Do the Republicans even make any sense?

“We have one of the most predictable economic crises in this country coming. It’s a debt-driven crisis. And so we have an obligation – not just a legal obligation but a moral obligation – to do something about it,” Ryan, a Wisconsin Republican, said Thursday morning.

Among other things, the House GOP plan calls for a reduction in individual tax rates and brackets. Instead of today’s six brackets, with rates from 10% to 35%, it calls for just two: 10% and 25%. The proposal would eliminate the alternative minimum tax while dropping the top corporate tax rate from 35% to 25%.

So they say a debt-driven crisis is imminent, yet they want to cut revenue. Wouldn’t the sensible approach be to both cut spending and increase revenue?

Yeah, I know. “Cut taxes blah blah blah revenue increases magically.”

Do they even push that anymore? Everything I hear these days is “Cut taxes because less government is inherently good”.

Well, some of them will say they plan to cut all federal departments and programs except Defense, Security, and Immigration, which they will combine into one new cabinet department called Guns, to be headed by Ted Nugent.

That probably would balance the budget, except they inadvertently cut the IRS…

Yeah, I know. “Cut taxes blah blah blah revenue increases magically.”

It’s not that tax cuts increase revenue magically, but rather that economic growth increases revenue. And there’s nothing magical about that.

That’s why the deficit jumped so much in Obama’s term… not because he dramatically increased spending, but rather because revenues dropped precipitously when the economy tanked.

There is no evidence deficit-financed tax cuts, in general, increase tax revenue. None.

Taxes and government scares away the confidence fairies, donchaknow?

They have in California. :)

With California’s government system, can you blame 'em?

There are numerous examples of tax cuts resulting in significant revenue increases, through resultant economic growth.

In the 20’s, dropping the top marginal rate to about a third of what it was resulted in not only dramatically increased revenues, but actually resulted in the percentage of the revenues coming from the richest parts of society doubling.

In the 60’s when Kennedy cutting the top rate from 90 to 70% resulted in large revenue increases, and again, almost doubled the revenues received from people making over 100k a year.

In the 80’s, when Reagan further cut the rate down to 50%, you again saw a similar effect in rising revenues.

And Ireland in the 90’s presents a case for a whole country cutting its corporate tax rate, and then experiencing a period of huge economic growth.

There most certainly is evidence that, in certain situations, cutting taxes can result in increased revenues through improved economic growth.

But we must note that part I underlined there. It’s not a universal truth that tax cuts will always increase revenues in all situations… that’s obvious, as evident in the extreme case of reducing all taxes to zero, which will be guaranteed to reduce all revenues to zero.

So, in summary, I agree with your statement… because of the it’s not true “in general”. But in certain cases it definitely is true, and cannot be handwaved away as “magic”.

Er… were those deficit-financed?

No, there are not. This cannot be stressed enough. The effect of tax cats is completely undetectable in the long-run growth history of the United States. There has been ample research in this area. If you disagree, cough up the papers.

That the right now takes it as an article of faith that this is a viable solution for the US is just an sign of complete disconnect with reality.

There most certainly is evidence that, in certain situations, cutting taxes can result in increased revenues through improved economic growth.

The situations where tax revenue increases are 1) reduced tax evasion and 2) liquidity traps. The situations where GDP growth increases is liquidity traps. That’s it. There are no other. The situation where deficit-financed tax cuts work is even more constrained. None of these was the case in the 1920s, 1960s, 1980s, or Ireland 1990s; each one of those is a common myth on the right, supported by various forms of statistical lying.

The notion of “deficit financed” doesn’t really mean anything. If you cut taxes and revenues go up, then they are not being deficit financed. Because your deficit is decreasing.

Again, revenues don’t go up. Link your sources if you want me to explain why.

My new hobby:

Agree with a thing a republican say every day. I make a effort to ignore the things I disagree with republican people, and search for a thing that I agree, and agree with then.

Is not really funny, and I feel somewhat bad, because is like helping people continue with his delusions :P

No, there are not. This cannot be stressed enough. They are completely undetecable in the long-run growth history of the United States. There has been ample research in this area. If you disagree, cough up the papers.

I presented the most clear examples, and everyone pretty much agrees on them as examples of this effect. So you can’t just say they don’t exist, because they do.

The situations where tax revenue increases are 1) reduced tax evasion and 2) liquidity traps. The situations where GDP growth increases is liquidity traps. That’s it. There are no other. None of these was the case in the 1920s, 1960s, 1980s, or Ireland 1990s; each one of those is a common myth on the right.

So you believe that, despite seeing dramatic economic growth in those situations, the resulting dramatic increases in revenue were actually due to reductions in income tax evasion?

I think that ultimately, as is usually the case, we will fail to see eye to eye on this because the causality is impossible to prove completely. It’s always going to be possible for people to say, “Well, those increases in revenue happened despite the cuts, rather than because of them.”

Even at that point though, it doesn’t really matter, because then it just demonstrates cases where cutting taxes is not going to necessarily reduce revenues. Which is good enough, because the only counter argument is that it may have reduced them compared to some fictional alternate reality scenario where the tax cuts didn’t take place.

Nope. You provided zero numbers for your contentions on the growth rates. You provided no evidence that “everyone agrees.” The data series I’ve read indicates there was 1) no dramatic GDP growth in those periods and 2) no dramatic growth in tax revenue.

As some examples, here’s what I’m talking about, here’s the log growth in inflation-adjusted federal tax revenue over the Reagan tax cuts, compared to the baseline projection pre-tax cuts:

Productivity growth for the period:

Long run real-dollar GDP growth.

Here’s a really long-run log growth. Long-run growth is dominated by the fundamentals.

Similar data sets are available for the other “tax cut growth” mythical periods; if there’s an effect of tax rate changes on economic growth or tax revenue growth it’s incredibly subtle. By contrast, the immediate effects of tax cuts on revenue are clearly obvious.

Nope. You provided zero numbers for your contentions on the growth rates. You provided no evidence that “everyone agrees.” There was 1) no dramatic GDP growth in those periods and 2) no dramatic growth in tax revenue.

As one example, here’s the log growth in inflation-adjusted federal tax revenue over the Reagan tax cuts, compared to the baseline projection pre-tax cuts:

Productivity growth for the period:

Long run real-dollar GDP growth.

Similar data sets are available for the other “tax cut growth” mythical periods; if there’s an effect of tax rate changes on economic growth or tax revenue growth it’s incredibly subtle. By contrast, the immediate effects of tax cuts on revenue are clearly obvious.

All I know is cutting government spending even more will mean lost government jobs and less money in aid in the pockets of people who turn around and put it all back in the economy because they are living check to check.

Then you cut revenue and any savings you’ve made from spending cuts are immediately lost.

I really think there are elements in the Republican party that want to crash the economy so they can eliminate a lot of government programs and return us to a Gilded Age. That was a great time to be a white male of privilege. Not so great for a lot of others.

Those certainly are graphs, showing numbers.

The tax cuts proposed by Kennedy were signed into law by Johnson in 1964. Among other reductions, they reduced top tax braket from 91% in 1963 to 77% in 1964 and 70% in 1965. The impact:

Federal revenue:
106.56B in 1963
112.61B in 1964
116.82B in 1965
130.84B in 1966.

Federal Deficits:
4.756B in 1963
5.915B in 1964
1.411B in 1965
3.698B in 1966.

Unemployment:
5.7 in 1963
5.2 in 1964
4.5 in 1965
3.8 in 1966

Sources:

http://www.bls.gov/cps/prev_yrs.htm
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist01z1.xls

Want to respond Jason? Cite empirical data from the source, not political hacks pushing a narrative.