Taxpayer Rescue Plan - Forgo 2008 Federal Income Taxes

[ParanoiA]

I tried to find some other source for this story since I know how some here are biased to Fox, but it really doesn't matter, Louie is speaking for himself. (Further, I hope this link works...)

 

http://www.foxnews.com/video-search/m/21533709/read_my_lips.htm?pageid=23043

 

Texas congressman Louie Gohmert proposes we ditch 2008 federal income tax collection. Interesting. I like the statement of faith in the people to have their money back. Gee, how nice we be trusted with our own money.

 

Of course, I hear the cries now from those who believe in maximizing revenue for the government. Although it doesn't entirely fall on deaf ears, as this time I'm even wondering how we're going to pay the national debt if we did this.

 

I agree with Gohmert's premise to stimulate the economy by maximizing the money we keep. I just think that should be the premise all the time, except, of course, when we're in so much debt.

 

What do you all think?

[ecoli]

And don't forget the laffer curve... increasing taxes doesn't *necessarily* increase revenue.

[jackson33]

Although I don't necessarily agree, much of the debt being taken on, is because 'credit markets' have dried up. That is in loaning or buying preferred stocks are loans, which can be cashed in, at some point in the future. IMO; There is still plenty of cash out there, but waiting for some sign of a bottom or at least stability. At best then, government is establishing a false bottom.

 

2009 Tax revenues by ALL governments are going to be at several year lows, while every one of those governments has budgeted 2009, based on 2008 revenues. Forgiving the Federal Tax Payers or the Corporate structure taxes due for 2008 would do nothing, unless it was proposed for the entire 2009 year, not 2008. Then you would have mass planning to avoid some gains in 2009, creating the same problems that may be part of the current problem, from the investment arena. Bad idea...

[npts2020]

Well, I have heard supposedly reputable economists claim that reducing taxes actually increases government revenue. Therefore if we reduce taxes all the way to zero won't we have just maximized revenues as much as is possible?

[ecoli]

Well, I have heard supposedly reputable economists claim that reducing taxes actually increases government revenue. Therefore if we reduce taxes all the way to zero won't we have just maximized revenues as much as is possible?

That's not the claim... look up the 'laffer curve' I alluded to in post 2.

[bascule]

That's not the claim... look up the 'laffer curve' I alluded to in post 2.

 

I find the Neo-Laffer Curve to be a bit more realistic:

 

[iNow]

I find the Neo-Laffer Curve to be a bit more realistic:

Indeed. Much more accurate of a depiction AFAICT.

 

 

The critiques on wiki sum up the issue well:

 

Conventional economic paradigms acknowledge the basic notion of the Laffer curve, but they argue that government was operating on the left-hand side of the curve, so a tax cut would thus lower revenue. The central question is the elasticity of work with respect to tax rates. For example, Pecorino (1995) argued that the peak occurred at tax rates around 65%, and summarized the controversy as:

 

Just about everyone can agree that if an increase in tax rates leads to a decrease in tax revenues, then taxes are too high. It is also generally agreed that at some level of taxation, revenues will turn down. Determining the level of taxation where revenues are maximized is more controversial.

 

 

However, in support of ecoli's point about "not *always*" good to increase taxes (his post suggesting a concession of the fact that it's more a mere possibility in present context rather than a probable occurance):

 

In 1924, Secretary of Treasury Andrew Mellon wrote, "It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower rates." Exercising his understanding that "73% of nothing is nothing" he pushed for the reduction of the top income tax bracket from 73% to an eventual 24%.

Edited December 1, 2008 by iNow

[Pangloss]

Actually I think that's the Laughter Curve, isn't it?

[Sisyphus]

That's not the claim...

 

But it is the proposal!

[CaptainPanic]

I really love economy, because it's absolutely NOT science. This thread shows it again:

 

While physicists discuss the 100th decimal of the speed of light, and mathematicians calculate the millionth decimal of [math]\pi[/math], economists discuss whether NO tax, or 50% tax is best for the economy and government revenues.

 

In other words: they're totally clueless.

 

Economy is like religion. Whatever is believed by a majority is basically sort of perhaps true. And it can change in a matter of days.

[npts2020]

That's not the claim... look up the 'laffer curve' I alluded to in post 2.

 

In any other part of this forum, a discussion of something like a Laffer Curve would be immediately moved to pseudoscience and speculations. It is an interesting observation that seems to fit some of the data but imo does very little to explain why things might act that way in reality. I would be willing to bet that a majority of those advocating tax cuts couldn't tell you what a Laffer Curve is, at any rate. I don't mind paying taxes if I get something tangible for those taxes. The problem is that Americans get the least for their tax dollars of any developed country in the world. Tax cuts would be great but we need to better utilize what we have before cutting that amount.

[ecoli]

However, in support of ecoli's point about "not *always*" good to increase taxes (his post suggesting a concession of the fact that it's more a mere possibility in present context rather

 

Yes... that is exactly my point, thank you.

[padren]

I can't help but to suspect that the people who will stimulate the economy the most are the people who will (ie, need to) spend it the fastest - the people already desperate and probably make too little to pay income tax right now anyway... or at least any significant level of income tax.

 

100,000 ten dollar bills in the hands of the poorest 100,000 people in the country today, and it will all be spent in the economy by tomorrow.

 

Ten $100,000 checks handed out to the ten richest people in the country, and it will have near zero impact on their spending.

 

 

I'd rather see taxes be more or less business as usual, and actually improve the social programs that help people be productive. A program to help someone find a new job helps them get back and producing faster, and every month a person is unemployed is productivity that can never be reclaimed. The serious disruptions that can occur in people's lives when they go through prolonged unemployment also hurt their productivity, and that can't be good for the economy. I don't see the IRS taking "A year off" doing any good in the long run, personally.

 

 

As far as the Laffer Curve, the percent really is likely to be highly volatile and more or less based on the difficulty associated with earning money, and how much is needed to achieve a level of comfort. If you could work for one day to live comfortably all year with only 1% of your earnings, you could endure a 99% tax rate because as much as you'd hate the IRS, it would be a choice between one day's work and year long comfort, or poverty. I would bet though at any given moment, there probably is some "golden value" somewhere, even if it did slide around regularly.

[Pangloss]

100,000 ten dollar bills in the hands of the poorest 100,000 people in the country today, and it will all be spent in the economy by tomorrow.

 

Ten $100,000 checks handed out to the ten richest people in the country, and it will have near zero impact on their spending.

 

And in the second scenario much of the million ends up in the hands of the ten richest people in the country anyway.

[padren]

And in the second scenario much of the million ends up in the hands of the ten richest people in the country anyway.

 

You mean in the first scenario? That's sort of why I never "got" trickle down economics - it always struck me that money "trickles up" since it's usually the wealthier people that provide the services that the poorest people need to spend money on.

[Saryctos]

You mean in the first scenario? That's sort of why I never "got" trickle down economics - it always struck me that money "trickles up" since it's usually the wealthier people that provide the services that the poorest people need to spend money on.

 

Trickle down being on the cost side. If it takes an extra $X to make something the cost will be passed down the chain. Unfortunately as it goes down it snowballs as well. From producer to retailer plenty of extra %s are tacked onto the price increase. So in essence if you increase the price to the producer, the cost to the end user is even higher.

[padren]

Trickle down being on the cost side. If it takes an extra $X to make something the cost will be passed down the chain. Unfortunately as it goes down it snowballs as well. From producer to retailer plenty of extra %s are tacked onto the price increase. So in essence if you increase the price to the producer, the cost to the end user is even higher.

 

Do you think a reduction in cost to the producer nets a better economic boost than increasing spending power of the consumer? I understand the logic, but it seems that for every dollar a producer saves, they'll maximize how much can be cleared as profit, and go into the hands of already wealthy share holders/CEOs, which is more likely to be saved than spent. In an economy like we have today, it seems more efficient to me to enhance the spending power of the consumer to actually increase the money moving around in the economy.

[bascule]

Trickle down being on the cost side. If it takes an extra $X to make something the cost will be passed down the chain. Unfortunately as it goes down it snowballs as well. From producer to retailer plenty of extra %s are tacked onto the price increase. So in essence if you increase the price to the producer, the cost to the end user is even higher.

 

Increases in manufacturer costs are certainly vested upon the consumer. You'll have a lot harder time making that argument regarding cost decreases being passed onto the consumer. That was the plan behind Reaganomics and Bush Sr.'s policies, and it didn't work out so well in reality. By the time they were done, the national debt had skyrocketed, the financial sector had melted down, and we were in a recession. But at least taxes for the top 1% had been cut substantially.

 

Hey! Deja vu!