Budgets being cut anyway . . .

[missionfinder]

Those in favor of raising taxes don't have history backing them up. It will not increase revenue. Historically no matter what the tax rate is the government takes in about 18-19% of GDP.

W. Kurt Hauser: There's No Escaping Hauser's Law - WSJ.com

 

[M Paquette]

Those in favor of raising taxes don't have history backing them up. It will not increase revenue. Historically no matter what the tax rate is the government takes in about 18-19% of GDP.

W. Kurt Hauser: There's No Escaping Hauser's Law - WSJ.com

Therefore, extraplating from one data point, it becomes intuitively obvious to even the most casual observer that dropping all taxes to zero should result in a near-infinite spike in productivity, resulting in the government recognizing an increase in the government's take, presumably from collecting roundoff errors in banking statements or similar magic.

That article also uses one of my very favorite ways to mislead with statistics, using the IRS definition of Small Business (IRS) to talk about individual tax rates being paid by business owners, combined with the mention of most jobs being created by Small Business (SBA) using the rather different definition used by the SBA that allows companies of 500 employees (1000 for organic nitrogen fertilizer producers, etc) to be called a small business. Most of these are C Corporations paying taxes at corporate tax rates.

The WSJ gang seems to be cribbing from each others notes. I see this whopper in quite a few of their opinion pieces.

Oh, and if you think I'm not taking this discussion seriously, you're right. In the strange world of government budgets, a budget cut is when a department gets an increase in funds, just not quite as big an increase as they'd planned on. Anyone who thinks that sort of cut will reduce a deficit is invited to tea at the Hatter's place.

Lord save us from congressmen and other useful idiots.

 

[lets-retire]

Of course, as you know, there are those who advocate raising taxes as well as cutting spending. You've already prioritized your desire to cut non-defense spending. You can also move toward solvency by collecting more taxes.

Actually I stated cut all spending, with defense and security being the last to be cut. The reason is if we cut defense and security first, it opens us up to attack. Get as much out of the cuts from agencies that will not result in us being attacked, then cut defense and security as much as possible. Only after the waste is cut out of government should taxes be increased on EVERYONE. Not just the rich or the poor, everybody gets a tax increase. If the government can't responsibly handle the money they are receiving why should we give them more to mismanage. Make the government spend our money responsibly then, if they do not have enough give them more. One of the biggest problems I see with our government now is too few people are paying into the system and they are voting themselves more gravy from the gravyless government coffers.

 

[MasterBlaster]

Therefore, extraplating from one data point, it becomes intuitively obvious to even the most casual observer that dropping all taxes to zero should result in a near-infinite spike in productivity, resulting in the government recognizing an increase in the government's take, presumably from collecting roundoff errors in banking statements or similar magic.

That article also uses one of my very favorite ways to mislead with statistics, using the IRS definition of Small Business (IRS) to talk about individual tax rates being paid by business owners, combined with the mention of most jobs being created by Small Business (SBA) using the rather different definition used by the SBA that allows companies of 500 employees (1000 for organic nitrogen fertilizer producers, etc) to be called a small business. Most of these are C Corporations paying taxes at corporate tax rates.

The WSJ gang seems to be cribbing from each others notes. I see this whopper in quite a few of their opinion pieces.

Oh, and if you think I'm not taking this discussion seriously, you're right. In the strange world of government budgets, a budget cut is when a department gets an increase in funds, just not quite as big an increase as they'd planned on. Anyone who thinks that sort of cut will reduce a deficit is invited to tea at the Hatter's place.

Lord save us from congressmen and other useful idiots.

The mistake many of the pro-taxers make is assuming that higher taxes won't change behavior. Art Laffer's famous curve depicted in a simple yet elegant curve the concept.

The Laffer curve Illustrated

The Laffer curve is an idea that serves it's point.

To maximize government tax revenue clearly the points at the ends of the horizontal axis won't generate any income. With 0% tax you get no income. With 100% tax you get nobody willing to work. In between you get variable government income. Depending then on where the curve peaks and its shape there is an ideal tax rate to generate the most income. As taxes move away from that ideal spot revenue falls.

The real question then is... At what taxation level does the curve peak ? The answer is not very clear. The data supports a variety of taxation positions.

The other questions are... Where are we on a Laffer-like curve ? What is it's shape ? and will increased taxation levels from where we are now actually increase government income ?

 

[Brat]

...
There is a new aquatic center that the Feds chipped in $40 mill to build...why when there is a servicable facility that was less than 15 years old that they're now tearing down.

That is an unusually short lifespan but indoor aquatic facilities have a notoriously short lifespan if construction shortcuts were taken because of the chlorine vapors.

I retired from DoL many years ago. My former colleagues and a couple 'short timers' get together for lunch a couple times a year. Last gathering there was a discussion about the LACK of complaints about violations of the statutes they enforce yet increasing hiring. Seemed nuts to us.

 

[Mulligan]

Therefore, extraplating from one data point, it becomes intuitively obvious to even the most casual observer that dropping all taxes to zero should result in a near-infinite spike in productivity, resulting in the government recognizing an increase in the government's take, presumably from collecting roundoff errors in banking statements or similar magic.

That article also uses one of my very favorite ways to mislead with statistics, using the IRS definition of Small Business (IRS) to talk about individual tax rates being paid by business owners, combined with the mention of most jobs being created by Small Business (SBA) using the rather different definition used by the SBA that allows companies of 500 employees (1000 for organic nitrogen fertilizer producers, etc) to be called a small business. Most of these are C Corporations paying taxes at corporate tax rates.

The WSJ gang seems to be cribbing from each others notes. I see this whopper in quite a few of their opinion pieces.

Oh, and if you think I'm not taking this discussion seriously, you're right. In the strange world of government budgets, a budget cut is when a department gets an increase in funds, just not quite as big an increase as they'd planned on. Anyone who thinks that sort of cut will reduce a deficit is invited to tea at the Hatter's place.

Lord save us from congressmen and other useful idiots.

M Paquette, your last full paragraph is actually why I can never figure what they are talking about in terms of "cuts". Normal people considers cuts a reduction from the previous years numbers. But the politicians seem to talk in future tense budget cuts from projected yearly increases. Thats why I never understand what they are saying.

 

[Westernskies]

The Naurian's have already establish a beachhold, within striking distance of the fleet in Pearl Harbor. So the pincer movement has already started.

I just saw on MSNBC where Palau, Tuvalu, and San Marino have joined their coalition, and have or will be establishing beachholds on the US mainland... we're scr*wed.

 

[martyp]

Actually I stated cut all spending, with defense and security being the last to be cut. The reason is if we cut defense and security first, it opens us up to attack. Get as much out of the cuts from agencies that will not result in us being attacked, then cut defense and security as much as possible. Only after the waste is cut out of government should taxes be increased on EVERYONE. Not just the rich or the poor, everybody gets a tax increase. If the government can't responsibly handle the money they are receiving why should we give them more to mismanage. Make the government spend our money responsibly then, if they do not have enough give them more. One of the biggest problems I see with our government now is too few people are paying into the system and they are voting themselves more gravy from the gravyless government coffers.

I understand the series of steps you are advocating. I guess I think we can do more than one thing at a time. I don't think we need to cut back to a nothing before starting again.

 

[M Paquette]

M Paquette, your last full paragraph is actually why I can never figure what they are talking about in terms of "cuts". Normal people considers cuts a reduction from the previous years numbers. But the politicians seem to talk in future tense budget cuts from projected yearly increases. Thats why I never understand what they are saying.

Oh, it's simple, really. The reasoning works something like this:

We've cut the budget by lowering the amount projected to be spent from wildly optimistic increases in spending to relatively modest increases in spending. The resulting savings has reduced the budget deficit from a projected really horrible shortfall to a merely worrisome shortfall. Even though the deficit is projected to be larger than in prior years, it is still smaller than it could have been, so therefore we have reduced the budget deficit.
​

It's the accounting version of magic realism, reifying the hypothetical and taking credit for it.

 

[M Paquette]

The real question then is... At what taxation level does the curve peak ? The answer is not very clear. The data supports a variety of taxation positions.

The other questions are... Where are we on a Laffer-like curve ? What is it's shape ? and will increased taxation levels from where we are now actually increase government income ?

Past experience in the US suggests the peak of the curve is above 24% (Harding-Coolidge tax cuts) and experience in Scandinavian countries suggest the peak for their economic models is somewhere in the 30-40% total taxation range. Note that the economic models there place significant services to be paid via taxes rather than as a private expense. (These are not marginal rates, but reflect the total taxation burden.)

The US tax burden currently lies on the left side of the Laffer curve. When the Economic Growth and Tax Relief Reconciliation Act of 2001 and the follow-on Reconciliation Act of 2003 were in place, the drop in tax revenue was partially compensated for by the increase in revenue from increased economic activity. Best case analysis indicated that GDP growth of 1.27% over 20 years would provide complete revenue compensation for the tax cut. Alas, the best case economic growth projected from the tax cut stimulus was 0.7% over 20 years, based on measurements in 2006. (Mankiw & Weinzierl assumed a very high earnings-weighted compensated labor supply elasticity to get the tax cuts to 'pay for themselves', which, alas, those pesky laborers failed to produce. Ungrateful wretches!)

If the US tax burden were to the right of the Laffer Curve peak, we would have seen an increase in tax revenue larger than the tax cut, and much higher GDP growth following the tax cuts than we actually got.

 

[M Paquette]

I just saw on MSNBC where Palau, Tuvalu, and San Marino have joined their coalition, and have or will be establishing beachholds on the US mainland... we're scr*wed.

Pulaka and crunchy fruit bat for everyone! And salute our new overlords with a round of kava and coconut juice.

 

[GregLee]

Normal people considers cuts a reduction from the previous years numbers. But the politicians seem to talk in future tense budget cuts from projected yearly increases. Thats why I never understand what they are saying.

Maybe normal people shouldn't do that. We're talking about future spending, so the only rational way to proceed is by projecting to the future. The effect of a budget change which will take place in the future can only be understood in relation to future income and future costs. It's too bad the world must be so complicated.

 

[bcinvest]

Right. Then we need to cut tax rates. That will increase productivity and tax revenues will grow.

That is an overused urban legend that is not justified by the facts. Tax cuts lower revenue and increase deficits.

 

[RetiredGypsy]

That is an overused urban legend that is not justified by the facts. Tax cuts lower revenue and increase deficits.

It also seems an even larger urban legend that giving a government more money makes them more competent at their jobs and their decisions on where to spend that money.

 

[M Paquette]

That is an overused urban legend that is not justified by the facts. Tax cuts lower revenue and increase deficits.

That's the Laffer Curve gag. Lowering taxes to increase revenue only works when taxes are so high that they are a disincentive to work, probably at a tax burden over 40% or thereabouts. The US is considerably lower. As evidence, the 2001/2003 tax cuts came nowhere near paying for themselves.

 

[bcinvest]

A great article on the revenue impact of tax cuts. Claim That Tax Cuts "Pay For Themselves" Is Too Good To Be True — Center on Budget and Policy Priorities

 

[Westernskies]

The solution is obvious:

Tax ourselves into prosperity.

 

[RetiredGypsy]

The solution is obvious:

Tax ourselves into prosperity.

Wait, this has some merit. They tax us, and then we turn around and tax them to get a lot of it back.

 

[M Paquette]

The solution is obvious:

Tax ourselves into prosperity.

I dunno, Stimpy. That didn't work so good last time we tried it.

I suggest something utterly bizarre. Actually cutting spending, you know, the bit where we really spend less than what we really were spending. Real honest to gosh outside the beltway budget cutting. Across all budgets.

Don't do that goofy thing where you limit cutting to 'discretionary programs' that total less than the budget deficit. You won't cover the deficit even if you run the 'discretionary programs' to zero, and I doubt you'll convince people that shutting down the courts, Federal prisons, FBI, CIA, Border Patrol, Center for Disease Control, and related 'discretionary programs' is good governance.

Cut. Cut til it hurts. Do you really need to buy more C-17s than the Air Force can crew? Could we get by with a few less amphibious landing craft? (and when was the last time we took a beach? WW II?) Maybe one less aircraft carrier? One less flying antitank laser cannon? Maybe Medicare shouldn't provide all those 'free scooters.' Maybe lung transplants for 80 year old smokers aren't such a great benefit. Maybe we could raise the full retirement age one month per year that passes.

Then, after we've carved off the excess, if absolutely necessary, we can look at taxes.

Not that any of this will happen, of course. I fully expect that in 10 years the interest on the national debt will be the tail wagging the dog, the largest non-entitlement expense. I doubt the interest rate on further debt will be 2-3% then. More like 8-10%. Not cutting now is going to hurt later. It'll hurt a lot.

 

[brewer12345]

MPaquette, I suspect that the last time we took a beach was the invasion of Grenada.

 

[Nords]

MPaquette, I suspect that the last time we took a beach was the invasion of Grenada.

The Marine Corps faces this funding controversy every year... the last major opposed amphibious landing was Inchon, although they played a mighty fine diversionary fake during DESERT STORM.

USMC's toughest [-]enemy[/-] opposed landing operation is explaining to skeptical Congressional staffs why the Navy's Army needs its own V-22 Air Force.

It's not just the Marines facing these justification struggles. WWII was the last time that a U.S. submarine shot a warshot torpedo at a warship.* There's perennial serious negotiations about getting rid of the ADCAP torpedo so that submarines can cram more TOMAHAWKs in their "torpedo" rooms.

The biggest problem with the funding cuts is deciding what missions to give up, which makes it really hard to implement Pax Americana's 911 response forces. Congress isn't willing to give up missions-- just adequate funding.

* For you military-trivia buffs, USS BREMERTON was tasked to sink an oil tanker in 1999.

 

[Westernskies]

MPaquette, I suspect that the last time we took a beach was the invasion of Grenada.

Who can forget the image of the media storming the beaches of Somalia with microphones, hindering the troops in 1993? Certainly not our finest hour.

 

[M Paquette]

MPaquette, I suspect that the last time we took a beach was the invasion of Grenada.

Ah, right! When we almost had a Christmas without nutmeg for our eggnog! (Yeah, and some US students at a Grenada medical school needed rescuing...)

WWII was the last time that a U.S. submarine shot a warshot torpedo at a warship.* There's perennial serious negotiations about getting rid of the ADCAP torpedo so that submarines can cram more TOMAHAWKs in their "torpedo" rooms.

I don't think I could really object to not carrying all that Otto fuel around in a closed atmosphere. (If a torpedo accidentally starts while inboard, the exhaust, which includes carbon monoxide, hydrogen cyanide, and ammonia becomes the crew's new breathing mix. This is generally considered a Bad Thing.)

 

[Mulligan]

Maybe normal people shouldn't do that. We're talking about future spending, so the only rational way to proceed is by projecting to the future. The effect of a budget change which will take place in the future can only be understood in relation to future income and future costs. It's too bad the world must be so complicated.

To me though (and I admit I'm no genius), I think if the term "cuts" is used it is in reference to the proceeding years budget."Slowing of growth" should be used to describe what politicians are referring to as cuts. If a family anticipates a 5% increase in wages next year, and still wants to cut their $100 a month "eating out budget". I would assume most would go to say $90 a month, instead of going to $103 a month and calling that a "cut".

 

[samclem]

Past experience in the US suggests the peak of the curve is above 24% (Harding-Coolidge tax cuts) and experience in Scandinavian countries suggest the peak for their economic models is somewhere in the 30-40% total taxation range. Note that the economic models there place significant services to be paid via taxes rather than as a private expense. (These are not marginal rates, but reflect the total taxation burden.)

The US tax burden currently lies on the left side of the Laffer curve. When the Economic Growth and Tax Relief Reconciliation Act of 2001 and the follow-on Reconciliation Act of 2003 were in place, the drop in tax revenue was partially compensated for by the increase in revenue from increased economic activity.

Isn't the current total US tax burden (Fed, state, local) 27%? (99/365= .27). That's "to the right" of 24%, yes?

Regardless, we should be aware of what we are trying to divine here: "What's the rate of taxation that will result in the greatest overall tax revenue over time?" That is a worthwhile question to ask, especially as our governments continue to spend with reckless abandon, but it's certainly not the same question as "How much is it right to seize from individuals to use for the common good and to redistribute to others who did not earn it?"
Figuring out how much blood can be optimally harvested from an individual each week to yield the greatest "take" for the blood bank is one thing. It's not the same as asking how much a person "rightly owes" the blood bank. And it's not the same as asking how much blood a person can give up each week and still enjoy optimal health.

The private economy (still, most believe) has purposes beyond funding the government.