Quote:
Originally Posted by Shek
Tax cuts have increased growth. However, the problem with simply looking at tax revenues is that you conflate what's going on behind the scenes. Let's look at tax revenues from 2000 and beyond as an example.
2000 2,025.5
2001 1,991.4
2002 1,853.4
2003 1,782.5
2004 1,880.3
2005 2,153.9
2006 2,407.3
2007 2,567.7
As the argument goes, tax revenues create incentives for additional growth (agreed, and it also reduces the incentive to shelter income), which increases the pie (agreed), increases tax revenues compared to prior to the tax cut after people fully respond to the new incentives (agreed), and so they pay for themselves (disagree).
The "pay for themselves" argument requires that every single percentage point of growth HAS to be attributed to the change in behavior due to the tax cut. In other words, the counterfactual would be that if there weren't a tax cut, then there would have been no growth in the economy. In other words, to figure out the impact of the tax cut, you have to isolate growth that is due to the incentives change of the tax cut from growth that would have occured otherwise.
Only once you have done that can you answer the question "do tax cuts pay for themselves?". Here's a paper description by former Chairman of the Council of Economic Advisors for Bush 43, Greg Mankiw, who supported the tax cuts but not because they would pay for themselves. His conclusion was that in the long-run, capital gains tax cuts in the long-run would reduce revenue only by 50%, while tax revenues would increase by only $0.17 for every dollar cut on income taxes in the long-run. |
I followed that, but is it NOT a positive correllation when each and every single time taxes are cut (and in particular, excessively-high marginal rates), that you get an effect that is almost NEVER seen pre-cut? in other words, a moribund and sluggish revenue growth ALWAYS shows a significant expansion post-cut, BUT growth due to other factors can be seen and accounted for and remain uncorrellated for the period during which no tax cut occurred?
I dunno, you're the doctor, here, but I was under the distinct impression that
Sorry, forgot to add that they don't pay for themselves in the long-run, either was 180-out from the way lower tax rates were supposed to work, even allowing for other factors.