Respectively . . .
1. No.
The New Republic's Jon Chait (via Paul Krugman) explains:
[Y]ou will see the endlessly circulated right-wing talking point that nearly half of all Americans pay no income taxes. . . . [T]hey focus entirely on the federal income tax, because most people will not understand this constitutes just one portion of the overall tax system. . . .2. No.
Americans pay different kinds of taxes to different entities. State and local taxes tend to be regressive. Payroll taxes, which fund Social Security and Medicare, are also regressive. To balance this out, we have a pretty progressive income tax. If you focus only on the income tax, it makes it look like the rich are getting screwed. But of course the income tax is just one element. And conservatives are working hard to make the tax code more regressive at every level of government.
The conservative National Review's Kevin Williamson criticizes Speaker of the House John Boehner, Senate Minority Leader Mitch McConnell, and others for claiming or insinuating that lower taxes lead to higher revenue:
Tax cuts do not generally increase revenue, and Republicans should stop saying otherwise. . . .Can you imagine a world where cutting taxes increased tax revenue? What would happen? Every politician would always support cutting taxes, as this would give voters everything they want: low taxes and lots of government benefits! Yay! Needless to say, that is not what the real world is like.
There are no free lunches in taxation, or anywhere else.
Now that that's clear, can we please put an end to, as Krugman calls them, the "zombie tax lies"?
10 comments:
"Can you imagine a world where cutting taxes increased tax revenue?"
Absolutely! In such a world, the income tax is 100%. As a consequence, hardly anybody bothers with income-generating work. If you cut the income tax to, say, 40% for everybody, this would almost certainly increase revenue from the income tax. That is, of course, the idea behind the famous Laffer Curve. As it happens, though, no government has yet been stupid enough to introduce a flat income tax of 100%, so the easy option of revoking it does not exist.
Also: Happy Easter!
How to defeat a Republican:
"If cutting taxes raises revenue, then why don't you cut the tax rate to zero percent?"
LemmusLemmus, I meant a world (not just a specific situation) where cutting taxes consistently increased tax revenue.
JAC: LemmusLemmus, I meant a world (not just a specific situation) where cutting taxes consistently increased tax revenue.
What kind of criticism is that? LemmusLemmus isn't imagining a world, but a specific situtaion? He described a WORLD that met your conditions! Did it need to be entirely populated by hairdressers, or have some complex backstory where Hitler won WW2 to qualify as "a world"? He said all that was necessary, because in either of those worlds if the tax rate was 100%, dropping it would increase revinue.
What kind of criticism is that? LemmusLemmus isn't imagining a world, but a specific situtaion? He described a WORLD that met your conditions!
No he didn't. He just described one situation where a tax cut would lead to increased revenues. And it was a good point, but it didn't contradict what I wrote. You're free to use the word "world" to mean "highly specific situation," but I was using "world" to literally refer to the whole planet earth.
The point of this post was to list 2 common misconceptions about taxes and explain why they're wrong. The 2nd of the 2 misconceptions is that, as a general principle, cutting taxes raises revenue. That is not true: cutting taxes generally decreases revenue.
Again, LemmusLemmus has a valid theoretical point: if taxes were high enough (e.g. 100% or close to 100%), they would actually decrease productivity so much that you could bring in more tax dollars by reducing the taxes to semi-sensible rates. But that is very far from the American tax structure.
Yay! Disagreement about the correct meaning of a word, always a fruitful topic for debate! And already someone mentioned Hitler!
Seriously, though, it's a complicated topic and you'd want to distinguish short- and long-term effects and causality is hard to establish, but here's a post that says your general principle is wrong for the postwar U.S.A.
LemmusLemmus: Seriously, though, it's a complicated topic...
The Laffer Curve isn't complicated at all. The fact that neither Republicans nor Democrats can understand it says all we need to know about our government's competence.
Nice job with the straw man ! Congratulations on this beautiful Easter morning. You see most on the right do not argue that we should have no taxes ...now do they?
Laters.
-Jim(the commenter)
How to defeat a Democrat:
"If raising taxes raises revenue, then why don't you raise the tax rate to 100 percent?"
Oh wait ...forget it. I will leave that sort of thinking to Jason and John.
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