Higher Taxes increases revenue and prosperity vs. Lower Taxes?

[rp4prez]

So in a debate one side is showing a graph (below) that the Bush tax cuts didn't increase revenue. I'm calling this joker out that he should dig a bit deeper to look for the reasons why revenue dipped the way it did. Like the 2000 dot com bust, the huge growth of government, etc.

However, made me wonder what you all thought here? Does lower taxes (in general) raise revenue or not for the government?

[AuH20]

The government produces nothing, siphons from the private sector and creates artificial market fluctuations? Are they serious?????

[Zippyjuan]

So in a debate one side is showing a graph (below) that the Bush tax cuts didn't increase revenue. I'm calling this joker out that he should dig a bit deeper to look for the reasons why revenue dipped the way it did. Like the 2000 dot com bust, the huge growth of government, etc.

However, made me wonder what you all thought here? Does lower taxes (in general) raise revenue or not for the government?

The chart looks at revenue which is independent of government expenditure.

Here is a simliar chart which looked at previous tax cuts and increases. It uses revenues and expenditures as a percent of GDP to allow for the economy growing or shrinking. :

http://rricketts.ba.ttu.edu/Tax%20Ra...20Revenues.htm

FactCheck.org's take: http://www.factcheck.org/taxes/supply-side_spin.html

Republican presidential candidate Sen. John McCain has said that the major tax cuts passed in 2001 and 2003 have "increased revenues." He also said that tax cuts in general increase revenues. That’s highly misleading.

In fact, the last half-dozen years have shown us that we can't have both lower taxes and fatter government coffers. The Congressional Budget Office, the Treasury Department, the Joint Committee on Taxation, the White House’s Council of Economic Advisers and a former Bush administration economist all say that tax cuts lead to revenues that are lower than they otherwise would have been – even if they spur some economic growth. And federal revenues actually declined at the beginning of this decade before rebounding. The growth in the past three years that McCain refers to brings revenues back in line with the 40-year historical average as a percentage of gross domestic product.

It’s unclear how much of the growth can be attributed to the tax cuts. Capital gains tax receipts did increase greatly from 2003 to 2006, but the CBO estimates that they will level off and decrease in the next few years. The growth overwhelmingly resulted from a sharp rise in corporate tax receipts, the cause of which is a topic of debate.

“Federal revenue is lower today than it would have been without the tax cuts,” Alan D. Viard of the conservative American Enterprise Institute told the Washington Post last October. Viard, who worked in the Treasury Department’s Office of Tax Analysis and the White House’s Council of Economic Advisers under President Bush, told FactCheck.org that “nobody can absolutely prove that.” Proof would require time travel and a reversal of tax policy. “But among economists, there’s no dispute.”

Tax cuts can be a sound economic move that spurs growth, says Viard. “But it doesn’t mean that [the cuts] gained revenue."

If the government had reined in spending – as McCain wanted – the senator might have more to brag about. Viard says economists would expect a boost to the economy if tax relief had been matched by spending cuts. When the cuts are deficit-financed (as these are), it’s still possible to have positive growth, he continues, but that’s a different matter from saying there’s a net increase.

[RCA]

The question is not what makes State revenue go up, but rather why do we care about State revenue going up.

[Zippyjuan]

The concern should be about growing debt. That means more future taxes as Ron Paul points out. Cutting taxes without cutting spending too only switches the taxes to the future- with interest added in for good measure.

[hugolp]

The question is not what makes State revenue go up, but rather why do we care about State revenue going up.

This.

Howcome government revenue going up is a good thing?

[Zippyjuan]

The theory was that you could simultaneously have lower taxes and bigger govenment- make everybody happier- the big government people and the lower taxes ones. Cutting the tax rates would promote economic growth meaning more money and the government could reduce their share of that money but still take in a larger total amount themselves.

[rp4prez]

The theory was that you could simultaneously have lower taxes and bigger govenment- make everybody happier- the big government people and the lower taxes ones. Cutting the tax rates would promote economic growth meaning more money and the government could reduce their share of that money but still take in a larger total amount themselves.

So what happened with that theory?

[Zippyjuan]

Hasn't worked out too well. You do get a short term bump from the stimulus but the market adjusts to it. The resulting growth is not enough to build up the coffers of the government to offset the cuts- meanwhile the deficit and debt both grow larger which would mean higher taxes in the future. Just like running up your credit card. You get more money to spend today (the consumers do) but you have to pay them off eventually- with interest.