BF2S Forums Does lowering the tax rate increase reveneue to the government?

Makes sense to me...

Some of them don't like it because they only want higher taxes, though some don't seem to pay them anyway.

Because the argument that lowering tax rates increases gov revenue has a a lower bound without a doubt, and even the argument on top of that is shaky.

It depends on the tax rate.

When Reagan lowered income taxes, it was at a time when the highest tax rate was about 70%.  He brought it down to about 35%.  By halving the top tax rate, this actually did increase government revenue.

The problem is that most advocates of lowering the income tax don't seem to understand that the gains made by lowering income taxes are geometric.  Once you go past a certain point in taxation, you start losing revenue rather than gaining it.  This applies to both increasing taxes and lowering taxes.

If other economies are any indication, the "sweet spot" for the highest personal income tax rate while bringing in the highest amount of tax revenue is somewhere around 50%.  If you go beyond that (higher or lower), you lose government revenue.

On the other hand, the "sweet spot" for corporate taxation at the highest rate is between about 25 to 30%.

The rates I am listing are including combined tax rates of federal and local taxes.

Turquoise wrote:

It depends on the tax rate.

When Reagan lowered income taxes, it was at a time when the highest tax rate was about 70%.  He brought it down to about 35%.  By halving the top tax rate, this actually did increase government revenue.

The problem is that most advocates of lowering the income tax don't seem to understand that the gains made by lowering income taxes are geometric.  Once you go past a certain point in taxation, you start losing revenue rather than gaining it.  This applies to both increasing taxes and lowering taxes.

If other economies are any indication, the "sweet spot" for the highest personal income tax rate while bringing in the highest amount of tax revenue is somewhere around 50%.  If you go beyond that (higher or lower), you lose government revenue.

On the other hand, the "sweet spot" for corporate taxation at the highest rate is between about 25 to 30%.

The rates I am listing are including combined tax rates of federal and local taxes.

True, you can tax too much and you can tax too little

Watch the movie IOUSA http://www.iousathemovie.com/

Reaganomics, or as George Bush Sr called it, "voodoo" economics only helped to increase the debt.
Under Clinton, and Gingrich, when taxes were raised we ran a surplus and the debt began to shrink.

moral, you can't spend more than you take in and the Reagan experiment proved that lowering taxes without fiscal prudence accompanying the tax cut = defecit and future pain. The Bush 43 tax cuts are one of the reasons why the deficit is so high right now. Tax cuts with increased spending do not make for a healthy economy. Laffer is a laugher.

IOUSA says it better, its worth the watch.

Turquoise wrote:

ATG wrote:

I fail to see why we tolerate confiscation of wages.

Because social programs take a lot of cash to run.

But why do we tolerate confiscation of wages?

Turquoise wrote:

50% is pretty low by Scandinavian standards.  But to answer your question, we have social programs, a large military, and a vast highway system to take care of.  Obviously, our government needs reform in many areas, but taxation is necessary for a First World country to run properly.  As bad as we might seem compared to certain other First World nations, our government is still far better than most.

This is truth. But, we shouldn't be looking for maximum efficiency in our tax collection. We should be determining how much we need for our budget, and taxing tenths of a percent more than that through a progressive tax system. Some sort of arbitrary 50% tax rate is ridiculous.

Turq, this should be your sig http://www.youtube.com/watch?v=Wo5Sm9poKTw . He put some real effort into that.

Turquoise wrote:

Flaming_Maniac wrote:

Turquoise wrote:

Because social programs take a lot of cash to run.

But why do we tolerate confiscation of wages?

Because it's better than tolerating Third World levels of poverty.

Keeping our money makes us poor?

Turquoise wrote:

But it's not arbitrary.  Maximizing government revenue without costing economic growth is the ideal, and so far as I've seen with respect to other countries, this 50% figure is the ideal.

If it's any consolation, I believe we should lower corporate taxes, because that would stimulate economic growth.  Personal taxation doesn't really have as much connection to the economy.

Why do you want to maximize how much money the government gets? Why do you want to give the government more money than it needs?

The government is not a person, the government is not a business. It has no reason to make as much money as possible.

Its also the case that if you lower taxes people don't go to such great lengths to avoid them.

Bushonomics - cutting taxes and increasing spending - doesn't work though.

The only ones that bitch about cutting taxes are those that live off of other peoples money, and those that want their votes.

Flaming_Maniac wrote:

How does letting people keep their money make them poor? You are trying to say over time people will become poor...but that is because they spent the money they earned before isn't it? Aren't you just saying they are unable to earn more money...which really isn't the case?

No, I'm saying that the principle of capital accumulation is continual.  Naturally, in a capitalistic society, wealth accumulates at the top.

The working class lives in a very different fashion from the rich, because they are continually vulnerable to financial burdens like illness or injury.  Also, if a working class person is raising a family and loses his/her job, he/she may need to be on state benefits temporarily before finding a new job.  If said benefits did not exist, he/she would be completely dependent on charity for help during hard times.  That is how things used to work.

If we went back to that societal structure, the lower class would dramatically increase in size due to people hitting hard times, and the middle class would shrink.

It's not a simple matter of people spending their money unwisely -- it's the reality that much of life is outside of your control.  You can do things to minimize your health risks, but you can still get cancer.  You can do things to minimize your injury risks, but you can still end up in a car accident that renders you handicapped.  There are a myriad of situations that can occur that necessitate aiding the general populace during hard times.

Flaming_Maniac wrote:

Dude, move to Norway. It's absurdly hard to take you seriously otherwise.

Would you prefer I use France, Canada, Japan, Ireland, Switzerland, Australia, or Sweden as examples?  They work too.

Flaming_Maniac wrote:

The cost of public amenities is finite. "optimal government revenue" is variable. Do the math.

The cost of public amenities is not finite, because the quality of said amenities is not.  Optimal government revenue is simply the most you can spend on amenities for the most quality.  Beyond this amount, you have diminishing returns.

Turquoise wrote:

Flaming_Maniac wrote:

How does letting people keep their money make them poor? You are trying to say over time people will become poor...but that is because they spent the money they earned before isn't it? Aren't you just saying they are unable to earn more money...which really isn't the case?

No, I'm saying that the principle of capital accumulation is continual.  Naturally, in a capitalistic society, wealth accumulates at the top.

Wealth accumulates with a few.

Turquoise wrote:

The working class lives in a very different fashion from the rich, because they are continually vulnerable to financial burdens like illness or injury.  Also, if a working class person is raising a family and loses his/her job, he/she may need to be on state benefits temporarily before finding a new job.  If said benefits did not exist, he/she would be completely dependent on charity for help during hard times.  That is how things used to work.

If we went back to that societal structure, the lower class would dramatically increase in size due to people hitting hard times, and the middle class would shrink.

It's not a simple matter of people spending their money unwisely -- it's the reality that much of life is outside of your control.  You can do things to minimize your health risks, but you can still get cancer.  You can do things to minimize your injury risks, but you can still end up in a car accident that renders you handicapped.  There are a myriad of situations that can occur that necessitate aiding the general populace during hard times.

1. If you get fucked over by cancer, you die and are no longer on hard times. Spending hundreds of thousands to keep you alive for 6 months is ridiculous. A simple quality over quantity assessment like this applies in a lot of different situations, and gets rid of an awful lot of the "lower class" a welfare state supports. It's not going to win any votes, but it's the only reasonable way to look at things. Animalistic instincts have no place in politics.

2. Some people fall on hard times, others have inordinately good luck. Taxation is irrelevant to either; to some degree it limits both ends of the spectrum, but that is all. Letting people keep what money they have does not make people poorer. Come on...you know the notion is ridiculous.

Turquoise wrote:

Flaming_Maniac wrote:

Dude, move to Norway. It's absurdly hard to take you seriously otherwise.

Would you prefer I use France, Canada, Japan, Ireland, Switzerland, Australia, or Sweden as examples?  They work too.

Oh I didn't mean to limit your search for real estate, just somewhere outside the U.S. of A.

Turquoise wrote:

Flaming_Maniac wrote:

The cost of public amenities is finite. "optimal government revenue" is variable. Do the math.

The cost of public amenities is not finite, because the quality of said amenities is not.  Optimal government revenue is simply the most you can spend on amenities for the most quality.  Beyond this amount, you have diminishing returns.

You have to write down how you are going to implement public amenities, or as we do in the U.S. at least write a budget for them correct? So at some point you must quantitatively determine the quality of the service for that year. This is finite.

lol according to that definition "optimal government revenue" is infinite or ever so slightly more reasonably a 100% tax rate...there must be a trade off between cost and quality.

The term diminishing returns implies you are looking at some sort of measure of value. The sentence before explicitly denies that notion. I don't really know what to say, I think you might have mixed up your wording.

Turquoise wrote:

Flaming_Maniac wrote:

1. If you get fucked over by cancer, you die and are no longer on hard times. Spending hundreds of thousands to keep you alive for 6 months is ridiculous. A simple quality over quantity assessment like this applies in a lot of different situations, and gets rid of an awful lot of the "lower class" a welfare state supports. It's not going to win any votes, but it's the only reasonable way to look at things. Animalistic instincts have no place in politics.

Lance Armstrong and many, many others would beg to differ with you.

Frankly, Lance Armstrong has not given anything to the world.

If you have the money and wish to spend it attempting to keep themselves alive, that is their business. Acting like everyone has a right to the longest life possible on the other hand to justify "taxation makes people richer" is a logically devoid approach.

Turquoise wrote:

Flaming_Maniac wrote:

2. Some people fall on hard times, others have inordinately good luck. Taxation is irrelevant to either; to some degree it limits both ends of the spectrum, but that is all. Letting people keep what money they have does not make people poorer. Come on...you know the notion is ridiculous.

No, I know you're being ridiculous by intentionally avoiding reality.

Letting people keep what money they earn does not push them further down the spectrum in any way. It can push the positive end of the spectrum higher, making the relative distance from the top seem further, but they did not become any poorer.

Turquoise wrote:

Flaming_Maniac wrote:

You have to write down how you are going to implement public amenities, or as we do in the U.S. at least write a budget for them correct? So at some point you must quantitatively determine the quality of the service for that year. This is finite.

lol according to that definition "optimal government revenue" is infinite or ever so slightly more reasonably a 100% tax rate...there must be a trade off between cost and quality.

That's what I just said with my previous response.

er what?

Turquoise wrote:

The cost of public amenities is not finite, because the quality of said amenities is not.

Flaming_Maniac wrote:

You have to write down how you are going to implement public amenities, or as we do in the U.S. at least write a budget for them correct? So at some point you must quantitatively determine the quality of the service for that year. This is finite.

Turquoise wrote:

Flaming_Maniac wrote:

The term diminishing returns implies you are looking at some sort of measure of value. The sentence before explicitly denies that notion. I don't really know what to say, I think you might have mixed up your wording.

When you said that public amenities are finite in value, you're assuming there is a limit to their worth.  Abstractly, there isn't.  The only finite limit I'm applying is where optimal government revenue meets optimal amenity worth.

Usually I am all for talking about things in abstract terms, but in this case that makes the idea devoid of all meaning. There is a definite price tag on social programs, they have to be paid for in dollars and cents. Assuming you define value as anything but the most you could possibly get voters to pay for it (yay big government) then there is a distinct point of where the most efficient dollar, the point after which you get diminishing returns. You would have an extremely difficult time giving me an example of a social program where that point is past this "optimal government revenue" point you say is around 50%.

Turquoise wrote:

In other words, the most appropriate amount to gather in taxation is the maximum that can be gained without harming economic growth.  From that point, you have a set amount of funds to split among public amenities.  The amount you should spend on each amenity is then determined by what can be spent before diminishing returns begin.  Of course, depending on how much the optimal government revenue is, you may not actually be able to reach this point with every amenity, so you have to prioritize spending.

Any amount of taxation harms economic growth.

The rich, primarily the ones who you are taking money from through taxation, are the ones who invest. Not very much of a transfer payment is going towards anything but consumption.

So yeah. Taxes are necessary, but the rest of your budget analysis kinda falls flat when you tax "the maximum without harming economic growth.