Talk:Tax cut

tax cuts aren't keynesian

A tax cut in and of itself it not a Keynesian stimulus. SPENDING is the Keynesian stimulus. So, a tax cut for someone who is likely to spend the money on goods and services is a Keynesian stimulus. Cut taxes for, say, a schoolteacher, and they are likely to spend it on goods and services. A tax cut for Bill gates is the OPPOSITE of a Keynesian stimulus; he is likely to invest the money he gets back, meaning take it out of circulation. It is logically possible that RAISING taxes on someone who is investing their money could qualify as a Keynesian stimulus. If you raise taxes on someone who is saving (taking capital out of circulation) and then spend that money on goods and services (put that money back into circulation), that is a Keynesian stimulus. The tax cut is not the variable that decides what is a Keynesian stimulus. Whether capital is put into or taken out of circulation is the variable that decides what is a Keynesian stimulus. So, for example, during WWI the tax rate on the wealthiest was very high- over 90%. Nobody was saving. They wanted to recirculate all existing capital. The government was spending that money to build the military- that's a Keynsian stimulus. That's how Keynesian stimulation ended the Great Depression. It wasn't through tax cuts, it was through spending. (Oct 23) —Preceding unsigned comment added by 128.138.210.150 (talk) 18:05, 23 October 2008 (UTC)

This is an obvious piece of politcal advertising, but at least it's now a reasonably balenced piece.

Really this should be at Tax rate. DJ Clayworth 15:27, 5 Feb 2004 (UTC)

Thanks, D.J. --Uncle Ed 16:15, 5 Feb 2004 (UTC)

Although in theory this could be international, in practice the "cut taxes and services" philosophy is really only a major political issue in the USA. Can't the article be moved to a namespace that makes that clearer?

jimfbleak 18:39, 5 Feb 2004 (UTC) (not a Democrat, socialist, or American)

I have done a major rewrite on this to try to get it less POV. Where people of honest good will cannot agree about whether something should be done, it is usually because at least one of the following is true:

1. There is an issue of values involved;
2. Theory does not make clear predictions about what will happen if it is done;
3. It is difficult or impossible to collect clear data about what happens when it is done.

All three of these apply to tax cuts, so early agreement is not in prospect. I have tried to make that clear in the revised article (I've downplayed the values issues, but they focus round whether you think income inequality is inherently bad, or taxation is inherently bad). seglea 00:50, 6 Feb 2004 (UTC) (not an American or a Democrat, and while a socialist, always willing to start from the presumption that people of different political persuasion are thinking and acting out of honest good will).

Nice rewrite. Learned a lot. DJ Clayworth 18:04, 6 Feb 2004 (UTC)

Tax Cuts in the United States

I know I am opening up a can of worms here, but the assertion that the Reagan tax cuts lead to an increase in tax revenue is, at best, misleading. In fact, income tax revenues almost always grow over any 5 or 10 year period due to increased productivity, increased poplulation, inflation and other factors. During the Reagan years, real individual income tax revene grew by only 12%, which was much, much smaller growth than occured during the years either before or after Reagan.

Take a look at the relevant table in this pro-Reagan, pro-tax cut article from the Cato Institute. http://www.cato.org/pubs/pas/pa-261.html There are also many, many other articles saying the same thing, but since they are from sources like the NYT and other "liberal" publications you would dismiss them as being POV.

For your information, while nominal revenues to the federal government did double during the Reagan years, the majority of that came from social security and medicare taxes, which were increased during the Reagan years. (For most people, social security and medicare taxes are higher than their individual income taxes.) Other revene came from corporate taxes, whose rates were not changed. Further, even with respect to income taxes, you need to understand that the tax changes in the 80's didn't just cut tax rates (as poplular radio hosts like to focus on) bue also eliminated tax shelters. Yes, the highest marginal tax rates were 70% when Reagan took office, but nobody paid those rates! Instead, people invested in tax shelters (mainly real estate, but also cattle breeding operations and all sorts of crazy stuff) that led to paper losses that could be used to offset ordinary incomes. The reason the Democrats (who controlled Congress) went along with the tax cuts in the 80's was precisely to do away with these tax shelters. And by eliminating tax shelters (which didn't make any business sense), it encouraged more investment into productive activities, which tended to boost the economy.

All this is much to sophisticated for the talk-show hosts who insist that "tax cuts pay for themselves." Well, they don't. We don't need to argue that here, but Wikipedia should at least get its facts right in the main article.

63.166.114.11 15:47, 20 July 2007 (UTC)GeorgiaTex

I agree with the point that this article needs to include these views. Lack of attention to this article has created a single POV in this section. The NYT article would be fine but I'll check the Cato one as well. There is certainly disagreement on this. It is also poorly written. Stay tuned Morphh ^(talk) 17:00, 20 July 2007 (UTC)

Morph -- One of these days I'm going to make a good liberal out of you yet. For the liberal argument re tax cuts, see http://www.cbpp.org/3-8-06tax.htm. Thanks. GeorgiaTex (talk · contribs) 18:18, July 20, 2007 (UTC)

Ok, I've had a quick go at it. That's all I can do for the moment. Morphh ^(talk) 18:56, 20 July 2007 (UTC)

Morph -- I know it's hard to edit these things and find good cites, but once again you've got a cite here that does not support the claim being made in the text of the article.

"Supporters state that the Bush tax cuts helped the poor the most, as the largest income tax rate drops were given to the those with the lower incomes."

Then you cite to a Heritage Foundation Article. But even that article, as biased as it was, did not purport to argue that "the largest income tax rate drops were given to those with the lower incomes." Come on, Morph. That claim is demonstrably false. The highest marginal tax rates for ordinary income were cut from 39.6% to 35%. The highest tax rates on dividend income was cut from 39.6% to 20%. Everybody got the same benefit from the 10% tax rate for the first few thousand dollars of income. Can you please tell me just how "the largest income tax rate drops were given to those with the lower incomes?" — Preceding unsigned comment added by GeorgiaTex (talk • contribs)

This reference was there before I started editing the section to address your points. I did not have time to verify it. I mainly focused on cleaning up the section, wording, and adding criticism. Looking at the reference, lawmakers low­ered the initial tax brackets from 15 percent to 10 percent and then expanded the refundable child tax credit, which, along with the refundable earned income tax credit (EITC), reduced the typical low-income tax burden to well below zero. As a result, the U.S. Treasury now mails tax "refunds" to a large proportion of these Americans that exceed the amounts of tax that they actually paid. All in all, the number of tax filers with zero or negative income tax liability rose from 30 million to 40 million, or about 30 percent of all tax filers. It concludes, in myth ten, that the tax cuts have led to the rich shouldering more of the income tax burden and the poor shouldering less. I have tried to reword the article to better reflect the statement. Morphh ^(talk) 12:06, 22 July 2007 (UTC)

A self-contradictory and unattributed POV

In the United States in recent decades, most "supply-siders" have been Republicans, and both President Ronald Reagan and President George W. Bush are well known for signing tax cuts into law, in the belief that effects (1) and (2) would predominate, with overall beneficial effects. President Reagan's tax cuts were indeed followed by increased growth and substantial job creation, which produced higher tax revenues, helped shrink the deficits and eventually led to the budget surpluses of the 1990s, and supply-side economists argue that the link between the two was causal.

Is it really the belief of supply-siders -- or are anti-supply-siders putting words in their mouths? I never thought Reagan or Bush thought revenues would go DOWN if tax rates were cut. Moreover, the next sentence in the paragraph says that the Reagan/Bush taxt cuts produced higher tax revenues if the article challenges this (footnoted) assertion later on, I must have missed it.

I think we should say that certain advocates believe that tax cuts will reduce revenues, and that certain other advocates believe that they will/have increase revenues. --Uncle Ed 18:23, 6 Feb 2004 (UTC)

Ed, your additions seem more POV than the previous version. Your sentence beginning 'Advocates who want...' is weaselly; it implies that that is the reason they propose this, without actually saying it.

Also, for the unitiated, why is capital gains an obvious example? The only reason I can think of for this is that a reduction triggers sales of capital that otherwise would otherwise be deferred, in which case what you are doing is bringing forward tax revenues from the future that would otherwise be paid later, but at a higher rate. DJ Clayworth 18:29, 6 Feb 2004 (UTC)

DJ, you are probably right. What I assume to be "common knowledge" might merely be the wishful thinking of supply-siders. If so, the solution is to attribute the POV to them.

Do we know for a fact that capital gains cuts have usually resulted in increased revenues from the capital gains tax? Then the article should say so, but probably will need a source (not just a columnist with an axe to grind, either!).

If it's not a known fact, then we better say "Sy Cider, economist at Blah Blah Industries joins Professor Blather at Big University in claiming that... while Mr. X and Professor Y maintain that..." --Uncle Ed 18:48, 6 Feb 2004 (UTC)

I agree strongly with Ed's last point, though it is often depressingly difficult to trace these opinions back to their sources.

But going back to the former discussion, Ed, I think you missed the point I was trying to make. I was trying to distinguish between the immediate effect of a tax cut (which is a matter of logic) and its long term effect (which is a matter of theory, circumstance, etc). It cannot possibly be disputed that the immediate effect of a tax cut is to reduce government revenues and increase consumers' real income. That does not rule out the possibility that there is a subsequent increase in government revenues because the tax cut has had benign effects through the economy - and I certainly did not intend to rule that out; in my view it's (a) an empirical matter that has not yet been settled and (b) likely to depend on the conditions of the economy, degree of internationalisation of trade, etc. Similarly I don't think it is a matter of "some economists believe..." that there will usually be a mixture of the different possible effects of a tax cut (or any other government economic policy action) - the real world is a messy place and pure outcomes are as rare as dodos.

I will re-edit back to what I was saying before, but I will try to make it more explicit, in the hope that the above is not really contentious. seglea 18:55, 6 Feb 2004 (UTC)

When little kids misbehave, sometimes I tell them, "You're being impossible." At the risk of losing the Uncle part of my user name, I'm now going to do the impossible.

You said, It cannot possibly be disputed that the immediate effect of a tax cut is to reduce government revenues and increase consumers' real income. But I think capital gains is an obvious exception. Investors don't sell (and thus no tax is collected) when the rate is too high. As soon as the tax is lowered enough, investors sell; thus (a) immediately increasing government revenues and (b) possibly adding to investor's income (assuming they don't immediately re-invest the proceeds).

But I'm not an economist, merely the offspring of two MBA holders. The "trickle-down" theory of academic excellence has not been shown to hold water (!) so maybe I'm wrong. Anyway, the article can't quote me as an authority because I have no credentials even if I occasionally make a lucky guess!!

How do you want to put it, then, seglea? --Uncle Ed 19:03, 6 Feb 2004 (UTC)

It's looking pretty reasonable to me now, and I'd be content to leave it the way it is - but I'm not an economist either, just someone who works around the fringes of the discipline. And I should learn never to say that something cannot be disputed - that's an open invitation to dispute it! You could be right about capital gains tax, too - stock markets are notorious for being able to move more quickly than the real economy, and even in the real economy tax changes often produce an immediate surge of activity either in anticipation or reaction. A good example is raising the tax on tobacco products - that has been done so often by so many different governments that we have pretty good data on what happens, which is (i) after the increase is announced but before it goes into effect, a surge in demand; (ii) after it goes into effect, an immediate fall in demand; (iii) over a period of months, a gradual return of demand, but to a level that is somewhat lower than previously. In this case too net government revenues can go up or down as a result, of course, but not for the same sorts of reasons as we are discussing in the present article, because the effects are not big enough to be macroeconomic - it's just a standard piece of microeconomic analysis of the effects of a price change. seglea 20:21, 6 Feb 2004 (UTC)

Economics is tricky. I'm not a subscriber to any particular school of thought. I like free markets whenever I want to get a higher-paying job, but I like socialism whenever I think of the enormous inequities between rich and poor. The only thing I'm sure of is that Marx's prediction that Capitalism would make the rich richer AND the poor poorer has been thoroughly disproven in democratic countries with free market economies: the poor got richer, too! --Uncle Ed 20:42, 6 Feb 2004 (UTC)

Unemployment

Question: If the Republican supply-siders say that lowering taxes on the rich creates jobs, why does the BLS show that Republicans always cause a higher unemployment rate than the democrats. From 1948 until 2007, the BLS statistics show that every Democrat since and including Harry Truman with the exception of Jimmy Carter has lowered the unemployment rate, while the supply sider Republicans have always increased the unemployment rate. These 2 pages will show you the truth and reality in this: http://www.whitehouse.gov/history/presidents/chronological.html http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000 (On this one you'll have to change the 'from' date in the drop down menu) Compare unemployment in Republican and the Democrat administrations. Democrats lower unemployment, generally, while Republicans raise unemployment, generally.— Preceding unsigned comment added by 70.233.144.127 (talk • contribs)

So are you arguing that raising taxes creates jobs? In general they suggested economic growth, which could be measured with much more the an unemployement number. It also depends on which taxes you cut. A cut in corporate taxes will have more of an a effect on this then personal taxes. Here is a quote from Alan Greenspan [ http://www.ajc.com/business/content/business/stories/2007/07/27/taxes0727.html published today]: “Greenspan said businesses are not doing a good job of convincing voters that lower corporate taxes can boost job creation. ‘Regrettably, there is still a great deal of populism in this country,’ he said.” Morphh ^(talk) 12:42, 27 July 2007 (UTC)

Well, let's see, Carter didn't cut taxes and due to bracket creep, taxes effectively increased and while Carter was president, jobs were created at a higher rate than during either of Reagan's terms, and that happened while inflation was high, an oil crisis driving oil prices to record high prices, and tight money driving interest rates to record high levels. Clinton added tax hikes on top of Bush tax hikes on top of Reagan tax hikes following the Reagan 1981 tax cuts, and job creation during his two terms was higher than during either of Reagan's two terms. Reagan's second term had higher job creation rates even as Reagan signed multiple (six according to Bartlet) tax hikes than his first term. Enployment rose for the months prior to his signing the 1981 tax cuts, and then fell constantly for the 16 months after for a 2.6 million jb loss, and then jobs were created after half the tax cuts were rescinded, and other taxes raised. And the best of all, the tax cuts in 1997, 2001, 2002, 2003, 2004, 2005, 2006, 2008, and 2009 have not resulted in any increase in employment since they have gone into effect, other than to create added government jobs. Who said government doesn't create jobs.... Federal tax revenues today are 5% of GDP lower than in 1998 which supposedly means tax payers have more than 5% more money to spend more wisely than government, with government spending more money unwisely keeping millions of unemployed from bankruptcy and homelessness to recreate the era of the Oakies and their cars piled high with goods and kids heading west. Mulp (talk) 00:07, 13 November 2009 (UTC)

Supply side economics hasn't been a part of the platform for that long. Look at the legislation they sign, not the R or D next to their name. —Preceding unsigned comment added by 68.13.210.154 (talk) 03:23, 18 November 2008 (UTC)

Remains Bias

This article must be revised to speak to the issue objectively and present both sides of the argument, including the ups and downs. The entire argument reads like a Conservative grad student's thesis on how great Reaganomics is. Please adjust. —Preceding unsigned comment added by 72.219.25.244 (talk) 06:04, 14 June 2008 (UTC)

I agree with the above statement. This article is ungodly one sided. I mean, come on, just look at the main sources: A neo-con newspaper, and a conservative think tank. Abalu (talk) 00:37, 23 July 2008 (UTC)Abalu

And for that matter, what is a "critic of tax cuts"? The article makes a short attempt to be objective on this by saying that there are lots of factors to consider when setting a tax rate (be that rate "higher" or "lower"), but what does it mean then to talk about critics of tax cuts. This implies people exist who would never be open to adjustment of taxes in any direction but up, implies it to me anyway.Xyad (talk) 15:14, 9 April 2010 (UTC)

We are all Keynesians now

Wikipedia is not a place for political position pieces; tax cuts to stimulate the economy predate Reaganomics. You would need to start with Kennedy at the latest. If you want to write an article on tax cut stimulus, be factual. Blablablob (talk) 20:33, 26 September 2008 (UTC)

Biased Article

"However, during this period the national debt more than tripled (from $908 billion in 1980 to $3.2 trillion in 1990) this was due to the immense increase in spending during Reagan's tenure and probably is not a result of the tax cuts"

Those lines seem to be written by Reagan himself, please would someone adjust this article. Ricardoread (talk) 03:02, 18 February 2009 (UTC)

tax cut theory vs tax cut empirical studies

The oft stated and assumed theory is that cutting taxes will boost the economy. Picking Mankiw as an example as I had to pay $150 for a intro to macro text that stated flatly something like "taxes are a deadweight loss to the economy". Political pundits often claim cutting taxes will stimulate the economy, using similar arguments to those Mankiw uses in his text. I'm being bit unfair to Mankiw as this is generally accepted wisdom in some highly rated economic schools, but on the other hand, Mankiw never hinted taxes had any purpose at all - one might argue Mankiw is arguing wars should be funded by debt, or maybe from pillage and plunder and other spoils of war.

My point is, does anyone have a few academic sources that justify lower taxes and cutting taxes in theory that are not political polemics?

Then, as theory needs to be tested in the real world, does any one have academic papers or other objective studies to cite that support the proposition that lower taxes are better than higher taxes for two similar economies or for the same economy. Ideally some examples of both, say two asian tigers with similar government economic policies but differing tax rates, and periods in the US, zgermany, Britain, et al, where growth in GDP, employment, median incomes, etc, changes in response to tax cuts and tax hikes as prediced by theory.

I've been doing my own work as a result of failing to find empirical studies so I'm limited in what I can contribute, but if someone cites sources that predict something I might be able to create the reduced data in graphics form from BLS datasets to illustrate it. My empirical study refute the "tax cut theory" Mulp (talk) 00:34, 13 November 2009 (UTC)

I'm not sure where to post this... sorry

This is the most biased article I have seen on Wikipedia. For a moment I thought it was a spoof. Although I'm only a casual user, I can't help but think that the people of the world deserve a much broader view of this subject. It almost seems as if the article was written by the CATO Institute. I hope you, whatever your political bent, will be more honest in the future and strive, simply to tell the truth.

Again, I apologies if this rant is out of place. —Preceding unsigned comment added by Jeffjacks7 (talk • contribs) 10:36, 25 June 2010 (UTC)

Can this really be saved?

This article, as everyone seems to concur, is a damn mess. It's biased, sloppy, contains trivial information in many sections or sections are not really fully formed paragraphs. Tax cuts are part of keynesian and supplyside/classical or any school of economic thought.

Building on that. One option, since tax cuts is simply too broad of a topic for an article really; Perhaps this page should just be a definition with redirects to various articles on specific tax cuts or monetary/fiscal articles related to tax cuts. Some examples would be whatever the wikis on keynes/supplyside tax sections, the laffer curve, et al.

A second option would be what I'm going to suggest; Simply merging tax cuts into taxes with it's own section. This would give everyone a nice opportunity to rewrite this and boil it down to what's necessary and relevant. Include both sides, it cannot be avoided nor should it, but keep it pretty cut and dry. Like dryly explaining Keynes tax multiplier (-MPC/MPS) and and the focus of the "G" variable in C+I+G-netex=GDP. Supply side would obviously focus on marginal tax rates and the Laffer Curve; The focus on Say's Law. Dry and separate, let the reader draw their own comparisons and conclusions --71.173.214.181 (talk) 06:41, 10 August 2010 (UTC)

Merging to taxes makes sense to me. Dlabtot (talk) 16:24, 10 August 2010 (UTC)

Save

Trying to save article. Please wait and help out. —Preceding unsigned comment added by 122.173.245.26 (talk) 06:03, 29 August 2010 (UTC)