Exasperation with tax cut slogans
Mark Thoma expresses his exasperation with the tax cut slogans of lawyers and journalists:
The disappointing part is that the press still lets them get away with this. At best, the press generally says something like “some economists claim this isn’t true,” implying there’s a debate about this issue — that some credible economists think the tax cuts will, in fact, pay for themselves — when there is no debate and the answer is clear. Tax cuts don’t pay for themselves.
If the press won’t call them on this obvious falsehood, how can we trust them on anything? Instead of reflecting poorly on the press, this ought to bring the general credibility of the people making these claims into question. The press ought to ask something like, “Are you this ignorant about economics, in which case why should anyone vote for you, or are you deliberately misleading people? I’ll assume you aren’t ignorant, so here’s the question. If you are willing to make false claims about the revenue generated from tax cuts in order to promote them for the wealthy, what other falsehoods will you be willing to promote in order to serve political ends? If voters can’t trust you to tell the truth about tax cuts, how can they trust you on anything?”
But then, there is more to the story.
Over at Mankiw’s blog is the ‘cover’ these journalists see. A Harvard economics prof ‘deconstructing’ Goolsbee’s white board lectures. (h/t beezer)
Thoma – EV post, October 24, 2010 – “As for the cost of extending the tax cuts to the wealthy, the Tax Policy Center estimates that making all the Bush tax cuts permanent, as opposed to extending them only for the middle and lower classes, would cost $680 billion over the next decade.”
I think that Thoma meant to say that extending or making permanent the Bush tax cuts for upper income earners (top 2%) “would cost $680 billion over the next decade.”
U.S. Treasury projected that extension of the Bush II era tax cuts for all income earners will represent a Federal revenue loss of $3,675.7 billion over the period, 2010-2020.
The losses attributed only to extending the Bush II era tax cuts to upper income earners is stated in a U.S. Treasury table as $679.6 billion over the period, 2010-2020. The Tax Policy Center rounded up to $680 in a subsequent publication, as cited by Thoma.
The U.S. Treasury table providing this data was identified and provided in a Tax Policy Center reference dated July 29, 2010:
Department of the Treasury Revenue Estimates for Extension of 2001 and 2003 Tax Cuts and the Administration’s High-Income Tax Proposals Impact on Tax Revenue ($ billions), 2010-20
Jul 29, 2010
http://www.taxpolicycenter.org/taxtopics/TCE_Congress.cfm
and
http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=2785
Thoma – EV post, October 24, 2010 – “As for the cost of extending the tax cuts to the wealthy, the Tax Policy Center estimates that making all the Bush tax cuts permanent, as opposed to extending them only for the middle and lower classes, would cost $680 billion over the next decade.”
I think that Thoma meant to say that extending or making permanent the Bush tax cuts for upper income earners (top 2%) “would cost $680 billion over the next decade.”
U.S. Treasury projected that a permanent or ten year extension of the Bush II era tax cuts for all income earners will represent an estimated Federal revenue loss of $3,675.7 billion over the period, 2010-2020.
The estmated loss attributed only to extending the Bush II era tax cuts to upper income earners is stated in a U.S. Treasury table as $679.6 billion over the period 2010-2020. The Tax Policy Center rounded up to $680 in a subsequent publication, as cited by Thoma.
The U.S. Treasury table providing this data was identified and provided in a Tax Policy Center reference dated July 29, 2010:
Department of the Treasury Revenue Estimates for Extension of 2001 and 2003 Tax Cuts and the Administration’s High-Income Tax Proposals Impact on Tax Revenue ($ billions), 2010-20
Jul 29, 2010
http://www.taxpolicycenter.org/taxtopics/TCE_Congress.cfm
and
http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=2785
Thoma – EV post, October 24, 2010 – “As for the cost of extending the tax cuts to the wealthy, the Tax Policy Center estimates that making all the Bush tax cuts permanent, as opposed to extending them only for the middle and lower classes, would cost $680 billion over the next decade.”
I believe that Thoma meant to say that making permanent the Bush tax cuts for upper income earners (top 2%) “would cost $680 billion over the next decade.”
U.S. Treasury projected that making permanent the Bush II era tax cuts for all income earners will represent an estimated Federal revenue loss of $3,675.7 billion over the period 2010-2020.
The estimated Federal revenue loss attributed only to making permanent the Bush II era tax cuts to upper income earners is stated in a U.S. Treasury table as $679.6 billion over the period 2010-2020. The Tax Policy Center rounded up to $680 billion in a subsequent publication, as cited by Thoma.
The U.S. Treasury table providing this data was identified in a Tax Policy Center reference document dated July 29, 2010:
Department of the Treasury Revenue Estimates for Extension of 2001 and 2003 Tax Cuts and the Administration’s High-Income Tax Proposals Impact on Tax Revenue ($ billions), 2010-20
Jul 29, 2010
http://www.taxpolicycenter.org/taxtopics/TCE_Congress.cfm
and
http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=2785
This is an absolutely absurd statement:
“when there is no debate and the answer is clear. Tax cuts don’t pay for themselves.”
I can point you to all sorts of examples of tax cuts paying for themselves. For example, the reduction in the top rate on investment income from 98% to 60% in the UK in the 1980s. Russia’s dropping of Soviet era income taxes to a flat rate 13%.
I can even point you to tax cuts that could/should happen which would increase revenue: like the abolition of Stamp Duty on share trading in the UK.
That cuts in income tax or capital gains taxes from current US levels will increase tax revenues, yes, I agree that would not happen. I would take as my guide on such matters one Greg Mankiw who has published estimates on the matter. (His numbers were, from memory, that only 30% of an income tax cut would be paid for, 50% of a capital gains tax cut.)
But whether a tax cut pays for itself depends upon which tax, from what rate, in what structure of an economy.
The blanket statement that “tax cuts don’t pay for themselves” is as absurdly wrong as the statement “all tax cuts pay for themselves”.
Just for kicks, consider this situation. Corporate income tax is only levied on profits that are made in the US…and on profits made abroad which are then remitted into the US (to pay for dividends etc). Profits which are made abroad by a US domiciled company’s subsidiary and which stay abroad pay no US corporate income tax.
Now, imagine that profits which are remitted pay 35%. Or we bring in a special, this year only, 5% tax rate for such profits remitted.
Whether or not that taqx cut pays for itself is an empirical matter. How much of their foreign profits do US domiciled companies remit each year? How much is stacked up offshore? How much of what is stacked up would be remitted with the lower rate, the tax cut?
No, I don’t know either but that is in fact a tax cut under discussion right now. And it’s a tax cut that was enacted a few years back as a special one year event. So, anyone want to go look and see whether the last time this was done tax collected rose or fell?
You know, check and see whether some tax cuts, some of the time, do pay for themselves?
Now that is an election slogan I could live with Tim.
“Some tax cuts, some of the time, do pay for themselves”.
Unfortunately it tested very poorly with the key Liquid Enough to Make Campaign Contributions demographic.
Like Fleishman and Pons’ cold fusion, or 12% real gains in real estate, people really WANT to believe in something for nothing. They can become quite incensed when you challenge them. My co-worker tried in vain to prevent her nephew from wiring money to Canada to pay for the taxes on a $50k prize. “Monkeys will fly out of my butt before you see a dime of that money.” For a while, “Still no monkeys?” was a catch phrase in our office.
Would you believe, when I was a candidate in an election (for the European Parliament, which has a weird party list election system) that was pretty much what I was saying. And as I was writing a lot of the party’s economic press releases etc, that’s pretty much what the party was saying too. We came second in that election, second largest number of Members of the European Parliament (although not me, I was too far down the party list) from the UK and we beat the then Labour Government into third place.
Who knew? Honesty pays in electoral politics?
I’m also at the Adam Smith Institute (think Cato but more extreme) and that’s what we say there too.
It’s interesting that Thoma and others howl like wounded animals about the Republican positions on taxation, but take a convenient pass on Obama’s stated intent to keep most of the Bush II era tax cuts in place. Obama is willing to extent the vast majority of the tax cuts.
Where is the liberal outrage on that one???????
It’s interesting that many liberals howl like wounded animals about the Republican positions on taxation, but take a convenient pass on Obama’s stated intent to keep the majority of the Bush II era tax cuts in place. He’s on the record with that statement.
Where is the liberal outrage on that one???????
“On Sept. 8, in a speech in the Cleveland area, President Obama threw down the gauntlet to the GOP, saying that Democrats were “ready, this week … to give tax cuts to every American making $250,000 or less.
The administration wants to keep the AMT indexed, keep the tax cuts for the middle class (including capital-gains measures), extend relief for the so-called marriage penalty, expand the child tax credit, and increase tax credits for education. It also wants to reinstate the estate tax and expand the earned-income tax credit, which is for low-wage earners.
The Obama proposal would retain about 82 percent of the dollar value of the Bush tax cuts and would keep taxes about the same for 98 percent of taxpayers, according to an estimate by the Tax Policy Center, a joint effort between the Urban Institute and the Brookings Institution.”
http://www.csmonitor.com/USA/Politics/2010/0913/Bush-tax-cuts-101-What-changes-could-be-in-store-for-taxpayers/(page)/2
It’s interesting that many liberals howl like wounded animals about the Republican positions on taxation, but take a convenient pass on Obama’s stated intent to keep the majority of the Bush II era tax cuts in place. He’s on the record with that statement.
Obama is willing to leave over $3 trillion in lost Federal revenue for the period 2010-2020 on the table. And that is Treasury’s figure.
Where is the liberal outrage on that one???????
“On Sept. 8, in a speech in the Cleveland area, President Obama threw down the gauntlet to the GOP, saying that Democrats were “ready, this week … to give tax cuts to every American making $250,000 or less.
The administration wants to keep the AMT indexed, keep the tax cuts for the middle class (including capital-gains measures), extend relief for the so-called marriage penalty, expand the child tax credit, and increase tax credits for education. It also wants to reinstate the estate tax and expand the earned-income tax credit, which is for low-wage earners.
The Obama proposal would retain about 82 percent of the dollar value of the Bush tax cuts and would keep taxes about the same for 98 percent of taxpayers, according to an estimate by the Tax Policy Center, a joint effort between the Urban Institute and the Brookings Institution.”
http://www.csmonitor.com/USA/Politics/2010/0913/Bush-tax-cuts-101-What-changes-could-be-in-store-for-taxpayers/(page)/2
It’s interesting that many liberals howl like wounded animals about the Republican positions on taxation, but take a convenient pass on Obama’s stated intent to keep the majority of the Bush II era tax cuts in place. He’s on the record with that statement.
Obama is willing to leave over $3 trillion in lost Federal revenue for the period 2010-2020 on the table. And that is Treasury’s figure.
Where is the outrage on that one? is this just part of the double standard game being played out by some liberals?
“On Sept. 8, in a speech in the Cleveland area, President Obama threw down the gauntlet to the GOP, saying that Democrats were “ready, this week … to give tax cuts to every American making $250,000 or less.
The administration wants to keep the AMT indexed, keep the tax cuts for the middle class (including capital-gains measures), extend relief for the so-called marriage penalty, expand the child tax credit, and increase tax credits for education. It also wants to reinstate the estate tax and expand the earned-income tax credit, which is for low-wage earners.
The Obama proposal would retain about 82 percent of the dollar value of the Bush tax cuts and would keep taxes about the same for 98 percent of taxpayers, according to an estimate by the Tax Policy Center, a joint effort between the Urban Institute and the Brookings Institution.”
http://www.csmonitor.com/USA/Politics/2010/0913/Bush-tax-cuts-101-What-changes-could-be-in-store-for-taxpayers
It’s interesting that many liberals howl like wounded animals about the Republican positions on taxation, but take a convenient pass on Obama’s stated intent to keep the majority of the Bush II era tax cuts in place. He’s on the record with that statement.
Obama is willing to leave over $3 trillion in lost Federal revenue for the period 2010-2020 on the table. And that is from Treasury’s data.
Where is the outrage on that one?? Is that part of the double standard treatment by some liberals?
“On Sept. 8, in a speech in the Cleveland area, President Obama threw down the gauntlet to the GOP, saying that Democrats were “ready, this week … to give tax cuts to every American making $250,000 or less.
The administration wants to keep the AMT indexed, keep the tax cuts for the middle class (including capital-gains measures), extend relief for the so-called marriage penalty, expand the child tax credit, and increase tax credits for education. It also wants to reinstate the estate tax and expand the earned-income tax credit, which is for low-wage earners.
The Obama proposal would retain about 82 percent of the dollar value of the Bush tax cuts and would keep taxes about the same for 98 percent of taxpayers, according to an estimate by the Tax Policy Center, a joint effort between the Urban Institute and the Brookings Institution.”
http://www.csmonitor.com/USA/Politics/2010/0913/Bush-tax-cuts-101-What-changes-could-be-in-store-for-taxpayers
The argument that tax cuts pay for themselves is like the argument that austerity generates growth.
When you look at the examples of when they actually happened you find a major problem of the “omitted variable” that was really the driving force behind what happened, not the tax cut or the austerity program itself.
MG, read the comments on a blog read by a lot of liberals sometime. There is no shortage of criticism of Obama on his tax proposals and many other topics. Take your strawman elsewhere.
I’m pretty sure when an American politician today makes the argument that tax cuts pay for themselves, they’re not talking about Russia in 1990.
I can name most of the big name liberals who are outraged that Obama isn’t pushing for total elimination of the Bush II era tax cuts. It’s not a long list. The same story applies to Democrat economists. There isn’t much outrage, rather more of a whimper whenever voiced.
There is a hell of a difference between outrage and whimpers.
MG:
Why do you think he is willing to allow TAX BREAKS TO SUNSET for 3% of the taxpayers and keep the breaks for the balance of the taxpayers? Maybe it has something to do with income over the last decade and who benefited the most from the 2001/2003, etc. taxbreaks?
In any case, Obama has not eliminated all of the taxbreaks for the upper 3%. Read the rest of the Williams article