Small Business Lending Bill

[halplm]

Exactly how does reducing revenue help anything?

Who said anything about reducing revenue? I was only talking about lowering taxes.

# Since rising health costs are the single largest reason for projected long-run deficits, it is appropriate that health reform be considered through the reconciliation process.

rising health costs only add to the deficit if the government is paying those health costs.

the health care reform that was passed has already and will continue to increase costs.

[River]

Well, if government revenue isn't coming from taxes, where's it coming from?

[halplm]

Well, if government revenue isn't coming from taxes, where's it coming from?

It is, but lowering taxes increases revenue.

[River]

How?

[Infidel]

Hal, since taxes were higher from the 1950s through the 1990s than they are now, why was unemployment not consistently high then?

The top marginal income tax rate was lower than now from 88-92 (28-31%).

[halplm]

with lower taxes, there is more money in the economy. With more money available, there is more economic growth. With more economic growth, more taxes are collected.

If you couple this with cutting spending, you get increased government efficiency, not to mention potential government surpluses and debt repayment,which would help everyone.

[Túrin Turambar]

with lower taxes, there is more money in the economy. With more money available, there is more economic growth. With more economic growth, more taxes are collected.

Not always, and then only to a degree. Revenue collected increases with tax rates for a while before it begins to decrease, and the point when revenue is at its maximum may be quite high, in the vicinity of 60-70%. A 2005 CBO Report (discussed on wikipeda here) found that a 10% cut of then-current U.S. tax rates would lead to a fall in revenue, as any improvement in economic growth would make up only a little over a quarter of the value of the tax cuts.

[halplm]

Well, if you believe the COB, then do whatever you want. I'm pretty sure they are politically motivated by the people that want to increase spending (all parties)... and thus, want more taxes collected regardless of the consequences.

[N.E. Brigand]

Hal, since taxes were higher from the 1950s through the 1990s than they are now, why was unemployment not consistently high then?

The top marginal income tax rate was lower than now from '88-'92 (28-31%).

Thanks for the correction, Infidel.

So hal, since:

1. Taxes were higher from the 1950s through the 1990s, apart from 1988-1992, than they are now; and
2. You claim that the "middle class won't be earning enough to pay taxes if the businesses are taxed so much they can't employ anyone"; yet
3. You note that "taxes aren't the only factor determining unemployment";

It would seem that lowering taxes is not a sure cure for unemployment.


Oh, and as regards the Congressional Budget Office, since you don't trust their numbers, whose would you prefer be used in these discussions?

[halplm]

I don't believe that I have said lower taxes was a sure cure for unemployment.

I'm pretty sure all I said was that raising taxes could make unemployment worse.

As far as the CBO is concerned, I find most everyone making financial predictions is motivated by wanting certain results (much like climate scientists), so I prefer to look at real numbers rather than predictions.

[Túrin Turambar]

Well, if you believe the COB, then do whatever you want. I'm pretty sure they are politically motivated by the people that want to increase spending (all parties)... and thus, want more taxes collected regardless of the consequences.

In which case wouldn't they have an interest in maximising revenue?

Regardless, they're not the only source of data on this subjects. Studies have been done on tax rates and economic growth in several countries. And while high taxation does hamper economic growth, there's no clear consensus on how high it needs to be.

Obviously cutting taxes from 100% to 90% would see revenue increase, as there would be no revenue at all if taxes were 100%. But decreasing taxes from 10% to 0% would see revenue fall to nothing. Somewhere in between is the point where the economic benefits of cutting taxes no longer make up for the lost revenue.

[N.E. Brigand]

As far as the CBO is concerned, I find most everyone making financial predictions is motivated by wanting certain results (much like climate scientists), so I prefer to look at real numbers rather than predictions.

So if you were given two budget options, how would you, without waiting ten years for the real numbers to come in, choose between them? If I told my boss, who each spring wants to know how much a given season of plays was going to cost and earn, that rather than provide him with a budget, which is a prediction (particularly on the income side), that he'd have to wait until next year to see how the numbers came in, he'd never be able to select a season.

[halplm]

As far as the CBO is concerned, I find most everyone making financial predictions is motivated by wanting certain results (much like climate scientists), so I prefer to look at real numbers rather than predictions.

So if you were given two budget options, how would you, without waiting ten years for the real numbers to come in, choose between them? If I told my boss, who each spring wants to know how much a given season of plays was going to cost and earn, that rather than provide him with a budget, which is a prediction (particularly on the income side), that he'd have to wait until next year to see how the numbers came in, he'd never be able to select a season.

well, with two budget choices, it's quite simple, the one that costs less, provided, of course they are equal on the grounds of adequately meeting the funding for necessary government functions.

[Lidless]

with lower taxes, there is more money in the economy.

No. A common fallacy. Where does the tax money go?

It depends on where the tax money is spent. Most will be spent...in the economy. On govt and defence jobs, on public constructions, most of which in itself will generate more tax revenue.

It depends on how much goes to foreign contractors, but then again, the same is true on a person spending money in a store that imports its goods or outsources its manufacture overseas.

Some will be used to pay off debt, and the more you tax you get from the cycle the quicker you pay it off.

[Lidless]

In fact in the free economy if banks still are not lending (responsibly) to businesses ,each other and home owners - the only way to truly stimulate the economy without raising more debt is to raise taxes a bit and then pour it back into the economy, enhancing the cycle and getting more tax back again.

[halplm]

In fact in the free economy if banks still are not lending (responsibly) to businesses ,each other and home owners - the only way to truly stimulate the economy without raising more debt is to raise taxes a bit and then pour it back into the economy, enhancing the cycle and getting more tax back again.

How is taking money out of the economy going to stimulate it?

How do you stimulate an economy by taking a bunch of money out of it... swirling that money around, and send some of it (not all) back into the economy?

Even if the government was perfectly efficient, and not a dime was wasted... how is it possible that tax money can possibly improve things... when every dime of it was taken out of the economy to begin with?


The reason banks and businesses are not lending or spending... is because every time they do, they put themselves at risk. Usually, these risks are offset by the potential rewards such an action may provide. However, when the government is actively saying they are going to raise taxes, and increase regulation... suddenly those rewards are questionable, and the risks are much more... risky.

In such a situation, the only way to get things moving again is for the government to step back, say they are going to do nothing, or better yet lower taxes and make risks more rewarding, so the money starts flowing again, rather than sitting still or simply being sucked up by the government.

This is one thing I have never understood why people don't get it. Businesses want to make money. They make money by taking risks and realizing opportunities. They don't make money by hoarding it. People and businesses save money (i.e. take it out of the flowing economy) to stave off risks when opportunities are scarce.

If the government lets people and businesses keep more of their money, it will be invested. If the government takes it... it can only at most be returned in smaller amounts.

[Túrin Turambar]

Even if the government was perfectly efficient, and not a dime was wasted... how is it possible that tax money can possibly improve things... when every dime of it was taken out of the economy to begin with?

Because the public sector is still part of the economy. In practical macroeconomic it doesn't matter if I earn ten dollars and spend it or if the government takes if from me in tax and spends it themselves. It's less efficient, but the government still saves or spends money just like any other player in the economy.

[Infidel]

Hal, since taxes were higher from the 1950s through the 1990s than they are now, why was unemployment not consistently high then?

The top marginal income tax rate was lower than now from '88-'92 (28-31%).

Thanks for the correction, Infidel.

So hal, since:

1. Taxes were higher from the 1950s through the 1990s, apart from 1988-1992, than they are now; and
2. You claim that the "middle class won't be earning enough to pay taxes if the businesses are taxed so much they can't employ anyone"; yet
3. You note that "taxes aren't the only factor determining unemployment";

It would seem that lowering taxes is not a sure cure for unemployment.


Oh, and as regards the Congressional Budget Office, since you don't trust their numbers, whose would you prefer be used in these discussions?

You are welcome.
The problem with the CBO numbers is that they are only allowed to base their conclusions on the data (however faulty or not) they are given. For example, when you hear about the Clinton surplus, this is based on CBO analysis. But the data is incomplete, and in reality there was no surplus, when a true and accurate accounting of all the numbers is done (such as by the Treasury department). More recently with Obamacare, and CBO numbers were being touted for the costs (and/or savings), but CBO personal were issuing caveats with it, and later issued reports with increases based on other factors received.

[halplm]

Even if the government was perfectly efficient, and not a dime was wasted... how is it possible that tax money can possibly improve things... when every dime of it was taken out of the economy to begin with?

Because the public sector is still part of the economy. In practical macroeconomic it doesn't matter if I earn ten dollars and spend it or if the government takes if from me in tax and spends it themselves. It's less efficient, but the government still saves or spends money just like any other player in the economy.

That would be true except for two things. First, the government also regulates, so they can create unfair playing fields both for and against an advantage. Second, the government has no need to actually spend wisely. It does not behave like any other player in the economy because it has no consequences for overspending.

Well, until total economic collapse, but that's generally too late.

[River]

Isn't that kind of like saying humans aren't part of the ecosystems of North America because we invaded and made a mess? And while it's common for people to believe that, the fact of the matter is, we're here and we've done what we've done and you can't build an accurate model without accounting for human activity.