Where is the US economy headed?

We did not grow out of the deficits in the '90's. Clinton produced surpluses by insisting on pay as you go. Moreover, he had the support of key Reps, such as Gingrich.

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Okay, whatever.

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okie wrote:

I think you are dead wrong here. Under your reasoning, excluding the lower amounts of income of all citizens would not make the income tax progressive, which is utterly preposterous. Under your reasoning, the income tax rates above that threshold apply to all citizens, so it would not be progressive! I think you are obviously wrong. You somehow cannot get past the idea that other taxes besides income tax can be progressive.

Wrong wrong wrong!

I will remind you that it was I who first pointed out to you that progressivity can apply to other taxes besides income tax. It was in the definition I provided you from Wikipedia. I even bolded that part! So for you to say I 'can't get past that idea,' is ridiculous. Ridiculous.

You don't have a clue what you are talking about when it comes to taxation; you keep conflating terms and making up new definitions for things. For example, you say:

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Under your reasoning, the income tax rates above that threshold apply to all citizens, so it would not be progressive!

I have never made mention of gradations in taxation at all. And this doesn't even make any sense. The 'gradation levels' define the progressivity of the tax. If we had the same levels of gradation in Sales Tax, then that would be a progressive tax as well. We don't, and so it isn't. Excluding things from sales tax does not make the SALES TAX ITSELF progressive or non-progressive. Sorry.

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This doesn't actually mean anything at all. It certainly doesn't address the fact that we saw high, and in some cases much higher, levels of growth when the marignal rates were far higher than they are today. Also, there is no actual evidence that higher marginal tax rates have a negative effect on the economy overall. Certainly it isn't as if people just up and stop investing because their tax rate is 35% instead of 31%. Especially given the levels of money involved.

We will never agree on this. We will just have to agree to disagree. [/quote]

With the difference being that you made positive claims which you can't back up. I can easily show that we had high levels of growth during the periods in which our marginal tax rates were much higher. This directly destroys your assertion. You can't just say 'we agree to disagree.' You are wrong. You can disagree all you like but it doesn't change that fact.

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I have not written a myth. I recognize that the Bushs were not conservative, and Congress during Reagan was anything but conservative, so I agree, spending has spiraled out of control. The only thing that has kept things halfway reasonable has been the economic growth.

Sorry, Bush was elected as a Conservative candidate and the Congress has consistently ran on Conservative platforms and values. You deny it now that the Conservatives that you have worked to elect have failed to lower spending. They lied to you. You can't deny them now just because they haven't stood up to your principles.

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Here again, tax cuts by definition do not necessarily lower revenues

Oh my god. Yes they do. Lowering the tax rates automatically and immediately lowers the revenue brought in. I can provide you with reams of evidence of this simple and easy to understand concept.

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and in fact the opposite has happened just recently.

Completely untrue. You can not show any evidence that this is true.

Remember that during an expansionary period, we always will see a rise in revenue. The question is, are the revenues rising faster than the lost money from the tax cuts? Are they at higher levels then they would be if the taxes were not cut, overall? And the answer is no, they are not. You have no data to show this. You're just making **** up.

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We will never agree on this. You say provide proof. Your side cannot prove anything either, because we cannot rewind history and plug in a different tax rate with all other factors remaining the same.

Sure I can. I can show you any number of facts and figures which show the immediate effects of cutting taxes: lower revenues.

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Except in certain extreme theoretical conditions, tax cuts cause revenues to fall, and tax hikes cause them to rise. The economy also can affect revenues. During an expansion, revenues can rise unusually fast, and during a recession, they can drop unusually fast.

The latter is what happened following the first Bush tax cut. When Bush took office, tax revenues accounted for 19.8 percent of gross domestic product. After the tax cut, they collapsed to a low point of 16.3 percent--far lower than even the most pessimistic projection.

Yes, revenues have risen from that low level, but they still haven't recovered. The Center on Budget and Policy Priorities found that revenues currently lag $200 billion behind the revenue growth you would normally find during a recovery.

http://www.tnr.com/doc.mhtml?i=w061023&s=chait102306

NO actual economists take the supply-side theory seriously. None of them. There is absolute proof that raising taxes raises revenues, and lowering them lowers revenues. You can theorize a point in which this does not happen, but your theories aren't even close to any actual reality we have experienced, have no predictive ability, and no utility in deciding new tax rates. They are immaterial to the discussion.

ALL theories which promote lowering taxes in order to raise revenues rely upon leaps of faith and logic, not to mention conflation of statistics. There is no proof that the economy grows faster under a tax cut, none.

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I think we grew ourselves out of the deficits in the 90's, no small credit due to the Republican Congress, and also due to lower military expenditures. That was my point, and I believe that is our best hope for balancing the budget in the future. If you raise tax rates too precipitously, it might pay off the first year or two, but you run the risk of slowing growth as a result, down the road, and we have to have growth to ever have any hope of balancing the budget.

Actually no credit at all is due to the Republican Congress for our 'growth.' They didn't have anything to do with it. In fact, one of the reasons we balanced budgets is because we raised taxes. Remember that part? And it didn't slow the economy, it didn't slow revenues, it didn't slow investment. Quite the opposite in fact.

You say that "you run the risk of slowing growth as a result," but that's Bullshit. You can't provide any actual evidence that this will/has happened, that tax hikes - and we're talking modest ones, a few percentage points here or there - will slow the economy into a recession.

Cycloptichorn

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Cycloptichorn wrote:

okie wrote:

I think you are dead wrong here. Under your reasoning, excluding the lower amounts of income of all citizens would not make the income tax progressive, which is utterly preposterous. Under your reasoning, the income tax rates above that threshold apply to all citizens, so it would not be progressive! I think you are obviously wrong. You somehow cannot get past the idea that other taxes besides income tax can be progressive.

Wrong wrong wrong!

Cycloptichorn

I am going to limit the debate to this elementary point, cyclops. Frankly, if you cannot understand a principle this simple, I am tempted to give up on you, and it seems to be a waste of time to debate anything more complex than this. I don't mean to offend you, but do the searches all over the internet, whatever, read books, and you will find references all over the place concerning things like injecting progressivity into a sales tax by exempting necessities, such as food. This is so elementary.

I will post this quote from just one site. I did not think it would even be necessary to start posting links on something so simple. Whew!

"Join an organization that wants to make government better. There really is a better way for the USA to collect its taxes. A fair and simple progressive 10% National Sales Tax is that better way. And we will make it a progressive, 10% National Sales Tax. We plan to exempt food, rent and medicine. That means that the low income families and individuals will pay almost no tax since they usually have to spend most of their income on the exempt items."

http://www.noirs.com/plan.html

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okie wrote:

Cycloptichorn wrote:
okie wrote:

I think you are dead wrong here. Under your reasoning, excluding the lower amounts of income of all citizens would not make the income tax progressive, which is utterly preposterous. Under your reasoning, the income tax rates above that threshold apply to all citizens, so it would not be progressive! I think you are obviously wrong. You somehow cannot get past the idea that other taxes besides income tax can be progressive.

Wrong wrong wrong!

Cycloptichorn

I am going to limit the debate to this elementary point, cyclops. Frankly, if you cannot understand a principle this simple, I am tempted to give up on you, and it seems to be a waste of time to debate anything more complex than this. I don't mean to offend you, but do the searches all over the internet, whatever, read books, and you will find references all over the place concerning things like injecting progressivity into a sales tax by exempting necessities, such as food. This is so elementary.

I will post this quote from just one site. I did not think it would even be necessary to start posting links on something so simple. Whew!

"Join an organization that wants to make government better. There really is a better way for the USA to collect its taxes. A fair and simple progressive 10% National Sales Tax is that better way. And we will make it a progressive, 10% National Sales Tax. We plan to exempt food, rent and medicine. That means that the low income families and individuals will pay almost no tax since they usually have to spend most of their income on the exempt items."

http://www.noirs.com/plan.html

It is not I who misunderstands, Okie. You have dropped every one of my points and yet you somehow believe you are winning the debate. Be honest with yourself, please!

Here's a question for you: do you understand the difference between the overall rate of taxation, which is defined by the combination of the various taxes we pay, and individual rates of taxation?

Progresssivity of a tax is defined by the rate at which something is taxed, not what you exempt from it. That's progressivity of the overall rate of taxation.

You do understand that there are fools all over the internet that will agree with all sorts of idiotic concepts? To say 'do a search, and you'll see other people... screwing it up too' helps your case not one bit.

Can you show any statistical data to support your position that lowering taxes does not automatically lead to a drop in revenue? I bet you cannot.

Cycloptichorn

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Cycloptichorn wrote:

Progresssivity of a tax is defined by the rate at which something is taxed, not what you exempt from it. That's progressivity of the overall rate of taxation.
Cycloptichorn

No, not correct. For example, the income tax is laced with exemptions, which help make it progressive. Rate of tax, and graduations add to the progressivity, but there is much more to it than that.

Just admit you are wrong just once. It would be much easier for you.

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okie wrote:

Cycloptichorn wrote:

Progresssivity of a tax is defined by the rate at which something is taxed, not what you exempt from it. That's progressivity of the overall rate of taxation.
Cycloptichorn

No, not correct. For example, the income tax is laced with exemptions, which help make it progressive. Rate of tax, and graduations add to the progressivity, but there is much more to it than that.

Just admit you are wrong just once. It would be much easier for you.

But, I'm not wrong. The items exempted from income tax make the overall rate of taxation more progressive, but the income tax itself is not more progressive.

For example: Let us say that we exempt people from paying income taxes on items spent on their health care. Cool. This is a big percentage of the income for many poor people so it's a good thing. This eases their overall tax burden - but it does not change the rate at which the rest of their income is taxed, nor the rate of how the income of the rich is taxed.

Those rates remain the same; for example, the income tax charged for those in the <50k per year bracket could be 15%. If you exempt health costs from this, the income taxed charged for that bracket is still 15%. The fact that you are exempting certain items from the tax does not mean that the rates involved in that tax change one bit.

I ask again, because you - who have dropped all my points, made claims which you can't back up, and changed the subject several times - did not answer it: do you understand the difference between the overall rate of taxation, which is defined by the combination of the various taxes we pay, and individual rates of taxation?

You are massively confusing the two.

Cycloptichorn

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Cycloptichorn wrote:

okie wrote:
Cycloptichorn wrote:

Progresssivity of a tax is defined by the rate at which something is taxed, not what you exempt from it. That's progressivity of the overall rate of taxation.
Cycloptichorn

No, not correct. For example, the income tax is laced with exemptions, which help make it progressive. Rate of tax, and graduations add to the progressivity, but there is much more to it than that.

Just admit you are wrong just once. It would be much easier for you.

But, I'm not wrong. The items exempted from income tax make the overall rate of taxation more progressive, but the income tax itself is not more progressive.

For example: Let us say that we exempt people from paying income taxes on items spent on their health care. Cool. This is a big percentage of the income for many poor people so it's a good thing. This eases their overall tax burden - but it does not change the rate at which the rest of their income is taxed, nor the rate of how the income of the rich is taxed.

Those rates remain the same; for example, the income tax charged for those in the <50k per year bracket could be 15%. If you exempt health costs from this, the income taxed charged for that bracket is still 15%. The fact that you are exempting certain items from the tax does not mean that the rates involved in that tax change one bit.

So granting a standard deduction and deductions for dependents to everyone does not make it progressive? ooooookayyyyy!!! For low income people, these deductions may wipe out all income tax, but for higher incomes, income tax is still due. Obviously, such deductions cause lower income people to pay a much smaller percentage of their incomes as income tax, as compared for those with higher incomes. Infinitely smaller in fact, as any number divided by zero is infinity. I have only mentioned two deductions or exemptions. There are many more, such as earned income credits, earned child tax credits, etc.

Similarly, if sales tax is exempt from necessities, poor people that spend all of their budget on necessities end up paying a much smaller portion of their economic situation than more prosperous people.

I am growing tired of trying to explain the simplest of concepts.

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I ask again, because you - who have dropped all my points, made claims which you can't back up, and changed the subject several times - did not answer it: do you understand the difference between the overall rate of taxation, which is defined by the combination of the various taxes we pay, and individual rates of taxation?
You are massively confusing the two.

Cycloptichorn

I have dropped some of the argument points, because I am backing up to try to explain the simplest of things. Kind of like a teacher that gives up on explaining the square root of 356 if the pupil cannot add 2 + 2. How do you like that line, cyclops, but that is the way I feel. It seems pointless to address dozens of points, if we can't agree on one of the most basic, so that is what I am concentrating on.

I have not answered that question about the overall rate of taxation and the individual rate of taxation. I understand the difference, but what is your point as it relates to a tax being progressive?

I say again, you must get over the fact that there are many more ways to make taxes progressive than creating tax brackets, as in a graduated tax scheme for income tax. All we are talking about is skewing the amount of tax paid by poorer people, as a percentage of their budgets or income, compared with higher incomes or more affluent people.

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Because the things you mention - deductions, exemptions - make the overall rate of taxation progressive, not the income tax itself.

Look, the income tax itself is progressive, but not because of deductions or exemptions; it's progressive because we charge different rates based upon different levels of income. Period. We augment people's overall rate of taxation by allowing them deductions and exemptions, but this does not change the rate at which they are income taxed.

For example, again: If citizen X has a 20% rate of income tax, that isn't his overall rate of taxation. His overall rate is defined by the income tax, sales tax, luxury taxes he might pay, specialty taxes such as gift or cigarrette taxes, etc., and whatever deductions we might decide to give off any or all of these taxes. This will give you a rough figure in the end; lets' say that with all the taxes and such combined we have an overall tax rate of 21% in the end.

Now, we can make the overall rate of taxation more progressive by giving various discounts and deductions, but without changing the rates involved with the income tax - or any specific tax which is indexed to one's income or net worth - you don't change the specific progressivity of that tax.

So when you say,

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o granting a standard deduction and deductions for dependents to everyone does not make it progressive? ooooookayyyyy!!! For low income people, these deductions may wipe out all income tax, but for higher incomes, income tax is still due. Obviously, such deductions cause lower income people to pay a much smaller percentage of their incomes as income tax, as compared for those with higher incomes. Infinitely smaller in fact, as any number divided by zero is infinity. I have only mentioned two deductions or exemptions. There are many more, such as earned income credits, earned child tax credits, etc.

You are quite correct that the overall rate of taxation changes for the individual. But the specific rate of the specific taxes is not changed.

Why is this important? You may recall that we were discussing whether or not taxes were progressive, and which ones were or were not regressive. Individual taxes such as Sales tax and Gasoline tax are flat - you were correct to state this - in real numbers, but not flat in terms of the amount you pay. Therefore they are regressive, as the other half of the equation goes up and the amount paid stays relatively constant.

See?

Cycloptichorn

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You are hopeless, and you are also dead wrong in my opinion. No amount of reasoning will convince you.

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okie wrote:

You are hopeless, and you are also dead wrong in my opinion. No amount of reasoning will convince you.

You haven't actually used any, so how would you know?

I have little doubt that I am more educated than you in this regard, Okie. You would do better to try to understand and discuss the difference between the two concepts then to claim you understand them and then hopelessly mangle the ensuing discussion.

I like having economic discussions with you - they are fun. I'd rather come to an understanding than just throw my hands up and quit. What is it about my position that you feel is incorrect?

Do you not understand the positiont that it is the rate of taxation which defines progressivity of that specific tax, and not the exemptions or deductions which do?

Cycloptichorn

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Cycloptichorn wrote:

okie wrote:
You are hopeless, and you are also dead wrong in my opinion. No amount of reasoning will convince you.

You haven't actually used any, so how would you know?

I have little doubt that I am more educated than you in this regard, Okie. You would do better to try to understand and discuss the difference between the two concepts then to claim you understand them and then hopelessly mangle the ensuing discussion.

So, I can't resist, I have to ask, what is your education on this?

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I like having economic discussions with you - they are fun. I'd rather come to an understanding than just throw my hands up and quit. What is it about my position that you feel is incorrect?

Do you not understand the positiont that it is the rate of taxation which defines progressivity of that specific tax, and not the exemptions or deductions which do?

Cycloptichorn

I can agree you are one of the more fun liberals to debate. You at least are open about your opinions and you freely post your opinions with lengthy explanations.

You have identified the main disagreement. You apparently believe the rates, including graduated rates, can only define a progressive tax, but I think you are wrong. Exemptions and deductions also contribute to the nature of any tax in terms of being progressive or not. In fact, exemptions and deductions serve to accomplish the same effect as a graduated tax schedule by stipulating a zero % tax rate up to a certain threshold.

No matter your education on this, I think you are going to have to eventually eat crow on this.

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Progressivity is measured by overall taxation compared to overall income.

A tax would be progressive if someone making $10,000 pays $100 and someone making $100,000 pays $2,000. How they get to that % based on exemptions or rate per level of income doesn't matter.

Deductions can hide the level of taxation compared to total income since it reduces income from the gross level to the taxation level.

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After how many pages, I was waiting for anyone to weigh in, and lo and behold, even Parados backs up the obvious here, cyclops. Your case is doomed on this, cyclops, but I would like to know what your education is on this anyway?

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okie wrote:

After how many pages, I was waiting for anyone to weigh in, and lo and behold, even Parados backs up the obvious here, cyclops. Your case is doomed on this, cyclops, but I would like to know what your education is on this anyway?

You both appear to be arguing past each other.

Reread what Cyc has written. He said the same thing I did, perhaps just not as clearly.

A progressive tax does require changes in rates. How those changes occur can be a number of different ways. The US does it through change in the actual rate and a standard deduction.

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okie wrote:

After how many pages, I was waiting for anyone to weigh in, and lo and behold, even Parados backs up the obvious here, cyclops. Your case is doomed on this, cyclops, but I would like to know what your education is on this anyway?

Ever since I've had a discussion with Thomas about this subject, I've been reading up on it a lot for the last month. To the exlcusion of other topics of study, actually.

Give me a little while and I'll hunt up the reading list, if you care to see. I took it from a post I saw based on the writings of Milton Friedman, recently deceased.

I agree with Parados, if we are discussing the overall tax burden a person faces. Not so much if we are talking about an individual tax. The fact that we decide to exempt certain people from paying the tax doesn't change the fact that a certain tax may or may not be progressive. Hmm. For example, let us say that we give a tax credit for, people who have kids. It doesn't change the tax codes for people who don't have kids; therefore, is it really changing the level of taxation? Or have we just decided societally to exempt certain people from paying the real level of taxation?

Cycloptichorn

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Talk about twisting words. Parados, you just said a progressive tax could be accomplished by exclusions or deductions, which is what I said, and which is what cyclops vehemently denies. This is getting to be childish. Do you guys have some kind of mental block?

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parados wrote:

okie wrote:
After how many pages, I was waiting for anyone to weigh in, and lo and behold, even Parados backs up the obvious here, cyclops. Your case is doomed on this, cyclops, but I would like to know what your education is on this anyway?

You both appear to be arguing past each other.

Reread what Cyc has written. He said the same thing I did, perhaps just not as clearly.

No way. You re-read it. He is not saying the same thing at all.

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Cycloptichorn wrote:

[
Nope. Repeat after me, Okie: Excluding items from a tax does not make the tax itself any more progressive or regressive!

You are conflating two separate issues: progressivity of an individual tax and progressivity of our overall tax code. They aren't the same thing, at all.

On second thought, I agree with Cyc. You are too stupid to discuss this.

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Parados is correct. It is he effective tax rate that counts. You get that by dividing the tax due by your total revenue.

It so happens that the well-to-do have a lot of deductions, deferments, and exclusions than do the less wealthy. For instance, you have have money to take full advantage of the various IRAs, 549 exclusion, 403b deferment, etc. Also, not many poor would find it worthwhile to itemize deductions, which could give the wealthy charitable, medical, etc., deductions. All this reduces progressivity.

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Where is the US economy headed?

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