“And why do people keep pointing to the tax cuts of 1981 and 1986, while ignoring that the tax increases of 1982 and 1984, which essentially cancelled out the cuts, if not more? Really, 1986 wasn’t that huge of a deal, if you look at the decade it was in overall.)t”
People, who don’t know any better, keep pointing it out because they are reading/listening to those who conveniently leave out that fact because it goes against the argument they are trying to make.
Most people are against taxing the wealthiest more because they think someday they too may be in that category - when in fact, 99% of the people will never be that wealthy.
And to whoever suggested taxing consumption - those are the most regressive kinds of taxes and hurt the poor disproportionally. That is why those who complain about taxes, love the idea of a consumption tax.
"Most people are against taxing the wealthiest more because they think someday they too may be in that category - when in fact, 99% of the people will never be that wealthy.
Ha Ha…how else can it be explained that in a Democracy, 99% of the people can’t seem to raise taxes on 1%?
@emilybee, I have to respectfully disagree about consumption taxes. One can provide workarounds for their regressive nature (basically, credits for low income earners). Consumption taxes are more difficult to game. The problem will be how to find gainful employment for the armies of accountants who have forgotten how to do useful accounting (e.g., helping companies manage their finite resources) and specialize in shell games.
For the record, I like the idea of consumption taxes and only occasionally complain about taxes (and we pay a lot).
I know why I am omitting any tax law changes from 82 and 84 … because I don’t remember them at all. Granted, I was in college and in 82 I was a senior in high school so I wasn’t exactly following tax law changes at the time. But the 86 reform was a big deal unlike the 82 and 84 changes.
One was a big deal with major changes, the others were minor tweaks. Are you somehow arguing that the 86 tax law reform was not a big deal and not very responsible for the economic growth of the 90’s? I think you ar flat out wrong if that is the argument you are making.
I don’t disagree, but in practice they have raised taxes on the top 1% that is earning income that appears on a W2, but given a bye to the top 0.01%. My wife makes good money, and I honestly don’t mind paying taxes on it (leaving aside the question of whether I agree with how the money is used). I don’t blame my neighbors who are taxed on “carried interest” for cashing in, I probably would also, but it is unfair and should be stopped. We pay an extortionate amount in taxes, only in part because we live in NJ.
One reason I prefer a consumption tax (or a flat-ish tax) is that I think it’s beyond ludicrous that two college graduates don’t feel comfortable preparing their own taxes.
And to whoever suggested taxing consumption - those are the most regressive kinds of taxes and hurt the poor disproportionally. That is why those who complain about taxes, love the idea of a consumption tax.
Low income folks in our state pay about 16% in tax, more than any other group.
“One was a big deal with major changes, the others were minor tweaks. Are you somehow arguing that the 86 tax law reform was not a big deal and not very responsible for the economic growth of the 90’s? I think you ar flat out wrong if that is the argument you are making.”
You should do some research on gov’t spending under Reagan.
Government spending is out of control under any administration you can think of emilybee and besides I don’t think I said government spending wasn’t high under Reagan anyway. So are you changing the subject away from the rather obvious notion that tax rate decreases are good for economic activity? Are you somehow disagreeing with that? I hope not because if you are maybe you should do some research and you can start with the basics.
I wish they would fix the marriage penalty and the alternative minimum tax. I would rather pay a higher % and have those fixed. In reality, we’re paying that higher percentage anyway, especially due to the AMT, but the gov’t can pretend we’re not.
The 1980s changes appeared to be broadly revenue neutral, although simplication was generally a good thing. If they helped boost economic activity, that may have been more due to the elimination of various tax deductions and credits that encouraged less productive but tax favored activity.
“So are you changing the subject away from the rather obvious notion that tax rate decreases are good for economic activity.”
I’m not changing the subject. Government spending is a huge boost to the economy. Gov’t spending under Reagan increased dramatically and the national debt increased by several trillion by the end of his term in office from where it was at the beginning of his first term.
The economic growth was not a result of his tax cuts - it was due to the huge increase of government spending during his two terms in office. and raising taxes (which he did 7 out of the 8 years he was in office) one of which was the biggest tax increase in history.
But go ahead and continue believing in the failed theory of supply side economics.
Well, not so sure about that, or at least there are limits. Yes, you can insulate the poor from the regressive nature of consumption taxes through tax credits or rebates, but pretty much only by raising consumption tax rates on the middle class. Present consumption takes a far smaller fractional share of total income (including capital gains) for a Bill Gates or a Warren Buffett than it does for a two-working-spouse family that struggles just to pay the bills. The regressive nature of consumption taxes works not only at the bottom end, but at the top end, too. Think of it in terms of savings rates. At the very bottom end, savings rates are negative–people spend more on consumption than they earn in income (and they typically have no capital gains), and they get by through various forms of government assistance (the earned income tax credit, SNAP, public housing or housing vouchers in some cases, Medicaid, free or reduced price school lunches, etc.), private charity from food banks and such, spending down inherited or previously acquired assets (if any), and debt, to the extent they’re deemed credit-worthy enough to take on debt, often ending in bankruptcy. Consumption taxes hit these folks like a ton of bricks unless very substantial tax relief is provided. A little higher up the income scale, savings rates are approximately zero; pretty much 100% of current income goes to pay for current and past consumption. It’s only when you get to the middle quintile of income that savings rates become positive; at this level, the estimated average savings rate is about 11%, meaning 89% of income is going to consumption. From there, the savings rate keeps going up–17% for the fourth quintile, 24% for the top quintile, 37% for the top 5%, 51% for the top 1%–meaning that the fractional share of income going to consumption continues to decline the higher you go up the consumption scale, so that for the top 1%, roughly half of income would be exempt from consumption taxes, while the true middle-middle class taxpayer (middle quintile) would be paying consumption taxes on almost 90% of income. And my guess is by the time you get up to the stratospheric Gates/Buffett level, consumption represents an even much smaller fractional share of income. You can help out the bottom two quintiles by raising tax rates on the other three quintiles, but the effect of that surcharge will also be sharply regressive. Unless you could figure out a way to make consumption tax rates themselves progressive, but that sounds like an administrative nightmare.
There’s a reason wealthy people tend to like consumption taxes. It’s because they know a very large percentage of their income doesn’t go to consumption.
The economic growth was not a result of his tax cuts - it was due to the huge increase of government spending during his two terms in office. and raising taxes (which he did 7 out of the 8 years he was in office) one of which was the biggest tax increase in history.
But go ahead and continue believing in the failed theory of supply side economics.
@71,
This is shocking. Supply side economics is a failed theory.
Government spending is the reason the economy grew after the 86 tax reform. I’m glad you stated that as fact when it is the subject of great research and debate elsewhere. Like all things related to the economy and/or government policy there are lots of interesting theories and rhetoric allowing one to support whatever theory feels good at the time.
But, I am amazed to discover that government spending, not tax reform and lower income tax rates and a bunch of other good stuff in the 86 tax reform law, such as accelerated depreciation and provisions to allow deductions of capital expenditures (up to certain limits) was the cause or at least a significant contributing factor in the economic growth in the 90’s.
Government spending. That is fascinating. You believe that do you?
I’m not an economist or political scientist. I agree that consumption taxes are, by their nature, regressive, but then again, so are many current non-income taxes (payroll taxes, gasoline taxes, property taxes, sales taxes, etc.).
To my understanding, other economies have implemented consumption taxes. I can’t imagine that they have further impoverished their poor, but that might be because they tend to have safety nets in place for education, health care, housing, etc.
I don’t have an answer. I do know that what we have is very much broken. I’ve told this story before, but my father emigrated to the US as a 50-year old non-English speaker, with no money and 3 kids. He found a tenement that would reduce his rent for acting as a super/manager, mopping the stairs, collecting rents, screening applicants, etc. During the day he worked as an office clerk. He never became rich, but he put kids through college (full pay) and saved enough for a comfortable retirement. He wasn’t a fool, but he always appreciated this country for giving him a second chance, and didn’t mind paying his fair share of taxes. One year he came to me very proudly and told me that he had paid as much in taxes that April as he had made, total, two years previously. I internalized that, and until very recently, felt that I was doing my part in funding the government. We are very lucky that my wife makes a good living, but in the past few years the tax burden has started feeling unfair and out of proportion.
Yes, I and a number of others on this forum are (obviously) disagreeing with that “fact”, and it turns out that we’re in pretty good company, when you look at the army of economists who agree with us.