News Can Tax Cuts Truly Self-Finance in Times of Major National Expenses?

[Zlex]

Sounds like an argument for Intelligent Design.

Heh; How so?

 

[McGyver]

Certain Tax Cuts Will Spur Small Business Growth

Perhaps the best example I have studied and personally experienced with "tax cuts" is their unique ability to spur creation and growth of small business. There are many categories of tax cuts: corporate tax rates, industry credits, small business sub-chapter s-corporation taxes, death and estate taxes, and personal income taxes, etc. But I believe small business tax considerations deserve recognition.

About two years ago the Bush Administration gave out a one-time personal tax rebate designed to stimulate consumer spending, but I'm not sure that it actually provided a net gain. Various groups no doubt authored papers on this rebate, with their own political slant.

But "small business" is where Amercia invests in itself today, and holds the greatest promise for growth and tax revenue. When you're small, each $1 in tax savings proportionately plays a larger role in your ability to grow, spend, hire others, and be self-sustaining. Small business, as a rule, tends to reinvest a greater percentage of net earnings back in the business. So, as a small business grows and hires others - new tax revenues come via personal income taxes from newer and higher wages. These wages then drive consumer spending and the broader economy.

The other perhaps equally, if not larger determinent of small business growth, is CONFIDENCE in the overall economy AND your specific industry. Local, state, and federal regulatory policies also greatly help or hinder a small company's future outlook. Sadly, in recent years, much of the corporate tax breaks, industry credits, and loosening of regulatory policies have disproportionately favored big business. And big business, as we have seen so much in recent years, doesn't grow and hire people locally - they expand overseas. So, many of the long-standing tax-growth benefit formulas are not applicable in the same way today.

I believe there needs to be much more national discussion on how tax breaks can better serve small businesses that expand within the U.S., as these are our future businesses and industries. I am unsure of the precise formula and benefits that might be provided through death tax relief for families of small businesses - but I believe there should be a death tax distinction for families of U.S. small businesses vs. families who created their wealth via other means.

Stephen Dolle
Dolle Communications
www.diaceph.com

 

[Skyhunter]

Heh; How so?

It is the same rationale that the ID advocates use. IE life is so complex that it cannot be understood except by the existence of an omnipotent being.

To suggest that taxes do not effect the economy, or that it is impossible to predict or measure the results is a lot like saying that since there are holes in the theory of evolution it is proof of an intelligent creator.

I will grant you that economics is terribly complex and so many factors and variables are involved that it is difficult to assess the impact of various policies. However, for purposes of a political discussion, if the economic conditions are favorable when certain policies and personnel are in charge, and unfavorable with another, then I would suggest there is a general pattern that favors the more successful policy/theory/personnel.

Individual statistics can be interpreted many different ways using many different criteria. but the bottom line is the bottom line. Give credit where credit is due, Clinton had an economic philosophy that worked, on the whole much better than the Reagan/Bush trickle down theory.

 

[ron damon]

I think all arguments about 'the' economy are typically stupid.
1] At any given instant in time, there is not 'a' economy, in the same sense that there is not 'a' weather.
2] Over four decades, there is not 'a' economy, in the same sense that there is not 'a' climate.
The fact that it's hard to wrap your hands around that concept is no excuse to throw your hands up and refer to all of them as an 'it,' just to totally fabricate a basis for all of these economic arguments.
There is no action that the gov't can take, including tax cuts, tax increases, or taxes staying the same that will have 'an' effect on 'the' economy; there will instead be many effects on many economies, many of them measurable and many of them not. What we all do when we deem to talk about 'the' economy is oversimplify a complex system with simple aggregate numbers in an attempt to make the intractable tractable. Then, we sully forth with endless post hoc ergo propter hoc arguments about pulling this lever on this side of the elephant and seeing this twitch on the other side--immediately---6 weeks later---6 months later---6 years later----take your pick, whatever fits your politics. Might as well stand at the edge of the ocean and throw in sacrificed virgins, then wait for the perfect wave. No, not that one. No, not that one. There... there it is. See, it worked?
But, we can pretend we're all doing otherwise, for 'the' purpose of supporting 'the' voodoo dance at 'the' base of 'the' volcano.
Given the economies of the 1960s, vs the economies of the 1980s or today's economies, when we pull tax lever "A", no matter in which direction we believe the impact to be, how long should we expect to have to wait to see 'the impact of the change, and how, pray tell, while waiting, do we hold all other things constant so that we are sure we are seeing 'the' impact of 'the' input to 'the' economy?
Immediately? six months? six years? Does anyone, anywhere, have the slightest clue?
Not apparent.

So you don't believe in macroeconomics? Some in the Austrian school (to which I am sympathetic) maintain that economics should be restricted to microeconomics, meaning that while you can study the behavior of individuals, no causation laws can be scientifically established in the economy as an aggregate.

I believe that such an approach can be profitable when used to tackle many important problems such as trade and regulation, but as the monetarist program implemented by the Volcker Fed to fight inflation showed by producing spectacular results in line with theory, there are a few basic laws in macroeconomics that can be regarded as being reasonably well tested and established.

In regards with the Reagan years, and even though we can't determine the exact mechanism through which they operated, nor measure their individual contributions, it is very clear that the monetary, fiscal, and most importantly (in my humble opinion) institutional reforms carried out in the early eighties during the Reagan administration (and to some degree, the Carter administration) laid the foundation for the most spectacular growth seen since the days of total war.

And to make the argument wider, the other industrialized nations that did not produce such a "conservative revolution" are to this paying an extremely steep price in the form of sclerotic economies incapable of generating growth, investment, or employment. It is not a coincidence that the UK and the US (and to some extent, Canada) are the only G7 countries with healthy economies.

 

[edward]

Perhaps the best example I have studied and personally experienced with "tax cuts" is their unique ability to spur creation and growth of small business. There are many categories of tax cuts: corporate tax rates, industry credits, small business sub-chapter s-corporation taxes, death and estate taxes, and personal income taxes, etc. But I believe small business tax considerations deserve recognition.
About two years ago the Bush Administration gave out a one-time personal tax rebate designed to stimulate consumer spending, but I'm not sure that it actually provided a net gain. Various groups no doubt authored papers on this rebate, with their own political slant.
But "small business" is where Amercia invests in itself today, and holds the greatest promise for growth and tax revenue. When you're small, each $1 in tax savings proportionately plays a larger role in your ability to grow, spend, hire others, and be self-sustaining. Small business, as a rule, tends to reinvest a greater percentage of net earnings back in the business. So, as a small business grows and hires others - new tax revenues come via personal income taxes from newer and higher wages. These wages then drive consumer spending and the broader economy.

I agree 100%. Small businesses contribute to the country and even to local communities in numerous ways. I don't agree with the tax breaks that have been given to large companies that outsource production.

 

[Zlex]

It is the same rationale that the ID advocates use. IE life is so complex that it cannot be understood except by the existence of an omnipotent being.
To suggest that taxes do not effect the economy, or that it is impossible to predict or measure the results is a lot like saying that since there are holes in the theory of evolution it is proof of an intelligent creator.
I will grant you that economics is terribly complex and so many factors and variables are involved that it is difficult to assess the impact of various policies. However, for purposes of a political discussion, if the economic conditions are favorable when certain policies and personnel are in charge, and unfavorable with another, then I would suggest there is a general pattern that favors the more successful policy/theory/personnel.
Individual statistics can be interpreted many different ways using many different criteria. but the bottom line is the bottom line. Give credit where credit is due, Clinton had an economic philosophy that worked, on the whole much better than the Reagan/Bush trickle down theory.

There is no doubt that the modelers are simple, and there is no doubt that the models are simpler. I'm just not convinced that the reality is simpler.

Let's objectively look at one such model; the LTCM fiasco. What did these Nobel Prize winners do with all those even 'mildly' complicated terms in their simple model, the ones for which they had no possible way of modeling, or obtaining calibration data for, or even, measuring?

They simply threw them out of the model.

The result? A model that said, essentially, "The weather in San Diego is going to be sunny and warm tomorrow."

Hey, how can you knock that? Right up until the wheels fell off, and there was a cold, nasty day in San Diego.

Well, the model didn't reflect the conditions that led to that, that's all.

Oh.

A jet engine hardly has any moving parts at all, though the ones that do move a hellin. So, I guess designing jet engines is a trivial thing, and yet the models are complex, and nobody is throwing out significant terms, or else nobody is flying.

And yet, when it comes to modeling 'the' economy, the voodoo witch doctor/pygmies have no compunction at all showing up with their mind numbingly simplified models and their acres of ignored terms and hand wavingly claiming that 'the' economy is a trivial thing to model, to calibrate, and to confirm.

The truth is, state of the art economists can't get together and explain or agree upon what just happened, much less, what is going to happen, and why.

Take weather modeling. It makes detailed predictions, and those predictions are 'simple' variables that can be forecast, and after the event, recorded as actual observations, in space and time, at some ridiculously crude resolution. So, people can--and do--go back after the fact, and compare their models with actual outcome, and they can roll these models/observations forward in time over years and years and years, and still, state of the art is maybe a week or two for the models.

As well, their observations are a lot more sparse then their model data, which can pretty much be continuous. However, their observational data is finite, both in space and time, even with imperfect satellite data which, after all, does not measure surface temperature but rather scene radiance, from which surface temperature can only be inferred via correlation, a model of the atmosphere, and assumptions about the distributions of unmeasured aerosols in the atmosphere, like gunk from Mt St Helens or Pinatubo. As well, atmospheric models can fall back on simulations and controlled experiments of smaller models.

And yet, with all of that...they are still light years ahead of poor economists, who actually never get complete simultaneous snapshot observations, but only well after the fact anecdotal and incomplete measurements of aggregate things which occurred and were measured over time, and all of which was the crass financial rafterglow le3ft over by those emotional molecules that mere geophysicists do not have to contend with.

Given a stimulus, what is the response, how long does the response take, and what is its magnitude and sign? Haven't a clue, can't agree, can't prove a thing, might as well be sputtering away with a 5 hp Evinrude in a hurricane.

I would have to defer to Dr. Laura D'Andrea Tyson on the efficacy of the 1993 tax increase. Seems to me likely that she was a lot closer to the action. November, 1997, UCal/Berkeley. She spelled it out quite clearly for a roomfull of incredulous Berkeloids. I ordered the tape from C-Span. It's a sad image, I agree, but on cold, hoary Winter nights I sit up with a little snifter of fine Yukon Jack, put on my slippers and robe, throw another log on the fire, and play that tape to hear her say those three words to explain the Miracle Clinton Economy;

"Nothing we did."

But, your post hoc ergo propter hoc argument is quite compelling, apparently. Just not with her, and thus, not with me, either. You see, she actually ran the numbers. Turns out, we know how many folks actually earn more than $250K/yr, and we know how much additional income over $250K/yr they make, and we can multiply that by an extra 3.9% and come up with a piddling little number in a sea of of several trillion dollars. That, and there is no model to explain why taking marginal money out of the broad private economies and addiing additional marginal money to be handed out to a select few at the Cronyfest on the Potomac instead would cause the private economies to flourish.

Plus, I think she long ago figured out that the economies are not single variable systems.

 

[Skyhunter]

I would have to defer to Dr. Laura D'Andrea Tyson on the efficacy of the 1993 tax increase. Seems to me likely that she was a lot closer to the action. November, 1997, UCal/Berkeley. She spelled it out quite clearly for a roomfull of incredulous Berkeloids. I ordered the tape from C-Span. It's a sad image, I agree, but on cold, hoary Winter nights I sit up with a little snifter of fine Yukon Jack, put on my slippers and robe, throw another log on the fire, and play that tape to hear her say those three words to explain the Miracle Clinton Economy;

There is such a thing as "fine Yukon Jack?"

 

[Zlex]

There is such a thing as "fine Yukon Jack?"

Black Sheep of Canadian Whiskey, born of cold, hoary nights, when men struggled to keep their fires lit and their cabins warm.

100 proof.

I'm not ashamed to admit all of that is from memory.

A little sweet, which explains why adding Rose's sweetened Lime juice to it to make a 'Snake Bite' is so popular with true Yukon Jack afficionados.

Kind of like a cheap assed Southern Comfort, if that is not redundant. SOme say it has a little orangy tang to it.

Others just swig it down and get f*d up.

 

[Skyhunter]

Plus, I think she long ago figured out that the economies are not single variable systems.

True. I never said they were. I asked if tax cuts pay for themselves. Specifically did Bush's tax cuts pay for themselves. If revenues do not increase, they don't. If revenues increase they do.

All your analogies are meaningless to me. Just like all the climate models and their explanations mean little to me. The ice is melting, so I conclude the planet is warming up.

Clinton said he would get rid of the deficit and he did. Call it luck or whatever. As far as I am concerned he did what he promised to do.

 

[Skyhunter]

Black Sheep of Canadian Whiskey, born of cold, hoary nights, when men struggled to keep their fires lit and their cabins warm.
100 proof.
I'm not ashamed to admit all of that is from memory.
A little sweet, which explains why adding Rose's sweetened Lime juice to it to make a 'Snake Bite' is so popular with true Yukon Jack afficionados.
Kind of like a cheap assed Southern Comfort, if that is not redundant. SOme say it has a little orangy tang to it.
Others just swig it down and get f*d up.

Alcohol is poisonous to me so I only drink in extreme moderation. I usually prefer a single malt, just a small shot that I can wet my tongue and breath in the vapors.

 

[Smurf]

Sounds like an argument for Intelligent Design.

also known as an appeal to ignorance.

 

[Zlex]

True. I never said they were. I asked if tax cuts pay for themselves. Specifically did Bush's tax cuts pay for themselves. If revenues do not increase, they don't. If revenues increase they do.
All your analogies are meaningless to me. Just like all the climate models and their explanations mean little to me. The ice is melting, so I conclude the planet is warming up.
Clinton said he would get rid of the deficit and he did. Call it luck or whatever. As far as I am concerned he did what he promised to do.

In order to answer that we'll have to dance in front of the 'it's the health of the gov'ts books that drives the private sector' volcanoe once again.

Gov't needs to balance its books? Add revenue, cut spending. Of course, not even singularity driven Economics courses argue that 'companies' can raise revenues by raising prices. Yet we are to believe that gov't, the entity that makes it's money the old fashioned way: by dipping it's little funnel into an either strongly or weakly flowing stream, can somehow have its revenue determined by how deep or how shallow it dips it's little funnel into that strongly or weakly flowing stream.

Seems to me, when you can start to see the rocks, it doesn't matter how deep gov't dips its little funnel. We now have it on good advice that the strength of the stream is in no way influenced by how far the funnel is inserted.

Not even, I suppose, another 3.6% on a tiny fraction of folks earning over $250K/yr, but only on the amount above 250K/yr.

Well then, it must be interest rates.


Why no, it's midnight basketball.


Scratch that, it's gays in the military.


No, wait a minute, we need someone to scare the crap out of the country with Nationalized Health Scare, and then not implement it.


Oh, Hell. I give up. The primary purpose of this debate seems to be to simply imply that GWB has 'taken' us somewhere we don't want to be, and that someone has a plan to take us back. I guess, without actually hearing the details of what or how that is, we'll just all have to pretend that there is some point to this debate.

Welcome to Cargo Cult Economics; you are free to walk around the cabin, because nobody is actually flying the plane.