Republican Theology of Tax Cuts

[Palehorse]

Here's an example of just how twisted up the Republicans have become in trying to buy votes and implement failed (long term perspective) policies of the past.

As David Stockman, President Reagan's former budget director, says:


– We need "a higher tax burden on the upper income."

– "After 1985, the Republican Party adopted the idea that tax cuts can solve the whole problem, and that therefore in the future, deficits didn't matter and tax cuts would be the solution of first, second, and third resort."

– The 2001 Bush tax cut "was totally not needed."

– On claims that Reagan proved tax cuts lead to higher government revenues: "Reagan proved nothing of the kind and yet that became the mantra and it just led the Republican Party away from its traditional sound money, fiscal restraint."

– Former Vice President Cheney "should have known better" than claim the Bush tax cuts would pay for themselves.

– "I'll never forgive the Bush administration and Paulson for basically destroying the last vestige of fiscal responsibility that we had in the Republican Party. After that, I don't know how we ever make the tough choices."


http://thinkprogress.org/2010/11/28/stockman-slams-gop-taxes/

Indeed. Republicans have adopted the view that tax cuts for the rich are the "savior" of downward spiraling economic times, and see it as an cure all! Nothing could be further from the truth and there are many well educated, respected, and highly credentialed individuals who are experts in economics, who support tax cuts for the lower income individuals and a higher tax burden for the upper 2% of the population.

[Henry Hawk]

In 1980, the top income tax rate was 70%.....the richest 1% paid only 19% of all income taxes....when the rate was cut to 35%, they now pay more than double of that share...

86% of all of the federal income is paid by the top 25% of the income earners, that same group only paid 84% of the federal income before 2000.

http://online.wsj.com/article/SB119786208643933077.html

these are facts....

btw...this guy was indicted in a defraud scheme for a Company he was CEO of, this company file chapter 11 AFTER he resigned....he manipulated revenues and earnings...he ended up paying $13 million dollars to keep from going to jail, and he cost as many as 15,000 employee's their jobs around the world

just sayin, this guy is libel to say anything for a buck and sell a book....

[Palehorse]

. . .
these are facts....

btw...this guy was indicted in a defraud scheme for a Company he was CEO of, this company file chapter 11 AFTER he resigned....he manipulated revenues and earnings...he ended up paying $13 million dollars to keep from going to jail, and he cost as many as 15,000 employee's their jobs around the world

just sayin, this guy is libel to say anything for a buck and sell a book....

So you are saying the chief architect of Reagan's fiscal policy, and leader of the Office of Management and Budget during the Reagan administration is a crook? There's a surprise!   Once a crook always a crook no?

He's not selling a book that I am aware of, but he is making those statements on CNN!

[Palehorse]

In 1980, the top income tax rate was 70%.....the richest 1% paid only 19% of all income taxes....when the rate was cut to 35%, they now pay more than double of that share...

86% of all of the federal income is paid by the top 25% of the income earners, that same group only paid 84% of the federal income before 2000.

http://online.wsj.com/article/SB119786208643933077.html

. . .

DECEMBER 17, 2007

[Henry Hawk]

DECEMBER 17, 2007

so?...........the facts does not change......the less percentage of tax posed on the rich, the more they paid, overall.  Put them back in that 70% bracket and see if our revenues climb.......I seriously doubt it.

to me this is just commons sense.....

[Palehorse]

so?...........the facts does not change......the less percentage of tax posed on the rich, the more they paid, overall.  Put them back in that 70% bracket and see if our revenues climb.......I seriously doubt it.

to me this is just commons sense.....

That's not true, but if you want to believe that tripe you go right ahead, Maybe we should all chug on over to mamby pamby land too!

The fact is the revenues are not climbing because the rich are keeping their money just like the rest of us. They aren't spending and they are walking away from million dollar mortgages at a higher percentage than the poor are; with no ramifications what so ever, despite the fact their personal holdings and wealth could pay the mortgage in full many times over.

They aren't creating jobs, they aren't growing our economy, and in fact have barred the doors against the wolves like everyone else.

A friend of mine lives in a rural area of Arizona that contains high end properties and housing. He has watched the lions share of his neighbors walk away from those million dollar homes, seen the property go up for auction, and watched as the same family that lived there bought the house for cash payment at a fraction of what their former mortgage was. Yeah, thats real nice isn't it? They end up living in the very same house they once had a huge mortgage on, and now own it outright!

The fact is the reason this economy is in the shape it is in can be traced back to failed economic policies that encouraged companies to relocate to third world countries because there were no economic penalties in doing so; or at least none that would negatively impact their market share in the United States.

Now third world companies churn out the consumer products this country uses the most, but increasingly the life-blood of this economy, the working class, can no longer afford those things because their jobs used to be making them. Instead, they are slinging hash for minimum wage and facing the prospect of increased healthcare costs, taxation rates, and the implementation of "fees" for services historically covered by property taxes. . . (Double taxation).

[Palehorse]

. . .Reagan left three major adverse legacies at the end of his second term. First, the privately held federal debt increased from 22.3 percent of GDP to 38.1 percent and, despite the record peacetime expansion, the federal deficit in Reagan's last budget was still 2.9 percent of GDP. Second, the failure to address the savings and loan problem early led to an additional debt of about $125 billion. Third, the administration added more trade barriers than any administration since Hoover. The share of U.S. imports subject to some form of trade restraint increased from 12 percent in 1980 to 23 percent in 1988.

There was more than enough blame to go around for each of these problems. Reagan resisted tax increases, and Congress resisted cuts in domestic spending. The administration was slow to acknowledge the savings and loan problem, and Congress urged forbearance on closing the failing banks. Reagan's rhetoric strongly supported free trade, but pressure from threatened industries and Congress led to a substantial increase in new trade restraints. . .

http://www.econlib.org/library/Enc1/Reaganomics.html

[Henry Hawk]

That's not true, but if you want to believe that tripe you go right ahead, Maybe we should all chug on over to mamby pamby land too!

The fact is the revenues are not climbing because the rich are keeping their money just like the rest of us. They aren't spending and they are walking away from million dollar mortgages at a higher percentage than the poor are; with no ramifications what so ever, despite the fact their personal holdings and wealth could pay the mortgage in full many times over.

They aren't creating jobs, they aren't growing our economy, and in fact have barred the doors against the wolves like everyone else.

A friend of mine lives in a rural area of Arizona that contains high end properties and housing. He has watched the lions share of his neighbors walk away from those million dollar homes, seen the property go up for auction, and watched as the same family that lived there bought the house for cash payment at a fraction of what their former mortgage was. Yeah, thats real nice isn't it? They end up living in the very same house they once had a huge mortgage on, and now own it outright!

The fact is the reason this economy is in the shape it is in can be traced back to failed economic policies that encouraged companies to relocate to third world countries because there were no economic penalties in doing so; or at least none that would negatively impact their market share in the United States.

Now third world companies churn out the consumer products this country uses the most, but increasingly the life-blood of this economy, the working class, can no longer afford those things because their jobs used to be making them. Instead, they are slinging hash for minimum wage and facing the prospect of increased healthcare costs, taxation rates, and the implementation of "fees" for services historically covered by property taxes. . . (Double taxation).

and do you think raising their taxes WILL create jobs and stimulate our economy?  I have that answer and it is an loud NO.

I think it is time to raise tarriffs on China and other major importing countries.......but, we have got to get some consumer confidence going....and get this money we have right here, circulating......extending these tax cuts will have a positive impact on wall street and entreprenuers.....raising taxes will do just the opposite.

call it tripe if you want too, but I may not be the educated, free-spirited thinker that posses this forum...but I have plenty of common sense, and this is clearly an open and shut case...imo


as far as Reagans legacies, I think he had more of a positive effect than the negatives....there was a massive compromise for him to achieve his agenda's....but, you are right, there is plenty of room to place the blame .... but we need to move forward, and make sound moves......

[Palehorse]

Mises Daily: Wednesday, June 09, 2004 by Murray N. Rothbard

. . .Government Spending. How well did Reagan succeed in cutting government spending, surely a critical ingredient in any plan to reduce the role of government in everyone's life? In 1980, the last year of free-spending Jimmy Carter the federal government spent $591 billion. In 1986, the last recorded year of the Reagan administration, the federal government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically not reducing government expenditures.

Sophisticated economists say that these absolute numbers are an unfair comparison, that we should compare federal spending in these two years as percentage of gross national product. But this strikes me as unfair in the opposite direction, because the greater the amount of inflation generated by the federal government, the higher will be the GNP. We might then be complimenting the government on a lower percentage of spending achieved by the government's generating inflation by creating more money. But even taking these percentages of GNP figures, we get federal spending as percent of GNP in 1980 as 21.6%, and after six years of Reagan, 24.3%. A better comparison would be percentage of federal spending to net private product, that is, production of the private sector. That percentage was 31.1% in 1980, and a shocking 34.3% in 1986. So even using percentages, the Reagan administration has brought us a substantial increase in government spending.

Also, the excuse cannot be used that Congress massively increased Reagan's budget proposals. On the contrary, there was never much difference between Reagan's and Congress's budgets, and despite propaganda to the contrary, Reagan never proposed a cut in the total budget.

Deficits. The next, and admittedly the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down comfortably to about $200 billion, a level that seems to be permanent, despite desperate attempts to cook the figures in one-shot reductions.

This is by far the largest budget deficit in American history. It is true that the $50 billion deficits in World War II were a much higher percentage of the GNP; but the point is that that was a temporary, one-shot situation, the product of war finance. But the war was over in a few years; and the current federal deficits now seem to be a recent, but still permanent part of the American heritage.

One of the most curious, and least edifying, sights in the Reagan era was to see the Reaganites completely change their tune of a lifetime. At the very beginning of the Reagan administration, the conservative Republicans in the House of Representatives, convinced that deficits would disappear immediately, received a terrific shock when they were asked by the Reagan administration to vote for the usual annual increase in the statutory debt limit. These Republicans, some literally with tears in their eyes, protested that never in their lives had they voted for an increase in the national debt limit, but they were doing it just this one time because they "trusted Ronald Reagan" to balance the budget from then on. The rest, alas, is history, and the conservative Republicans never saw fit to cry again. Instead, they found themselves adjusting rather easily to the new era of huge permanent deficits. The Gramm-Rudman law, allegedly designed to eradicate deficits in a few years, has now unsurprisingly bogged down in enduring confusion.

Even less edifying is the spectre of Reaganomists who had inveighed against deficits—that legacy of Keynesianism—for decades. Soon Reaganite economists, especially those staffing economic posts in the executive and legislative branches, found that deficits really weren't so bad after all. Ingenious models were devised claiming to prove that there really isn't any deficit. Bill Niskanen, of the Reagan Council of Economic Advisors, came up with perhaps the most ingenious discovery: that there is no reason to worry about government deficits, since they are balanced by the growth in value of government assets. Well, hooray, but it is rather strange to see economists whose alleged goal is a drastic reduction in the role of government cheering for ever greater growth in government assets. Moreover, the size of government assets is really beside the point. It would only be of interest if the federal government were just another private business firm, about to go into liquidation, and whose debtors could then be satisfied by a parceling out of its hefty assets. The federal government is not about to be liquidated; there is no chance, for example, of an institution ever going into bankruptcy or liquidation that has the legal right to print whatever money it needs to get itself—and anyone else it favors—out of any financial hole. . .

. . . One way in which Ronald Reagan has tried to seize the moral high road on the deficit question is to divorce his rhetoric from reality even more sharply than usual. Thus, the proposer of the biggest deficits in American history has been calling vehemently for a Constitutional amendment to require a balanced budget. In that way, Reagan can lead the way toward permanent $200 billion deficits, while basking in the virtue of proposing a balanced budget amendment, and trying to make Congress the fall guy for our deficit economy. . .

Tax Cuts. One of the few areas where Reaganomists claim success without embarrassment is taxation. Didn't the Reagan administration, after all, slash income taxes in 1981, and provide both tax cuts and "fairness" in its highly touted tax reform law of 1986? Hasn't Ronald Reagan, in the teeth of opposition, heroically held the line against all tax increases?

The answer, unfortunately, is no. In the first place, the famous "tax cut" of 1981 did not cut taxes at all. It's true that tax rates for higher-income brackets were cut; but for the average person, taxes rose, rather than declined. The reason is that, on the whole, the cut in income tax rates was more than offset by two forms of tax increase. One was "bracket creep," a term for inflation quietly but effectively raising one into higher tax brackets, so that you pay more and proportionately higher taxes even though the tax rate schedule has officially remained the same. The second source of higher taxes was Social Security taxation, which kept increasing, and which helped taxes go up overall. Not only that, but soon thereafter; when the Social Security System was generally perceived as on the brink of bankruptcy, President Reagan brought in Alan Greenspan, a leading Reaganomist and now Chairman of the Federal Reserve, to save Social Security as head of a bipartisan commission. The "saving," of course, meant still higher Social Security taxes then and forevermore. . .

Since the tax cut of 1981 that was not really a cut, furthermore, taxes have gone up every single year since, with the approval of the Reagan administration. But to save the president's rhetorical sensibilities, they weren't called tax increases. Instead, ingenious labels were attached to them; raising of "fees," "plugging loopholes" (and surely everyone wants loopholes plugged), "tightening IRS enforcement," and even revenue enhancements." I am sure that all good Reaganomists slept soundly at night knowing that even though government revenue was being "enhanced," the president had held the line against tax increases.

"Reagan's foreign economic policy has been the exact opposite of its proclaimed devotion to free trade and free markets."
The highly ballyhooed Tax "Reform" Act of 1986 was supposed to be economically healthy as well as "fair"; supposedly "revenue neutral," it was to bring us (a) simplicity, helping the public while making the lives of tax accountants and lawyers miserable; and (b) income tax cuts, especially in the higher income brackets and in everyone's marginal tax rates (that is, income tax rates on additional money you may earn); and offset only by plugging those infamous loopholes. The reality, of course, was very different, In the first place, the administration has succeeded in making the tax laws so complicated that even the IRS admittedly doesn't understand it, and tax accountants and lawyers will be kept puzzled and happy for years to come.

Secondly, while indeed income tax rates were cut in the higher brackets, many of the loophole plugs meant huge tax increases for people in the upper as well as middle income brackets. The point of the income tax, and particularly the marginal rate cuts, was the supply-sider objective of lowering taxes to stimulate savings and investment. But a National Bureau study by Hausman and Poterba on the Tax Reform Act shows that over 40% of the nation's taxpayers suffered a marginal tax increase (or at best, the same rate as before) and, of the majority that did enjoy marginal tax cuts, only 11% got reductions of 10% or more. In short, most of the tax reductions were negligible. Not only that; the Tax Reform Act, these authors reckoned, would lower savings and investment overall because of the huge increases in taxes on business and on capital gains. Moreover savings were also hurt by the tax law's removal of tax deductibility on contributions to IRAs.

Not only were taxes increased, but business costs were greatly raised by making business expense meals only 80% deductible, which means a great expenditure of business time and energy keeping and shuffling records. And not only were taxes raised by eliminating tax shelters in real estate, but the law's claims to "fairness" were made grotesque by the retroactive nature of many of the tax increases. Thus, the abolition of tax shelter deductibility was made retroactive, imposing huge penalties after the fact. This is ex post facto legislation outlawed by the Constitution, which prohibits making actions retroactively criminal for a time period when they were perfectly legal. A friend of mine, for example, sold his business about eight years ago; to avoid capital gains taxes, he incorporated his business in the American Virgin Islands, which the federal government had made exempt from capital gains taxes in order to stimulate Virgin Islands development. Now, eight years later, this tax exemption for the Virgin Islands has been removed (a "loophole" plugged!) but the IRS now expects my friend to pay full retroactive capital gains taxes plus interest on this eight-year old sale. Let's hear it for the "fairness" of the tax reform law!

But the bottom line on the tax question: is what happened in the Reagan era to government tax revenues overall? Did the amount of taxes extracted from the American people by the federal government go up or down during the Reagan years? The facts are that federal tax receipts were $517 billion in the last Carter year of 1980. In 1986, revenues totaled $769 billion, an increase of 49%. Whatever that is, that doesn't look like a tax cut. But how about taxes as a percentage of the national product? There, we can concede that on a percentage criterion, overall taxes fell very slightly, remaining about even with the last year of Carter. Taxes fell from 18.9% of the GNP to 18.3%, or for a better gauge, taxes as percentage of net private product fell from 27.2% to 26.6%. A large absolute increase in taxes, coupled with keeping taxes as a percentage of national product about even, is scarcely cause for tossing one's hat in the air about a whopping reduction in taxes during the Reagan years.

In recent months, moreover; the Reagan administration has been more receptive to loophole plugging, fees, and revenues than ever before. To quote from the Tax Watch column in the New York Times (October 13, 1987): "President Reagan has repeatedly warned Congress of his opposition to any new taxes, but some White House aides have been trying to figure out a way of endorsing a tax bill that could be called something else.". . .


Deregulation. Another crucial aspect of freeing the market and getting government off our backs is deregulation, and the administration and its Reaganomists have been very proud of its deregulation record. However, a look at the record reveals a very different picture. In the first place, the most conspicuous examples of deregulation; the ending of oil and gasoline price controls and rationing, the deregulation of trucks and airlines, were all launched by the Carter administration, and completed just in time for the Reagan administration to claim the credit. Meanwhile, there were other promised deregulations that never took place; for example, abolition of natural gas controls and of the Department of Energy.

Overall, in fact, there has probably been not deregulation, but an increase in regulation. Thus, Christopher De Muth, head of the American Enterprise Institute and a former top official of Reagan's Office of Management and the Budget, concludes that "the President has not mounted a broad offensive against regulation. There hasn't been much total change since 1981. There has been more balanced administration of regulatory agencies than we had become used to in the 1970s, but many regulatory rules have been strengthened."

In particular, there has been a fervent drive, especially in the past year; to intensify regulation of Wall Street. A savage and almost hysterical attack was launched late last year by the Securities and Exchange Commission and by the Department of Justice on the high crime of "insider trading." Distinguished investment bankers were literally hauled out of their offices in manacles, and the most conspicuous inside trader received as a punishment (1) a fine of $100 million; (2) a lifetime ban on any further security trading, and (3) a jail term of one year, suspended for community service. And this is the light sentence, in return for allowing himself to be wired and turn informer on his insider trading colleagues. [Editor's note: Ivan Boesky was sentenced to three years in prison.]. . .

http://mises.org/daily/1544

so?...........the facts does not change......

[Henry Hawk]

an example of what I am trying to say....

Former President Ronald Reagan used to tell the story of his experiences as an actor in the high tax era of the 1950s. He found that his income from being the lead actor in five feature film productions each year left his family with a comfortable income. However, if he made a sixth movie the additional income earned from that movie would push him into a higher tax bracket (which was in the 90% range in those days) which, after paying the higher tax on that portion of his income, left him and his family with very little additional income for that year. The 90% tax on his income earned by making more than five movies per year was the same as having his pay for additional movies cut by 90%. Faced with the choice of spending time home relaxing with his family or working on location for a few weeks for 10% of his normal pay, he choose to limit himself to five films. This, of course meant that many of the other workers on the set whose jobs and income were tied to Reagan's movies were also limited to five films per year and, since they were in lower tax brackets, they suffered a cut in income due to less work.

[Palehorse]

There are two reasons for these numbers surrounding Reaganomics: One is they start with a recession, the change in the economy is responsible for most of these changes. The second reason is a short term effect.  During 1981 when there was talk of a Capital Gains Tax cut people held off selling their assets until the tax cut. Then people rushed to sell assets before the 1986 tax raise happened.

I submit the very same thing surrounding spending and tax cuts is going on right now. . .In 1993 Clinton raised the taxes on the rich, the opposite of Reaganomics, opponents argued that this would stop the growing economy. That did not happen.

[Henry Hawk]

Remember one thing though, the economy in the 90's was riding on a wave from the huge tech boom....most of Clintons administration.....to say that the revenue increase was because of the tax increase is a bit over-simplified......I say, the economy grew was in spite of the tax increase, not because of it....

[The Troll]

an example of what I am trying to say....

Former President Ronald Reagan used to tell the story of his experiences as an actor in the high tax era of the 1950s. He found that his income from being the lead actor in five feature film productions each year left his family with a comfortable income. However, if he made a sixth movie the additional income earned from that movie would push him into a higher tax bracket (which was in the 90% range in those days) which, after paying the higher tax on that portion of his income, left him and his family with very little additional income for that year. The 90% tax on his income earned by making more than five movies per year was the same as having his pay for additional movies cut by 90%. Faced with the choice of spending time home relaxing with his family or working on location for a few weeks for 10% of his normal pay, he choose to limit himself to five films. This, of course meant that many of the other workers on the set whose jobs and income were tied to Reagan's movies were also limited to five films per year and, since they were in lower tax brackets, they suffered a cut in income due to less work.

  Ronald Reagan was one of the worst thing that has happened to America.  Old Ron with the help of Newt Gingrich with his contract of America started all the the bad things that have happen to American is his time in office.

   He with David Stockman created the TRICKLE DOWN SYSTEM.  David Stockman has admitted this year the the TRICKLE DOWN didn't work and they knew it wouldn't work when they put it in.  The trickle down was put in to pay back the super rich and corporations for getting the Republicans elected.  So don't give me that bullshit that Ronald Reagan was a good president, because the wasn't.

  Henry you raising tax on Chinese goods is just the same as raising taxes.  But it will be a tax on the middle class and the poor.  Because the super rich does not buy anything made in China.  Why, because they have the money to but better products made some where else.  You sure don't know nothing about history and economics.

[Exterminator]

Indeed. Republicans have adopted the view that tax cuts for the rich are the "savior" of downward spiraling economic times, and see it as an cure all! Nothing could be further from the truth and there are many well educated, respected, and highly credentialed individuals who are experts in economics, who support tax cuts for the lower income individuals and a higher tax burden for the upper 2% of the population.

I knew as soon as I read this that Henry would come along beating this drum in complete denial of the facts even while he just watched the economy collapse despite exactly those tax cuts that he constantly claims are the panacea for the economy.

I've said it before and I'll say it again...it is really diabolically clever how these folks have managed to fool people who don't know any better into consistently supporting politicians and policies that are directly contrary to their own best interests.

[Palehorse]

I knew as soon as I read this that Henry would come along beating this drum in complete denial of the facts even while he just watched the economy collapse despite exactly those tax cuts that he constantly claims are the panacea for the economy.

I've said it before and I'll say it again...it is really diabolically clever how these folks have managed to fool people who don't know any better into consistently supporting politicians and policies that are directly contrary to their own best interests.

Indeed. I do not understand how so many can be so easily misled into going along with those lies. . . Especially when they have been proven to be lies in the first place!