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Musicmystery -> RE: With tax revenue down 25%, GOP still pushes tax cuts | Jay Bookman (4/16/2010 3:52:13 PM)
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ORIGINAL: Mercnbeth
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ORIGINAL: Musicmystery
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History proves that raising taxes, specifically on small businesses and the wealthy, actually decreases tax revenue.
I have to run for several hours--but do a little research, and you'll find the opposite is true regarding taxing the wealthy.
Soaking small businesses is simply a fear-mongering myth.
For reality look no further than California. Highest tax increase in the history of the county last year. Since then tax revenue is down to he point of seeking additional revenue sources.
Feel free to look it up.
California has a range of unique problems, beginning with voter mandated services and yet voter mandated restrictions on paying for them. It's an impossible situation, and nothing but changing their system is going to help.
Let's start with this--Is there an inverse relationship between tax rates and revenue collected? Within certain parameters--yes.
But that's the problem. Even the Laffer Curve acknowledges this--we aren't going to maximize revenue at 0%. Or at 100%. But that middle point is not at all concrete--people still have opportunity cost, diminishing returns, and nonpecuniary interests, all of which are going to influence marginal decisions more than tax rates.
What IS true, within a set of parameters, is that a tax cut does not cost as much as the lost revenue. That's a VERY different statement than claiming a simplistic and constant inverse relationship. In fact, even those who make the case for tax cuts increasing revenue don't do it by tax rates alone, but by bringing in a few dozen factors, all speculative, all of which have to happen for the model to work, and even then, depend on elasticity of supply and demand in labor and goods. The bottom line? They still cost money. It's not magic.
To make the case for this, you'd have to isolate income tax revenue, adjust for inflation, fluctuations in income, number of taxpayers, and compare it to tax rates just to be looking at any real numbers--and even then, you'd be ignoring several other factors, from short term/long term responses to changes in the overall economic climate and expectations.
Consider this--sales taxes go up 1%. Do you curtail your expenses? Doubtful. Probably not. OK--let's raise them 20%. Now that's going to hurt, probably, and now, at least in the long run, you might well make changes, depending on elasticity. Would you cut spending by 20%, though? Probably not--so while it would likely drag on the economy, revenue would rise (at least in the short run).
All I'm saying is this---it's not as simple as cut taxes and we have more revenue. We don't.
It's among the reasons deficits soar when people try it.
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