is incontrovertible that marginal rate cuts always spur economic activity which results in higher revenues to the treasury. Simply a proven fact.
  
  What we should be focusing on are obama's massive '13 tax increases and his 20 other tax hikes buried in obamacare ----- please, tell us, how they will stimulate economic activity? Actually, tell us how we will avoid depression given such confiscatory taxation.
• Devils Advocate

  

  
  
  Seems legit.
• stlouiedipalma

  QuakerOats;1269881 wrote:We have been through this debate many times, and the evidence is incontrovertible that marginal rate cuts always spur economic activity which results in higher revenues to the treasury. Simply a proven fact.
  
  What we should be focusing on are obama's massive '13 tax increases and his 20 other tax hikes buried in obamacare ----- please, tell us, how they will stimulate economic activity? Actually, tell us how we will avoid depression given such confiscatory taxation.

  Care to show us this "incontrovertible" proof? And by "incontrovertible", you'd better have multiple, reliable sources. Otherwise it's just the rantings of a true believer and should be taken as such.
• QuakerOats

  Yes, look at any chart of tax revenues to the US treasury in the 2-6 years following cuts in marginal rates and you will see significant revenue increases: Kennedy, Reagan (in fact, under Reagan revenues nearly doubled), and W.
  
  Reagan, 1983 - $600 billion >> 1988 - $909 billion
  
  W, 2003 - $1.78 trillion >> 2008 - $2.52 trillion
  
  
  It would be helpful and appreciated if all the skeptics would cut and paste this information to a readily accessible file, maybe even print it out and laminate it - wallet size - so they can pull it out whenever necessary to refute the claims of tax-n-spend liberals and all the Krugmans of the world.
  
  http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist01z1.xls
• BoatShoes

  QuakerOats;1270040 wrote:Yes, look at any chart of tax revenues to the US treasury in the 2-6 years following cuts in marginal rates and you will see significant revenue increases: Kennedy, Reagan (in fact, under Reagan revenues nearly doubled), and W.
  
  Reagan, 1983 - $600 billion >> 1988 - $909 billion
  
  W, 2003 - $1.78 trillion >> 2008 - $2.52 trillion
  
  
  It would be helpful and appreciated if all the skeptics would cut and paste this information to a readily accessible file, maybe even print it out and laminate it - wallet size - so they can pull it out whenever necessary to refute the claims of tax-n-spend liberals and all the Krugmans of the world.
  
  http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist01z1.xls

  This has already been covered ad nauseum. President Bush's own economists agree that QuakerOats is F.O.S.
  
  Edward Lazear, President George W. Bush's chair of the council of Economic Advisers said this; "I certainly would not claim that tax cuts pay for themselves."
  
  Alan Viard, Senior Economist on President Bush's Council of Economic Advisers "Federal Revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that."
  
  Douglas Holtz-Eakin, Alan Greenspan and Greg Mankiw have also said the same thing.
  
  And, so does everybody and everything else.
  
  The men I've listed are all card-carrying Republican experts on economic issues. They are not wrong or lying.
  
  This debate has already been parsed on this board and it is a shame we can't even agree on something that all of the evidence agrees on.
  
• IggyPride00

  

  W, 2003 - $1.78 trillion >> 2008 - $2.52 trillion

  2000 - 2.025 Trillion.
  
  In inflation adjusted dollars there was literally zero tax receipt growth over that period.
  
  We did however incur plenty of new debt in the years after the tax cuts when revenues dropped. On the net they lost money big time as the growth in receipts only kept up with inflation, and was never enough to both keep up with inflation and cover the newly accrued debt they caused in the years after they were passed.
• isadore

  gosh a ruddies those bush tax cuts sure did wonders for our economy. wow what the reagan and bush tax cuts did was give us our national debt.
• jmog

  BoatShoes;1269819 wrote:Well I don't know how left can I be when a libertarian in Milton Friedman was for them??? Ronald Reagan supported the Earned Income Tax Credit which generates negative tax liability. I'm only far left in this opinion in the modern political climate that has drastically shifted to the right and holds Ayn Rand in higher regard than Milton Friedman.
  
  And like I said, it's not clear to me why a negative tax liability is so much worse than people who use Food Stamps and/or medicaid way more in proportion to what they pay in taxes.
  
  At least with negative tax liabilities it doesn't have to involve a direct transfer through a government agency.

  Fine, keep negative tax liability but get rid of the other welfare/social programs you just mentioned. The real problem is that most people getting a one is getting all of them. It is a huge drain. It is ungodly how much more "revenue" the country would have at the federal level if they just capped it at "0". You can get every dime back, but not extra payments for nothing.
• stlouiedipalma

  I like the fact that Mitt claims he will bring real tax reform should he win in November. Of course, he can't give us the details of how he will achieve this. Just look at what he told David Gregory this past Sunday.
  
  http://thinkprogress.org/economy/2012/09/09/816841/romney-says-his-plan-to-cut-taxes-on-the-rich-doesnt-actually-cut-taxes-on-the-rich/?mobile=nc
  
  This guy must moonlight as a comedy writer. His material simply kills...
• QuakerOats

  BoatShoes;1270113 wrote:This has already been covered ad nauseum. President Bush's own economists agree that QuakerOats is F.O.S.
  

  The only people that are FOS are those that simply refuse to look at the numbers. AFTER THE BUSH TAX CUTS REVENUES INCREASED BY 40% from 1.7 trillion to $2.6 trillion. THOSE ARE THE CLEAR AND UNDISPUTED FACTS. Just because those FACTS do not comport with your failed arguments for more deficit spending, STOP LYING about the revenue numbers; they are what they are.
  
  Your time would be better spent as a guest on MSNBC; give Rachel a call.
• BoatShoes

  QuakerOats;1271380 wrote:The only people that are FOS are those that simply refuse to look at the numbers. AFTER THE BUSH TAX CUTS REVENUES INCREASED BY 40% from 1.7 trillion to $2.6 trillion. THOSE ARE THE CLEAR AND UNDISPUTED FACTS. Just because those FACTS do not comport with your failed arguments for more deficit spending, STOP LYING about the revenue numbers; they are what they are.
  
  Your time would be better spent as a guest on MSNBC; give Rachel a call.

  President Bush's own economists agree with me. We've covered why nominal dollars over years is worthless so stop using it. Every Republican economic expert disagrees with your claims. Why do you disagree with the very people President Bush trusted most on economic issues? If what you're saying is true, economists like Martin Feldstein wouldn't be bending over backwards in Op-Eds in the Wall Street Journal to pathetically try to argue that Mitt could make his tax plan revenue neutral through the elimination of tax expenditures (Which cannot happen without significant tax raises on the middle class i.e. elimination of home mortgage interest deduction).
  
  Points for the amount of water you will carry for team republican though.
• BoatShoes

  jmog;1270141 wrote:Fine, keep negative tax liability but get rid of the other welfare/social programs you just mentioned. The real problem is that most people getting a one is getting all of them. It is a huge drain. It is ungodly how much more "revenue" the country would have at the federal level if they just capped it at "0". You can get every dime back, but not extra payments for nothing.

  I mean, but why stop there? If we're so concerned about individuals getting more benefits from the government than what they pay I can think of much worse offenders than teh po0rz on m3dicaid.
  
  For instance, the one sole reason we're able to have multi-national firms and robust international trade is because of the United States Navy. And, due to transfer pricing manipulation, almost all multi-national corporations receive gratuitously more benefits from the United States Navy's ensuring safe international trade than they do in contributions. We've really known this since Alfred Thayer Mahan's The Influence of Sea Power Upon History.
  
  This is infinitely more of a drain/windfall than the "drain" caused by the "moocher class" i.e teh p00rz on teh gubmint tit wh0 don't want to work but prefer serving the D3mocrAt Party 0n teh m0dern day plantation; etc.
  
  Should we not try to also make sure that these economic actors aren't getting the ridiculous windfall gains from the protection of the U.S. Navy?
• stlouiedipalma

  QuakerOats;1271380 wrote:The only people that are FOS are those that simply refuse to look at the numbers. AFTER THE BUSH TAX CUTS REVENUES INCREASED BY 40% from 1.7 trillion to $2.6 trillion. THOSE ARE THE CLEAR AND UNDISPUTED FACTS. Just because those FACTS do not comport with your failed arguments for more deficit spending, STOP LYING about the revenue numbers; they are what they are.
  
  Your time would be better spent as a guest on MSNBC; give Rachel a call.

  You sound like the asylum patient who is convinced the bugs are crawling all over him. "But they are really there!! Can't you see them?"
  
  Perhaps you've skipped a dose or 12 of your meds. Call us when you get back on track. I'm sure things will seem better then.
• gut

  You can't cut taxes for people who don't pay any.
  
  You want to stimulate the economy? Then don't pick 8 pockets to sweeten one person's lemonade.
• jmog

  BoatShoes;1271572 wrote:I mean, but why stop there? If we're so concerned about individuals getting more benefits from the government than what they pay I can think of much worse offenders than teh po0rz on m3dicaid.
  
  For instance, the one sole reason we're able to have multi-national firms and robust international trade is because of the United States Navy. And, due to transfer pricing manipulation, almost all multi-national corporations receive gratuitously more benefits from the United States Navy's ensuring safe international trade than they do in contributions. We've really known this since Alfred Thayer Mahan's The Influence of Sea Power Upon History.
  
  This is infinitely more of a drain/windfall than the "drain" caused by the "moocher class" i.e teh p00rz on teh gubmint tit wh0 don't want to work but prefer serving the D3mocrAt Party 0n teh m0dern day plantation; etc.
  
  Should we not try to also make sure that these economic actors aren't getting the ridiculous windfall gains from the protection of the U.S. Navy?

  Sure, I can compromise, eliminate negative tax liabilities and you can raise corporate taxes. Sound good Boat?
• isadore

  over 30 years of increasing tax breaks for the rich at the cost of others and of our national debt, maybe some roll back in Obama's second term.
• jmog

  gut;1272451 wrote:You can't cut taxes for people who don't pay any.
  
  You want to stimulate the economy? Then don't pick 8 pockets to sweeten one person's lemonade.

  Actually they can, and do. This is exactly what I'm talking about. The problem is that to be honest most people who have a negative tax liability don't even realize it. They think they are getting "back the money they put in".
  
  The government says "we are cutting taxes for the poor" but since the poor aren't paying federal taxes anyway they are really just hading them a check for nothing.
• QuakerOats

  BoatShoes;1271555 wrote:President Bush's own economists agree with me. We've covered why nominal dollars over years is worthless so stop using it. Every Republican economic expert disagrees with your claims. Why do you disagree with the very people President Bush trusted most on economic issues? If what you're saying is true, economists like Martin Feldstein wouldn't be bending over backwards in Op-Eds in the Wall Street Journal to pathetically try to argue that Mitt could make his tax plan revenue neutral through the elimination of tax expenditures (Which cannot happen without significant tax raises on the middle class i.e. elimination of home mortgage interest deduction).
  
  Points for the amount of water you will carry for team republican though.

  
  You are in fantasy land.
  
  In nominal terms the revenues went up 40%, and in real terms revenues still went up tremendously - we did not have a 40% increase in CPI from '03 - '08; maybe 12%. Thus revenues went up by a factor triple that of inflation. ALL economists know this. I don't know why you continue to pray at the Krugman altar; he is clearly wrong. Again, the numbers tell the story, not the opinions of economists which vary wildly as they always do. There is simply no denying the huge revenue growth after the rate cuts; the numbers are there for everyone to see.
  
  Pick a new argument.
• BoatShoes

  QuakerOats;1273431 wrote:You are in fantasy land.
  
  In nominal terms the revenues went up 40%, and in real terms revenues still went up tremendously - we did not have a 40% increase in CPI from '03 - '08; maybe 12%. Thus revenues went up by a factor triple that of inflation. ALL economists know this. I don't know why you continue to pray at the Krugman altar; he is clearly wrong. Again, the numbers tell the story, not the opinions of economists which vary wildly as they always do. There is simply no denying the huge revenue growth after the rate cuts; the numbers are there for everyone to see.
  
  Pick a new argument.

  Laughable. I have not quoted a single liberal economist but only card carrying Republican Economists, many of whom are bending over backwards to carry Romney's water to desperately try to argue that his tax proposal could be revenue neutral with the elimination of tax expenditures used by the middle class...let alone raise revenue through growth magic.
  
  For example, N. Gregory Mankiw, Romney's economic adviser and former economic adviser to George W. Bush...A Card Carrying Republican....wrote in his intro economics textbook that people who think cuts in marginal rates increase revenue are Charlatans and Cranks
  
  Do you get it? The guy advising the guy you're going to vote for on economic issues would say that you are a crank for making the argument you're making.
  
  I'm gonna say it again...the guy advising the guy you're going to vote for would call you a crank.