The political genius of supply-side economics

[magnus]

Originally Posted by RAGE AGAINST THE MACHINE

Debunking the claim that higher income-tax rates reduce GDP.

wow, that's as bad as Weeks. Do you even know what that graph means?

I'm pretty sure that none of you have even the slightest clue what you are talking about much less what data you would need to use to effectively prove your points.

This whole thread is a mockery of debate. Pretty much everybody has contradicted their own postion and the data presented is meaningless to the point of the arguments....and yet for some reason this is the only thread on this whole freaking board that has stayed relatively civil and on topic?

Quick, somebody call weeks a name before I start to think I have been shifted to the bizarro world...

[Rage Against The Machine]

Originally Posted by magnus

wow, that's as bad as Weeks. Do you even know what that graph means?

I'm pretty sure that none of you have even the slightest clue what you are talking about much less what data you would need to use to effectively prove your points.

This whole thread is a mockery of debate. Pretty much everybody has contradicted their own postion and the data presented is meaningless to the point of the arguments....and yet for some reason this is the only thread on this whole freaking board that has stayed relatively civil and on topic?

Quick, somebody call weeks a name before I start to think I have been shifted to the bizarro world...

clue me in old wise one on top of the mountain.

[JWeeks]

Originally Posted by JoeNormal

You're the master of the search function, you find it. If you can remember when you started going wild with that graph, it shouldn't be hard.

I assume that you are unable to respond to my post and therefore have tried to hand it off to David. Sorry; either you provide a reference to David's post, or you refute the matter yourself.

It set us up for the great depression.

OK, let's see how that logic works, shall we? In 1920 we had a Depression. It lasted about 18 months. The government cut spending by 50% in two years, and lowered the tax rates. In fact, taxes were lowered so much that the top 2% paid almost all of the taxes.

http://www.cato.org/pub_display.php?pub_id=3015

Secretary Mellon knew that high tax rates caused the tax base to contract and that lower rates would boost economic growth. In 1924, Mellon noted: "The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business." He received strong support from President Coolidge, who argued that "the wise and correct course to follow in taxation and all other economic legislation is not to destroy those who have already secured success but to create conditions under which every one will have a better chance to be successful."



The Effects of the Mellon Tax Cuts
It is often assumed that broad cuts in income tax rates only benefit the rich and thrust a larger share of the tax burden on the poor. But detailed Internal Revenue Service data show that the across-the-board rate cuts of the early 1920s-including large cuts at the top end-resulted in greater tax payments and a larger tax share paid by those with high incomes. Figure 1 focuses on those earning more than $100,000. As the marginal tax rate on those high-income earners was cut sharply from 60 percent or more (to a maximum of 73 percent) to just 25 percent, taxes paid by that group soared from roughly $300 million to $700 million per year. The share of overall income taxes paid by the group rose from about one-third in the early 1920s to almost two-thirds by the late 1920s. (Note that inflation was virtually zero between 1922 and 1930, thus the tax amounts shown for that period are essentially real changes).
The tax cuts allowed the U.S. economy to grow rapidly during the mid- and late-1920s. Between 1922 and 1929, real gross national product grew at an annual average rate of 4.7 percent and the unemployment rate fell from 6.7 percent to 3.2 percent. The Mellon tax cuts restored incentives to work, save, and invest, and discouraged the use of tax shelters.
The rising tide of strong economic growth lifted all boats. At the top end, total income grew as a result of many more people becoming prosperous, rather than a fixed number of high earners getting greatly richer. For example, between 1922 and 1928, the average income reported on tax returns of those earning more than $100,000 increased 15 percent, but the number of taxpayers in that group almost quadrupled. During the same period, the number of taxpayers earning between $10,000 and $100,000 increased 84 percent, while the number reporting income of less than $10,000 fell.
The decade of the 1920s had started with very high tax rates and an economic recession. Tax rates were massively increased in 1917 at all income levels. Rates were increased again in 1918. Real GNP fell in 1919, 1920, and 1921 with a total three-year fall of 16 percent. (Deflation between 1920 and 1922 may also help explain the drop in tax revenues in those years, evident in Table 1).

So, after incurring a huge war debt from WWI, tax rates that started at 7% were raised to 77% on the very rich and remained there from until 1921. Then, as the tax rates were lowered, the total share of taxes paid by those making $100,000 per year increased from 29.9% to 61.3%, while middle class workers $5,000 to $10,000 saw their share of the tax burden decrease from 9.1% to 2.0%

One third of the federal deficit was paid down, with the government running a surplus, and most Americans paying very little of the tax burden, but that lead to the depression. (As opposed to the Federal Reserve deciding that the stock market was getting overheated and tightening the money supply).

In 1932, Hoover raised taxes in all income brackets, with the top rate going from 25% to 63%. If low tax rates brought us into the Great Depression, then raising those rates should have moved us out again. Why didn't that do the trick?

Roosevelt followed on by eliminating earned income credits, and reducing personal exemptions. He raised all rates, including increasing the top rate to 79% in 1936. Corporate tax rates were also increased from 12% to 24% from 1930 to 1940. An excess profits tax was added in 1937, an excise tax on dividends, a capital stock tax, liquor taxes, estate taxes, plus a new 2% social security tax. If taxes on the wealthy produces prosperity, then Roosevelt was clearly the test case for that. Raising those taxes, particularly on the wealthy should have spurred prosperity, yet, we had the 1937 depression within the depression.

Hoover raised taxes to try and balance the budget. Roosevelt raised taxes for the same purpose, but of course, he spent a lot more money than he raised in taxes. Roosevelt also was using taxes to soak the rich. As a result, the fraction of taxes paid by the rich (which had been 60+ percent) dropped to 27%. Whereas unemployment in the 20's dropped as low as 1.8%, unemployment was 25.5% in 1933, and was still at 14.6% in 1940.

So, I'm just curious. Was it the first tax cut in 1921 that triggered the depression? Or was it the cut in 1924-5 down to 25% that caused the depression (four years later)? Likewise, if raising taxes is the solution to solve a financial crisis, then why didn't the Hoover, followed by the Roosevelt tax increases bring the country out of the depression?

[JWeeks]

Check out this clip of Obama during his debate with Clinton. Here he states that he favors higher taxes for the rich, even if the result is bringing in less tax revenue into the treasury.
http://www.youtube.com/watch?v=IUfo-RxkXA8

Why would you promote a policy of "fairness" when the results would be detrimental to the deficit?

[Rage Against The Machine]

Originally Posted by JWeeks

I assume that you are unable to respond to my post and therefore have tried to hand it off to David. Sorry; either you provide a reference to David's post, or you refute the matter yourself.


OK, let's see how that logic works, shall we? In 1920 we had a Depression. It lasted about 18 months. The government cut spending by 50% in two years, and lowered the tax rates. In fact, taxes were lowered so much that the top 2% paid almost all of the taxes.

http://www.cato.org/pub_display.php?pub_id=3015



So, after incurring a huge war debt from WWI, tax rates that started at 7% were raised to 77% on the very rich and remained there from until 1921. Then, as the tax rates were lowered, the total share of taxes paid by those making $100,000 per year increased from 29.9% to 61.3%, while middle class workers $5,000 to $10,000 saw their share of the tax burden decrease from 9.1% to 2.0%

One third of the federal deficit was paid down, with the government running a surplus, and most Americans paying very little of the tax burden, but that lead to the depression. (As opposed to the Federal Reserve deciding that the stock market was getting overheated and tightening the money supply).

In 1932, Hoover raised taxes in all income brackets, with the top rate going from 25% to 63%. If low tax rates brought us into the Great Depression, then raising those rates should have moved us out again. Why didn't that do the trick?

Roosevelt followed on by eliminating earned income credits, and reducing personal exemptions. He raised all rates, including increasing the top rate to 79% in 1936. Corporate tax rates were also increased from 12% to 24% from 1930 to 1940. An excess profits tax was added in 1937, an excise tax on dividends, a capital stock tax, liquor taxes, estate taxes, plus a new 2% social security tax. If taxes on the wealthy produces prosperity, then Roosevelt was clearly the test case for that. Raising those taxes, particularly on the wealthy should have spurred prosperity, yet, we had the 1937 depression within the depression.

Hoover raised taxes to try and balance the budget. Roosevelt raised taxes for the same purpose, but of course, he spent a lot more money than he raised in taxes. Roosevelt also was using taxes to soak the rich. As a result, the fraction of taxes paid by the rich (which had been 60+ percent) dropped to 27%. Whereas unemployment in the 20's dropped as low as 1.8%, unemployment was 25.5% in 1933, and was still at 14.6% in 1940.

So, I'm just curious. Was it the first tax cut in 1921 that triggered the depression? Or was it the cut in 1924-5 down to 25% that caused the depression (four years later)? Likewise, if raising taxes is the solution to solve a financial crisis, then why didn't the Hoover, followed by the Roosevelt tax increases bring the country out of the depression?

taxes weren't the cause of the great depression.

[JWeeks]

Originally Posted by RAGE AGAINST THE MACHINE

taxes weren't the cause of the great depression.

JoeNormal seems to think that they were.

[shelley_utahjazzfan]

Originally Posted by RAGE AGAINST THE MACHINE

Ronald Reagan Raised Taxes in a Recession, Too

In 1982, with unemployment near 10 percent, President Ronald Reagan signed TEFRA. By cleaning up the tax code, slashing deductions, that tax act raised revenue by one percent of GDP over four years -- the largest peacetime tax increase in American history.

From your article:

I don't believe that Reagan ever initiated any of the tax increases enacted during his watch.

But it is pointless to bring up tax increases by the Democrat congress during the Carter recession, since Reagan's quotes were about across the board tax cuts that occurred in the century before he came to office.

[JoeNormal]

Originally Posted by JWeeks

I assume that you are unable to respond to my post and therefore have tried to hand it off to David. Sorry; either you provide a reference to David's post, or you refute the matter yourself.

It's just too bad I have a life and a real job or I'd feel obligated to continue searching. Oh well, I guess I'll have to admit defeat. <sigh>

FYI, revenue stays constant not because of some invisible hand voodoo. It's because the people who determine tax policy build in various loopholes, incentives, deductions, exemptions and perks to keep it that way.

Originally Posted by JWeeks

OK, let's see how that logic works, shall we? In 1920 we had a Depression. It lasted about 18 months. The government cut spending by 50% in two years, and lowered the tax rates. In fact, taxes were lowered so much that the top 2% paid almost all of the taxes.

http://www.cato.org/pub_display.php?pub_id=3015



So, after incurring a huge war debt from WWI, tax rates that started at 7% were raised to 77% on the very rich and remained there from until 1921. Then, as the tax rates were lowered, the total share of taxes paid by those making $100,000 per year increased from 29.9% to 61.3%, while middle class workers $5,000 to $10,000 saw their share of the tax burden decrease from 9.1% to 2.0%

One third of the federal deficit was paid down, with the government running a surplus, and most Americans paying very little of the tax burden, but that lead to the depression. (As opposed to the Federal Reserve deciding that the stock market was getting overheated and tightening the money supply).

In 1932, Hoover raised taxes in all income brackets, with the top rate going from 25% to 63%. If low tax rates brought us into the Great Depression, then raising those rates should have moved us out again. Why didn't that do the trick?

Roosevelt followed on by eliminating earned income credits, and reducing personal exemptions. He raised all rates, including increasing the top rate to 79% in 1936. Corporate tax rates were also increased from 12% to 24% from 1930 to 1940. An excess profits tax was added in 1937, an excise tax on dividends, a capital stock tax, liquor taxes, estate taxes, plus a new 2% social security tax. If taxes on the wealthy produces prosperity, then Roosevelt was clearly the test case for that. Raising those taxes, particularly on the wealthy should have spurred prosperity, yet, we had the 1937 depression within the depression.

Hoover raised taxes to try and balance the budget. Roosevelt raised taxes for the same purpose, but of course, he spent a lot more money than he raised in taxes. Roosevelt also was using taxes to soak the rich. As a result, the fraction of taxes paid by the rich (which had been 60+ percent) dropped to 27%. Whereas unemployment in the 20's dropped as low as 1.8%, unemployment was 25.5% in 1933, and was still at 14.6% in 1940.

So, I'm just curious. Was it the first tax cut in 1921 that triggered the depression? Or was it the cut in 1924-5 down to 25% that caused the depression (four years later)? Likewise, if raising taxes is the solution to solve a financial crisis, then why didn't the Hoover, followed by the Roosevelt tax increases bring the country out of the depression?

If you look at the graph you posted and read between the lines, you'll note that tax share going up dramatically at the same time as top tier tax rates going down indicates a growing imbalance in wealth among various segments of the population. This created economic instability throughout the system. It was this instability that directly or indirectly caused the stock market crash.

[shelley_utahjazzfan]

Originally Posted by Moot

Well, I don't know what to tell ya since you insist on listening to the warm fuzzy slogans instead of reading the facts, except perhaps SEE RAGE's POST ABOVE.

You didn't provide any facts that even related to the topic of across the board tax cuts and their effect of increasing government revenue, before or after Reagan.

HOW DID THE REAGAN TAX CUTS AFFECT THE U.S. TREASURY?

Many critics of reducing taxes claim that the Reagan tax cuts drained the U.S. Treasury. The reality is that federal revenues increased significantly between 1980 and 1990:
*
Total federal revenues doubled from just over $517 billion in 1980 to more than $1 trillion in 1990. In constant inflation-adjusted dollars, this was a 28 percent increase in revenue.3

*
http://www.heritage.org/Research/Rep...conomic-Record

[shelley_utahjazzfan]

Originally Posted by Moot

Btw, Reagan also said that trees cause pollution. ROTFL

Why is that so funny? They do.

Wildfire: