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    Supply Side Economics: The Big Con

    The assertion that tax cuts pay for themselves has little or no support within the mainstream economic profession, and there is no hard empirical data to back it up. Why then does the Republican Party continue to insist otherwise?

    Link: Tax Evasion: Online Only: The New Yorker



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    Re: Supply Side Economics: The Big Con

    As a historian, I'll tell you that that is barbara streisand of the highest order. Emperors who Decreased tax rates (without substantially changing the fundamental dishonesty of tax-collectors) had a significant positive impact in taxes collected during the later Roman Empire. When the empire fragmented, you had plenty of empirical data showing that the high-tax rate areas collected less taxes and had more internal strife than the low-tax rate areas, inasmuch as those areas still had a functioning government.

    The two assumptions I made when reading this article were this: The economics "profession" is dominated by leftist, even communist professors who've never actually "worked" in the field, or lifted a finger in their lives to earn a dollar. Second, WTF IS the "mainstream economic profession" according to "The New Yorker?" I would assume they just cherry-picked the results they wanted, and called everything else "extremist right-wing".


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    Re: Supply Side Economics: The Big Con

    You can't just look at the economics side of things - you also have to look at the accounting side of it. People that receive a tax cut take their tax savings to the store and buy something they wouldn't have ordinarily bought without that money. This raises a corporation's sales numbers, which in turn raises the "income before taxes" on the income statement. Tada - the government can now charge the corporations more taxes due to a higher income total (and I think corporations are charged at a higher rate than families as well).

    At least in theory this is how it's supposed to work. There are two things that prevent it from working the way it should. The first is the government shooting itself in the foot by spending the money that it would have saved by implementing this plan. The other is something the government has no control over - those receiving the tax cut not spending it - instead sticking that money into savings or using it to pay off debt (neither of which will have the desired effect of generating more business revenue and therefore creating more tax dollars).


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    Re: Supply Side Economics: The Big Con

    Quote Originally Posted by jdoggivjc View Post
    You can't just look at the economics side of things - you also have to look at the accounting side of it. People that receive a tax cut take their tax savings to the store and buy something they wouldn't have ordinarily bought without that money. This raises a corporation's sales numbers, which in turn raises the "income before taxes" on the income statement. Tada - the government can now charge the corporations more taxes due to a higher income total (and I think corporations are charged at a higher rate than families as well).

    At least in theory this is how it's supposed to work. There are two things that prevent it from working the way it should. The first is the government shooting itself in the foot by spending the money that it would have saved by implementing this plan. The other is something the government has no control over - those receiving the tax cut not spending it - instead sticking that money into savings or using it to pay off debt (neither of which will have the desired effect of generating more business revenue and therefore creating more tax dollars).
    But saving that money is good for the economy. If I have $10 extra at the end of the week, and I take that money and toss it into my ameritrade account which buy a mutual fund. That stimulates the economy by bumping up stock prices. Companies use higher stock prices to buy other companies, or leverage stock for capital expenses. The real problem is government waste and why the gov feels they need more $$$. They already have way too much, and until they can be trusted with what we are giving them, they should not get a penny more. Because you know where it is going, more waste!


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    Re: Supply Side Economics: The Big Con

    Actually there is evidence...just look at every time taxes have been cut (under Reagan and under G.W. Bush)...tax revenues subsequent to the cuts have increased dramatically (with an obvious lag period). Frankly, I don't think there is any credible evidence to the contrary...even JFK understood this concept.

    The problem with our government is not on the revenue side of the house...they get plenty of revenue ($3 Trillion or so I believe). The problem is on the expenditure side of things...all of the various social programs are breaking our collective backs.



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    Re: Supply Side Economics: The Big Con

    The New Yorker article did not dispute that tax rates impact human behavior. In fact, the article stated, "it’s inarguable that they do matter." But the thesis of the article is "what supply-siders have done is start with that reasonable idea and extrapolate it to unreasonable lengths."

    To support the contention that the supply side argument has been extrapolated to unreasonable lengths two papers were referenced. I am linking those two papers:

    Links:'
    http://www.cbo.gov/ftpdocs/60xx/doc6028/2004-16.pdf

    Marginal Tax Rate Reductions and the Economy - 3/15/01



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    Re: Supply Side Economics: The Big Con

    Both reports linked are irrepairably biased. Relying on the CBO on tax rates is like relying on a robber on whether to have more police. The Center on Budget and Policy Priorities mission is to expand welfare programs. Period.

    I'm surprised you didn't link to Karl Marx's "Das Kapital".


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    Re: Supply Side Economics: The Big Con

    Quote Originally Posted by cyclone#1 View Post
    Actually there is evidence...just look at every time taxes have been cut (under Reagan and under G.W. Bush)...tax revenues subsequent to the cuts have increased dramatically (with an obvious lag period). Frankly, I don't think there is any credible evidence to the contrary...even JFK understood this concept.

    The problem with our government is not on the revenue side of the house...they get plenty of revenue ($3 Trillion or so I believe). The problem is on the expenditure side of things...all of the various social programs are breaking our collective backs.
    There is no credible evidence to the contrary? For starters in 1993 the top marginal tax rate was increased from 31 percent to 39.6 percent. Nevertheless, economic growth flourished despite the tax increase.

    Furthermore, giving sole credit to the Reagan and GWB tax cuts for increasing tax revenues ignores a number of other factors that certainly influence economic activity.



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    Re: Supply Side Economics: The Big Con

    Government control of money does not create wealth or increased production. Private control of money does. That's enough for me.



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    Re: Supply Side Economics: The Big Con

    Quote Originally Posted by alaskaguy View Post
    There is no credible evidence to the contrary? For starters in 1993 the top marginal tax rate was increased from 31 percent to 39.6 percent. Nevertheless, economic growth flourished despite the tax increase.

    Furthermore, giving sole credit to the Reagan and GWB tax cuts for increasing tax revenues ignores a number of other factors that certainly influence economic activity.
    You've got to remember one thing - in 1993 Al Gore began mass-marketing his greatest creation ever - the internet. E-commerce might not have exploded until a little bit later, but you get the point.


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    Re: Supply Side Economics: The Big Con

    Supply side economics has been discredited for some time. The policy was even referred to by Bush 1 as "voodoo economics." There are obvious short term economic benefits, as there will be any time there is a large influx of capital into the market. This gain is fleeting though, and as a general rule a higher tax rate will generate more revenue over the long run than a lower one.



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    Re: Supply Side Economics: The Big Con

    Quote Originally Posted by Kyle View Post
    Supply side economics has been discredited for some time. The policy was even referred to by Bush 1 as "voodoo economics." There are obvious short term economic benefits, as there will be any time there is a large influx of capital into the market. This gain is fleeting though, and as a general rule a higher tax rate will generate more revenue over the long run than a lower one.
    I disagree completely. Money in the hands of people creates jobs and productivity. Money in the hands of government creates waste, and more government. It's like trying to give yourself a blood tranfusion from your right arm to your left arm, and spilling half of it in the process.



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    Re: Supply Side Economics: The Big Con

    Cyclonepride, your response indicates that you are missing the intended message. The message is not that government is less efficient than the private sector. Rather the message is that decreasing tax rates, does not in turn increase aggregate tax revenue.


    Last edited by alaskaguy; 10-24-2007 at 01:12 PM.

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    Re: Supply Side Economics: The Big Con

    Quote Originally Posted by alaskaguy View Post
    Cyclonepride, your response indicates that you are missing the intended message. The message is not that government is less efficient than the private sector. Rather the message is that decreasing tax rates, does not in turn increase aggregate tax revenue.
    If the government benefits from the taxing of productivity and wealth, then it stands to reason that the more wealth produced, the more taxes collected, even at a lower rate.



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    Re: Supply Side Economics: The Big Con

    How much in tax revenue does the USSR collect each year?


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