Posting Towards Gomorrah

[sgtclub]

Originally posted by taxwonk
You're heading for the extreme again. At a 95% tax rate, I agree with what you're saying entirely. When you start talking about the effect at rates of say, 28% vs. 35%, I don't think the principle applies. Neither tax rate is high enough to change income earning behavior.

But it is enough to change the way capital is allocated. A reduction in the dividend tax rate, for example, certainly has consequences.

[Mmmm, Burger (C.J.)]

Originally posted by sgtclub
I wasn't arguing anything, I just posted a story, although I do believe that there is a correlation between the Bush cuts and the increased revenues.

Okay--no need to argue. Just explain how those two are correlated.

[Mmmm, Burger (C.J.)]

Originally posted by sgtclub
But it is enough to change the way capital is allocated. A reduction in the dividend tax rate, for example, certainly has consequences.

Sure. Companies pay more dividends instead of retaining earnings adn repurchasing shares (which lead to higher k-gains taxed at the k-gains rate).

And, even putting that aside, you can't really say it changes long-run behavior on the basis of a change that many perceive will last only as long as a republican administration.

[sgtclub]

Originally posted by Mmmm, Burger (C.J.)
Okay--no need to argue. Just explain how those two are correlated.

It's a supply side argument, but I have nothing to back it up. That's why I said that it is my "belief."

[sgtclub]

Originally posted by Mmmm, Burger (C.J.)
Sure. Companies pay more dividends instead of retaining earnings adn repurchasing shares (which lead to higher k-gains taxed at the k-gains rate).

And, even putting that aside, you can't really say it changes long-run behavior on the basis of a change that many perceive will last only as long as a republican administration.

That and more deals are structured as equity plays instead of debt. The point is that it is not enough to look at tax rates and income, as Wonk seems to suggest. You also need to look at the type of tax cuts and the behavior changes resulting thereform.

[taxwonk]

Originally posted by sgtclub
But it is enough to change the way capital is allocated. A reduction in the dividend tax rate, for example, certainly has consequences.

Yep, it increases the amount of capital distributed to shareholders as dividends, reducing the amount of earnings retained for investment. The evidence is mixed, but it appears that at least as much of these dividends are "invested" in imported sports cars and expensive dinners as are invested in more or different stocks.

Longer term, it increases the amount of the tax burden that has to be borne by wage-earners.

[Mmmm, Burger (C.J.)]

Originally posted by sgtclub
That and more deals are structured as equity plays instead of debt. The point is that it is not enough to look at tax rates and income, as Wonk seems to suggest. You also need to look at the type of tax cuts and the behavior changes resulting thereform.

That's a remarkable proposition: changes in tax rates change behavior.

[Spanky]

Originally posted by taxwonk
Econometrics isn't really my field, so I'm approaching the edge of my ability to discuss the issue. However, I am certain that the Laffer Curve purports to demonstrate the elasticity of taxable income earning. To put it in the terms it is most commonly expressed: the greater the tax rate, the less tax will be generated because the increase in taxes acts as a disincentive to work harder to earn more income.

No it because high taxes start crowding out investment and hurt the economy. The less money people have the less money they have to invest and consume. The higher the corporate tax rate, the less money companies have to employ people or invest. High tax rates all over the world have been dropped because they hurt the economy.

There is no question that the lower the tax rates the better it is for the economy. However, you can't go too low because then you bleed the government and prevent it from providing for the infrastructure that is necessary for growth. With no government you get no growth.

However, above that level the issue is the more you tax now the more you lose in the future. The laffer curve states that when taxes reach a certain level they hurt growth so much that over the next few years revenue growth will dimish and a certain point they will actually cause overall revenues to diminsh.

At a certain point in the curve, over a five year period tax increase will actually lead to less revenue because of the loss in growth and a tax decrease will lead to more revenue because the growth will outweigh the cuts.

Just a small increase in the GNP dramatically increases tax revenue. So if a tax decrease brings in even a little rise in the GNP there is no question that such tax decrease can compenstae for the lost revenue through growth.

The Supply Siders argue that the Reagan tax cuts provided the growth that led to balancing the budget in the Clinton administration. In other words we grew our way out of the deficit.

So to maximise government revenue you need to find the point where if you raise taxes you get diminshing marginal returns and at that point you stop. That is the theory anyway.

There is no question the theory is sound, the issue is where is the maximum point on the curve. Conservatives think we are above it, and liberals generally think we are below it.

[Shape Shifter]

Originally posted by Spanky
No it because high taxes start crowding out investment and hurt the economy. The less money people have the less money they have to invest and consume. The higher the corporate tax rate, the less money companies have to employ people or invest. High tax rates all over the world have been dropped because they hurt the economy.

There is no question that the lower the tax rates the better it is for the economy. However, you can't go too low because then you bleed the government and prevent it from providing for the infrastructure that is necessary for growth. With no government you get no growth.

However, above that level the issue is the more you tax now the more you lose in the future. The laffer curve states that when taxes reach a certain level they hurt growth so much that over the next few years revenues growth will dimish and a certain point they will actually cause revenues to diminsh over the next few years.

So over a five year period tax increase will actually lead to less revenue because of the loss in growth and a tax decrease will lead to more revenue because the growth will outweigh the

Just a small increase in the GNP dramatically increase tax revenue. So if a tax decrease brings in even a little rise in the GNP there is no question that such tax decrease will increase revenue.

The Supply Siders argue that the Reagan tax cuts provided the growth that led to balancing the budget in the Clinton administration. In other words we grew our way out of the deficit.

So to maximise government revenue you need to find the point where if you raise taxes you get diminshing marginal returns. That is the theory anyway.

There is no question the theory is sound, the issue is where is the maximum point on the curve. Conservatives think we are above it, and liberals generally think we are below it.

That is so Gay.

[sgtclub]

Originally posted by taxwonk
Longer term, it increases the amount of the tax burden that has to be borne by wage-earners.

This is only true if you view things as static which, of course, they are not.

[Mmmm, Burger (C.J.)]

Originally posted by Spanky

So to maximise government revenue you need to find the point where if you raise taxes you get diminshing marginal returns and at that point you stop. That is the theory anyway.

There are two separate questions:

1) At what tax rate is revenue maximized
2) What is the optimal level of revenue and government spending for maximum sustained growth.

1 is much greater than 2.

[Spanky]

Originally posted by Mmmm, Burger (C.J.)
There are two separate questions:

1) At what tax rate is revenue maximized
2) What is the optimal level of revenue and government spending for maximum sustained growth.

1 is much greater than 2.

That is true. But in the long run point one and two will always be the same because point two will always maximise revenues in the long term. In other words, one percent of a trillion dollar economy is much more revenue than ten percent of a billion dollar economy. Or another way to put it, in the long run, economic growth is by far the most important factor in determining government revenue.

Another important point is that some government spending (and the taxes required for such spending) actually increase economic growth. Education and Infrastructure (which includes the legal system). So although taxing for these two items may decrease economic growth, the spending on them will increase long term growth more than the taxes to create them will reduce growth.

Finally some expenditures of government, although taxing to provide for them will decrease economic growth in the long run, the loss in future government revenue is offset by the present moral imperative (feeding the poor, protecting the environment etc).

[Tyrone Slothrop]

Originally posted by Spanky
That is true.

AONT, do you read your PMs?

[taxwonk]

Originally posted by sgtclub
This is only true if you view things as static which, of course, they are not.

Actually, it's true because things aren't static. As tax revenues decrease because one form of income (dividends) are taxed at lower rates, one of two things must happen: either expenditures have to decrease correspondent with the reduced revenues or taxes on other income (wages) must increase to make up the gap.

We've seen that the current administration is incapable of reducing spending. To be fair, no administration in recent history has managed to reduce expenditures in any meaninful way. Therefore, the tax revenue derived from wages will have to increase.

[Tyrone Slothrop]

• A source with firsthand knowledge of events says that this coming Thursday, Kirk Fordham — former chief of staff to both Foley and more recently Rep. Tom Reynolds, R-N.Y. — will testify that a few years ago he was told by then-House clerk Jeff Trandahl that Foley had been stopped while trying to enter the pages' dorm in an apparently intoxicated state. The source said Fordham will testify that he recalls this being the event that convinced both him and Trandahl to warn Hastert's office, with Fordham designated to have the conversation with Hastert's chief of staff, Scott Palmer. The source said that both aides had been watching Foley's behavior with pages and that Fordham had counseled Foley to watch his behavior.

AB News

Now tell me that the moat with the alligators was real, too.