Will Trump's tax cuts lead to increased tax revenue?

[Madison320]

I heard Rush Limbaugh say that Trump's tax cuts will actually lead to MORE tax revenue, like the Reagan cuts. I think this is something both parties get wrong. According to basic logic and the "Laffer Curve" tax revenue peaks somewhere around a 20-40% rate or so because once you get past a certain rate, overall economic activity is lower and you actually get less revenue despite the higher rate. But republicans think you can always cut rates and get more revenue, which is wrong because at some point rate cuts WILL lead to revenue cuts. On the other side democrats (and the CBO) always wrongly assume rate hikes will result in proportional revenue increases. For example if a rate of 40% nets 3 trillion, they assume a rate of 80% will net 6 trillion. Obviously that's wrong as well. In that specific case you'd definitely get lower revenues.

There's another factor here. These tax cuts if passed are temporary. We have 20 trillion in debt so it's very likely a future politician will raise rates. Businesses know this so it's less likely they'll invest in the US, knowing that rates may go up in the future.

Anyway my guess is that the Trump tax cuts will end up will less revenue, but not as much as the CBO predicts.

[CaptUSA]

It's entirely impossible to speculate. There are just too many factors here. "All other things being equal" can never happen in reality.

I'm more concerned about how much wealth (not revenue) is being siphoned off the productive economy - whether it's through taxes, inflation, or debt.

[TheTexan]

It's important to find the right balance of taxes, somewhere between 35%-55% is optimal

[TheTexan]

Trump should cut taxes and then make Mexico pay for the deficit

[r3volution 3.0]

I seriously doubt it.

The drop in revenue may be proportionately less than the drop in rates, but that's about it.

Meanwhile, spending...

[Zippyjuan]

It never worked in the past. Reagan signed what was at the time the biggest tax cuts in the US with the promise that economic growth would lead to more tax revenues but when the budget deficits started to soar again, he also signed what was at the time the biggest US tax INCEREASE (sold as "closing loopholes").


It's an idea that's been around since the Reagan administration cut taxes in 1981. But there's little evidence that future growth makes up for the revenues lost when tax rates go down.

"This idea that growth can pay for these kinds of huge tax cuts is operating in fairyland," former Clinton administration budget director Leon Panetta told MSNBC on Wednesday. "That just doesn't work, so if you're going to do a tax cut, then show how you're paying for it."

With Congress already struggling to head off looming budget deficits, that assumption may be a tough sell, according to Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

"While the administration can show tax cuts largely "paying for themselves" by simply changing economic assumptions, Congressional legislation is subject to stricter rules," he wrote in a recent note to clients.

http://www.cnbc.com/2017/04/26/trumps-tax-cut-plan-only-pays-for-itself-with-growth-in-fairyland.html

[wizardwatson]

Because of deficits it will lead to inflation, which will lead to increased revenue...

...sooooo, kind of?

[NorthCarolinaLiberty]

It never worked in the past. Reagan signed what was at the time the biggest tax cuts in the US...


It would if you did it right. It would if you went back far enough. But I'll set aside your (per usual) "practical" argument for something more stark. People like you and TheCount would never want to go that far back.



https://files.taxfoundation.org/legacy/docs/Chart1_1.jpg

[TheCount]

No.

[Zippyjuan]

It would if you did it right. It would if you went back far enough. But I'll set aside your (per usual) "practical" argument for something more stark. People like you and TheCount would never want to go that far back.



https://files.taxfoundation.org/legacy/docs/Chart1_1.jpg

Where in your chart is the revenue bump from the Reagan tax cuts? Biggest tax cut in US history at the time. (Granted that Reagan also signed the biggest tax increases following that because the deficit started soaring again).

[NorthCarolinaLiberty]

Where in your chart is the revenue bump from the Reagan tax cuts? Biggest tax cut in US history at the time. (Granted that Reagan also signed the biggest tax increases following that because the deficit started soaring again).


Where is your answer to my question about tax cuts pre-World War II?

Ah yes; Zip's patented template post where he attempts to discourage, disrupt, and/or cite negative consequences of anything remotely liberty. The template that never, ever gives his personal view on any issue, but so quick to be the wet blanket.

So, tell me, Zip. Would you favor pre-depression era and pre-World War II income tax rates for the U.S.?


Answers:

A. Yes because....
B. No because...
C. I'm not answering! I'm off to the next big thread!

[Madison320]

It never worked in the past. Reagan signed what was at the time the biggest tax cuts in the US with the promise that economic growth would lead to more tax revenues but when the budget deficits started to soar again, he also signed what was at the time the biggest US tax INCEREASE (sold as "closing loopholes").

Budget deficits soared because spending soared, not because revenue fell.

From 1981 to 1990 tax revenue went from about 400 billion to about 650 billion, despite lower rates.

That being said I don't think Trump's cuts will lead to higher revenue. The economy is in much worse shape now compared to 1981. Plus Reagan reduced the top rate down from 70%. Trump is reducing the top rate down from 39%. It's more likely that Reagan was on the back side of the Laffer curve when he cut top rates.

The whole idea that we threaten citizens with jail time or confiscation, if they don't pay 39% of their income makes me sick. Luckily you're not burdened with the same problem.

[Zippyjuan]

Budget deficits soared because spending soared, not because revenue fell.

From 1981 to 1990 tax revenue went from about 400 billion to about 650 billion, despite lower rates.

That being said I don't think Trump's cuts will lead to higher revenue. The economy is in much worse shape now compared to 1981. Plus Reagan reduced the top rate down from 70%. Trump is reducing the top rate down from 39%. It's more likely that Reagan was on the back side of the Laffer curve when he cut top rates.

1980 had double digit unemployment as well as double digit inflation. 1981 it was about eight percent unemployment. January 1981 inflation rate was 11.8%. https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx

Reagan signed tax cuts in 1981 and signed tax increases in 1982 and again in 1984 ( the Tax Equity and Fiscal Responsibility Act of 1982 and the Deficit Reduction Act of 1984). The 1981 tax reform also indexed taxes to inflation- when inflation was ten percent, taxes also rose by ten percent. Those helped increase government revenues from taxes.

Also note that few people were in the 70% tax bracket. That applied to all income over $165,000. It only took $55,000 a year in 1981 to put you into the top five percent of incomes. http://www.taxpolicycenter.org/statistics/household-income-quintiles

[NorthCarolinaLiberty]

1980 ...


Let's play a different game. Here are the answers from above.

Answers:

A. Yes because....
B. No because...
C. I'm not answering! I'm off to the next big thread!

[Madison320]

1980 had double digit unemployment as well as double digit inflation. 1981 it was about eight percent unemployment. January 1981 inflation rate was 11.8%. https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx

Reagan signed tax cuts in 1981 and signed tax increases in 1982 and again in 1984 ( the Tax Equity and Fiscal Responsibility Act of 1982 and the Deficit Reduction Act of 1984). The 1981 tax reform also indexed taxes to inflation- when inflation was ten percent, taxes also rose by ten percent. Those helped increase government revenues from taxes.

Unemployment and price inflation are superficial data points (not that they aren't totally meaningless). I'm talking the underlying structure of the economy. Back in the 1980s we were the world's biggest creditor, now we're the world's biggest debtor. We had about 3 trillion in debt, now we have 20 trillion. Rates have been at 0% for 8 years causing huge amounts of damage. We've printed 3.5 trillion (that's REAL inflation).We've been running huge trade deficits for decades. We're the king of red ink now. Back in the 1980s we still had a solid foundation.

[oyarde]

My guess is it will be no change .

[Zippyjuan]

Unemployment and price inflation are superficial data points (not that they aren't totally meaningless). I'm talking the underlying structure of the economy. Back in the 1980s we were the world's biggest creditor, now we're the world's biggest debtor. We had about 3 trillion in debt, now we have 20 trillion. Rates have been at 0% for 8 years causing huge amounts of damage. We've printed 3.5 trillion (that's REAL inflation).We've been running huge trade deficits for decades. We're the king of red ink now. Back in the 1980s we still had a solid foundation.

So you can have a solid economy with high unemployment and inflation. Interesting. Interest rates were also very high then (raised by the Fed to try to fight that high inflation rate) which made the costs of borrowing very high. 30 year mortgages for example were 18%. US Treasury rates (the cost of government borrowing) were around 15%. http://www.nytimes.com/1981/08/08/business/treasury-bill-rate-at-14.54.html Today, ten year notes are running about two percent.

[NorthCarolinaLiberty]

Interesting. .


What's interesting is you not answering questions about your views. Ah, the old template and Zip sticking to the playbook.

[Madison320]

So you can have a solid economy with high unemployment and inflation. Interesting.

Didn't say that. Reread my post.

[Zippyjuan]

Didn't say that. Reread my post.

this bit?


The economy is in much worse shape now compared to 1981.

Since inflation was eleven percent, interest rates 20% and unemployment eight percent vs today inflation less than two percent, interest rates one to two percent, and unemployment half of what it was then yet the economy is weaker than it was back then then high inflation, unemployment, and interest rates must mean a better economy. 1981 was a serious recession. We are not in a recession now.

Also of note- in 1980 we were still running a trade deficit. We had been nearly every year since 1976. We were not yet a debtor nation in 1981 but were already on our way- by 1985 we were (also under Reagan).

[Madison320]

What's interesting is you not answering questions about your views. Ah, the old template and Zip sticking to the playbook.

Zippy can't admit the economy is weak because Obama just left office after 8 years. The truth is both parties have contributed to the massive debt and damage from government stimulus. But I can say that because I'm not a partisan hack like Rush Limbaugh on the right or Zippy on the left.

[Madison320]

this bit?

I said, "The economy is in much worse shape now compared to 1981"

You translated that to, "So you can have a solid economy with high unemployment and inflation. Interesting."

[Zippyjuan]

The economy isn't in worse shape than it was in 1981.

[NorthCarolinaLiberty]

I think people are totally wasting their time having ivory tower discussions with people like Zip and TheCount. These guys have a much loftier goal than debating. If they can keep you wrapped in their game, then they continue to fly under the radar. That doesn't mean to never call their points wrong, but overall, remember the bigger picture. Their goal is not your goal. They want to steer you away from your goal. Debating? Yeah. This is what they want. They want you playing their game, not your game. Unmask them and they run like cockroaches.

I like this thread: http://www.ronpaulforums.com/showthread.php?510163-What-s-the-point-of-keeping-openly-deceptive-members

[Brian4Liberty]

Will Trump's tax cuts lead to increased tax revenue?

The type of question pondered by central planners. And as it is a forecast of the future, where small changes in tax rates have only a partial to zero effect, the answers given are incredibly disingenuous. A tax cut will result in a lower tax. That is the one and only fact. And that's enough of a reason to cut taxes.

[juleswin]

Answer is a no, tax cuts will improve the economy and GDP but the increase would most likely not be big enough to make up the difference in the cuts. I think govt have calculated for the most part the most efficient tax rates to maximize the tax revenue while keeping the cow alive and thriving.

And if tax revenue increases during a tax cut then it is probably not the cuts that is responsible for it. If tax cuts led to tax revenue increases, govt would do it cos they always want more of your money