In the second part here, I wanted to attack a basic idea
of conservatives and it show us something about them.
Tax cuts. Conservatives have been attacking taxes for
over a generation with a religious fever.
They claim, has both IMP and JERRY have, that taxes
that taxes are theft, it forces values upon people, it
is unconstitutional, a wide variety of arguments against
taxes exist. But they never actually show us figures to
prove their points. They always offer us emotional arguments,
taxes hurt americans or prevent initiative from people.
but what are the facts. Americans always claim they are
overtax, I am sure Jerry and IMP feel so, so what do the numbers
say. In the U.S. the overall amount of taxes paid, federal, state
and local reached a peak, of 29.6% of G.D.P. in 2000. that number
was swollen by taxes on capital gains during the stock-market
bubble. By 2002, the tax take was 26.3 and it has been lower since.
So are we massively overtax? Nope. in fact, most industrial
countries have a higher level, in 1999, Canada collected 38.2%
in France, it was 45.8 and in Sweden, 52.2%. So then one might
argue that taxes are at an historically high, that is wrong too.
As a share of the G.D.P federal taxes are currently at their lowest
point since the eisenhower administration. State and local taxes
rose substantially during between 1960 and early 1970’s, but
have been stable since. Aside from the capital gains taxes paid
during the bubble years, the share of taxes Americans have paid
has been flat since the Nixon years. Now who paid
might be different, so let us look at that. The middle class percentage
of taxes hasn’t changed much in those 30 years. It is still around
26%. Now the wealthy is a different story. They have seen a sharp
drop in their burden, The top tax rate the income tax rate on the highest bracket- is now 35%, half what is was in the 1970’s and with a brief
period between 1988 and 1993, that is the lowest rate since 1932.
Beyond that taxes that, directly or indirectly, bear mainly on the
affluent have been cut sharply. The tax rate on corporate taxes have
been cut in half since the 1960’s. the braindead inheritance
tax cut of 2001, overwhelmingly a tax on the very wealthy.
In 1999, only 2% of estates paid any taxes and half the tax was
paid by only 3,300 estates worth more then 5 million. The 2003 tax cuts,
sharply cuts taxes on dividend income another boon to the wealthy,
by the time the bush tax cuts full effect, people with really high
incomes well face their lowest average tax rate since the
hoover administration.
So what does that leave us. Americans pay low taxes by
international standards.
Most people’s taxes haven’t gone up in the past generation:
the wealthy have had their taxes cut to a levels not seen since
before the new deal. And we have more welfare for the rich programs
being suggested by bush. So why the rage against the lowest taxes
paid in the industrial world. I don’t know.
but here are some more things to be aware of, trickle down or
supply side economics. Now this is the view that the government
can cut taxes without severe cuts in public spending.
The Another doctrine here is called, “starving the beast” The basic
idea here is taxes should be cut precisely in order to force severe cuts
in public spending. Supply-side economics is the friendly face of
the tax-cut movement, but the “starve the beast” is where the power
lies. The starting point of supply side economics and jerry’s argument
is, taxes reduce the incentive to work, save and invest.
A businessman who knows that 70% of every extra buck that goes
to the IRS is then less willing to make the effort then a businessman
who knows the IRS will take only 35%, so reducing taxes will
will all other things being the same, spur the economy. So far so
good. but the government must pay their bill, (firemen, police,
military, garbage pick up, what have you) So the standard view
of economist is if you want to reduce the burden of taxes,
you must show what government programs you want to cut
as part of the deal. There is no free lunch.
But supply-siders argue that there is a free lunch. Cutting
marginal rates, would lead to such a large increase
in gross domestic product that it wouldn’t be necessary to come
up with offsetting spending cuts. So supply- siders say
“don’t worry, be happy and cut taxes” And we they say cut
taxes, it is always taxes on the affluent. Reducing the
top marginal rate means the biggest tax cuts go to people in
the highest tax bracket.
Now the other side of the camp in the tax-cut crusade actually
welcomes the revenue losses from tax cuts. Its most visible
spokesman today is Grover Norquist, yep, mister under indictment
Grover Norquist, who once told NPR, that “I don’t want to abolish government . I simply want to reduce it the size where I can drag it
into the bathroom and drown it in the bathtub”. The way to get
it down is to starve it of revenue. “The goal is reducing the size
and scope of government by draining its lifeblood” norquist told
U.S. new and world report.
What does reducing the size of the government actually mean?
Well they are vague, very vague about the details.
But the heritage foundation, has called for the removal of
the “new deal” and “the great society” So it is clear that
this group would great rid of any institutions that FDR AND LBJ,
created. That means social security (remember last year and bush’s
attack on SS. That is part of the plan to destroy SOCIAL SECURITY)
Medicare and medicaid all go under this plan. Most of what gives
the citizens of the U.S. a safety net against economic misfortune.
Now the village idiot has already come out in favor of this plan.
In august 2001, he called the disappearing surplus,
“incredibly positive new” because it puts congress in a
“fiscal straitjacket”
Now one wonders where the idea of supply side economics came
from. Was it from some prestigious economic professor or some
school of economic thought like Keynesian ism, or monetarism.
that is, as a set of scholarly ideas that have made their
way political discussion. Uh, NO. it came out of far right wing
political magazines. N. Gregory Mankiw, who is chairman
of bush light council of economic advisers, in his first edition
of his economic principles textbook, called reagan’s’ supply-side
advisers as ,“charlatans and cranks” Another not so happy fan
of supply side economic is the head of the “congressional budget office”
who in early 2006, Douglas holtz-eakin a conservative economist
who was handpicked to this job. He tried to evaluate the growth effects
of the bush administration’s new tax cuts. His conclusion, unless
the revenue losses from the proposed tax cuts were offset by spending
cuts, the resulting deficits would be a dragged on growth, quite
likely to outweigh any supply-side effects.
If supply-siders don’t have the support of the professional economist
then who employs these people? The answer is since 1970, almost
all prominent supply-siders have been aids to conservative politicians,
writers at conservative publications such as national review,
fellows at conservative policy centers such as heritage.
So if professional economist are not on board, what would the
goal be of such tax cuts. I touch on it earlier, the real target
is the size of the government. Irving Kristol, co-editor
of the “the Public interest” is one of the key proponents
of supply side economics, but years earlier he was not.
He said"I was not certain of its economic merits but quickly
saw it political possibilities" In 1995, he wrote that his real
aim was to shrink the government and that tax cuts were
a means to that end: "the task, as I saw it, was to create a new
majority, (which evidently would mean a conservative majority)
which came to mean in turn a republican Majority,-So political
effectiveness was the priority, not the accounting deficiencies
of the governments. " so in 1995 Kristol said he and his associates,
had set out to deceive the American public. They sold tax cuts on the pretense that they would be painless, (a free lunch) when they
themselves believed that it would be necessary to slash public
spending in order to make room for cuts. But what do tax
cuts actually do?
Ah this is the real question in all this. Do tax cuts benefit
the economy.
We look into history for our answer.
We will begin with the roaring twenties.
The supply-siders have claim tax cuts stimulated the economy
into a boom era. They say tax cuts and revenues climbed.
But as usual, they only give you a small deceptive part of the
whole picture. In the twenties only a small percent of
americans paid taxes, less then 20% of all americans paid taxes
and those who paid were very wealthy. Here is how the number break
down. During the high tax era of WW 1, 95% of all americans paid no income taxes. By the end of the 1920’s about 80% of all americans
still paid no income taxes. Only the wealthiest were tax, between
1920 and 1925, the top tax rate was reduced from 73% to 25%.
but still their numbers grew. In 1920 there were 33 millionaires who
made more then 1 million a year, in 1928, there were 511 people
who made then a million a year. among people who made from
$100,000 to 1 million in 1920 3,16 in 1928 it was 15,466. and
yet to make sense of this, the number of people who made over
hundred thousand a year, was only 0.01% of the American population.
But between 1923 and 1929, the lower 93% of the non farm population
actually experienced a 4 % drop in real disposable per capita income
and farmers suffered an even worse decline. In one year alone-1927-
The numbers of americans making a middle class income
(between $2000 and 5,000) declined from 2.17 million to 2.09
million-- almost all of the loss to the lower class.
So you can understand why a rich only tax saw increasing tax collections
and why the rich paid a higher share of those taxes. Between 1921 and 1928, the total tax collections grew from $719 million to $1,160 billion,
in a period of no inflation. The share of total tax burden paid by the
rich, (those making over 50,000) rose from 44.2 to 78.4%
But what would have happened if the poor had been paying taxes as
well? well with declining incomes, they would have paid less than
before. Because the middle class is larger then the rich,
this probably would have resulted in an overall DROP in tax collections.
and this is precisely what we saw during the reagan years.
THE FACT OF THE MATTER IS ALMOST ALL TAX HIKES HAVE SEEN
DRAMATIC AND INDISPUTABLE GROWTH IN TAX COLLECTIONS.
This is a sign the economy grew, which is opposite from what
tax cutters say will happen. They claim tax increases means the
economy shrinks, which should be reflected in tax collections
going down after a tax hike, not going up. As I have shown
during WW 1, Only the richest 5% of the income earners
payed taxes, and the top rate was hiked from 15 to 73%.
Increase in revenues were so extraordinary that they funded
the entire war, (the war did incur a debt, but this was paid
off by continuing high taxes for a few years after the war)
After the massive tax cuts of the 1920’s, FDR raised taxes on the
rich from 25% to 91%. Even the bottom rate climbed from 4% to 19%
by the end of his presidency (1945) and tax collections rose the most
of any president in U.S. history. Remember tax collection can only jump
with a strength in the economy, a dip in the economy reduces the amount
of tax money collected. This last recession proved this.
The only exception to the idea of tax cuts boost the economy is
bush’ sr 1990 tax hike. the potential revenue increase were lost
in the following recession. The recession of 1990 began in july, 1990
four months before bush signed his “no new taxes pledge”
Clinton tax increase in 1993 occurred after the recession had
passed and the increased in tax collections is clearly
visible:
Current constant (87 dollars)
------------------------------------------------------------------------------------- 1990: 466,884 413,355
1991: 467,827 397,677< recession year
1992: 457,964 392,969
1993:509,680 411,032< clinton tax passes
1994: 543,055 429,496<takes effect
1995: 590,244 458,300
Quite clearly the clinton tax increase helped the economy,
as tax collection rose, which is a sign of economy strength.
It is also quite clear in the corporate income taxes.
current constant (87 dollars)
1990: 93,507 82,787
1991: 98,086 83,378<recession year
1992: 100,270 82,786
1993: 117,520 94,774<clinton tax passes
1994: 140,385 111,029< takes effect
1995:157,004 121,907
This is in marked contrast to the reagon tax cuts which saw
collections fall despite also occurring in a similar position in the
business cycle, namely the start of a recovery.
So let us look at Reagen’s tax cut economy.
Also as a booming economy, so tax revenues should grow
as they did during clinton’s years.
Nominal constant (87 dollars)
1980 517.1 728.1
1981 599.3 766.6<tax cut passed
1982 617.8 738.2<drop
1983 600.6 684.3<drop
1984 666.6 730.4
1985 734.1 776.6<81 level recovered
1986 769.1 790.0
1987 854.1 854.1
1988 909.0 877.3
1989 990.7 916.2
1990 1031.3 914.1
1991 1054.3 894.7
1992 1090.5 895.1
and as for that favorite right wing nonsense,
here are the number for Kennedy tax cuts.
receipts percent change from previous year
1961 138,069 -----
1962 150,567 +9.0%
1963 155,375 +3.2%
1964 156,804 +0.9<tax cut takes effect
1965 154,475 -1.5
where is the great benefit coming from the tax cuts, which was
in the 5th year of a 9 year expansion. Tax collection to see
a negative growth was a sign that tax cuts don’t do what they are
supposed to do. Now in 1966, income tax collections did rise
again, but LBJ had already begun the keynesian deficit spending
on the Vietnam war and so we can’t really tell what is effect
of the tax cut after this.
In sum, supply-siders have no obvious success stories to point to.
Indeed, almost all the historical evidence runs against them.
Cutting taxes have no benefit of any kind to the economy
and the numbers prove it.
conservatives cannot make any kind of argument for tax cuts
based on any kind of boost for the economy. If the facts run
against you, you must resort to emotional arguments, which
is what in fact conservatives do. They never talk about facts or
evidence, they talk about personal incentive, motives, entitlements.
Never facts.
Kropotkin