Quote of the Day: Swedish Tax Lesson for Congress?
Tax rates are falling all over the globe -- even in Sweden. The exception is the U.S. Congress, which is scrambling to find some way, any way, to raise them.
The proposed 44% top marginal rate would reduce U.S. competitiveness by reducing the after-tax return on investment. Less investment means fewer jobs and lower wages. A Tax Foundation analysis of tax returns finds that roughly three in every five Americans in the highest income tax bracket are small business owners, who create most new jobs.
What's missing from this Congressional tax debate is any recognition that today's tax rates are producing record tax receipts. If the current pace of tax collections continues amid a modicum of spending restraint, the federal budget could be balanced within 18 months. The tax share of GDP is approaching 19%, which is above its modern historical average.
It's a sorry day when American politicians have to be instructed in the virtues of low tax rates by the Swedes.
~From today's WSJ editorial "100% Marginal Tax Rate"
13 Comments:
When it comes to balancing the budget, there are only two things that need to be considered: revenue and outlays.
Repeat after me: OUTLAYS DETERMINE REVENUE, NOT VICE-VERSA!!!!
WSJ promoted huge increases in outlays in the form of supporting a totally unnecessary war.
Also, the WSJ's, Norquists, and AEI's of the country sat back during the unprecedented increases in pork that happened on a Republican Congress/Republican presidency.
Yet they shreik to the high heavens when anybody proposes raising taxes to account for money that was ALREADY spent.
anonymous:
You are incorrect. Outlays DO NOT determine revenue.
Increased government spending does not cause increased tax revenue.
If that were the case, why wouldn't you propose government take all private income?
BTW: The WSJ consistently pointed out the pork being slopped by the Republican congress and signed into law by President Bush.
Here's the formula:
Lower tax RATES = increased economic activity = increased tax revenue
I thought that I put it reasonably clearly the first time, but now I see I haven't.
Outlays drive revenue collection.
The fundamental conflict is everyone wants low taxes, and high amounts of government services. But, in the long run, it must be the case that revenue collected matches outlays.
Following this assumption, there are two generally coherent positions: higher taxation/more services, lower taxation/fewer services.
I am a young person, but for my entire life, the pattern has been that money is spent before politicians figure out a way to spend it.
Right now, we continue to pay interest on $10 trillion of debt. This is a significant part of the budget, and the only part that provides us with no services (other than the "service" of dumping today's debt onto tomorrow's taxpayers).
There is no excuse for running continued deficits through an economic expansion. This debt is like building the top floors of a skyscraper from materials scavanged from the foundation: all well and good, until the building comes tumbling down.
You write: Lower tax RATES = increased economic activity = increased tax revenue
This is only true subject to many caveats-- so many such that in practice it hardly ever turns out to be true. When Bush cut tax rates, revenue went down. But people said, "give it some time to work." Then when revenues increased, it was "Aha! Our plan worked!"
Not really. Economies are cyclical. Everybody knows that.
Money taken from taxation does not disappear into the ether. If a government can use the capital more efficiently than the private sector, taxation is a net benefit. If the private sector uses capital better, taxation is a hindrance. Also, in terms of utility, many people would argue that a small sacrifice in net economic activity is a reasonable tradeoff for a more egalitarian society.
It's really quite easy.
1) Transition from income tax to sales tax because income tax increases the price of domestic goods vs imports which drives outsourceing and pumps value out of the country.
2) End all foreign aid and corporate welfare. The US Constitution provides for the welfare of US Citizens, not Exxon, not Isrealis and not Mexicans.
3) Enforce criminal charges against corporate officers and government employees. No more fines paid with other people's money - prison time for corruption.
anonymous:
From a 10-07-2006 post on Carpe Diem:
"Individual income tax receipts rose by 13% in FY 2006, to a record-high of $1.049 trillion, surpassing the previous record set in 2000 at the height of the last economic expansion."
There is abundant data showing that the 2003 cut in tax rates has resulted in record federal tax revenues.
Regardless of what is happening in the US - you still pay a lot less tax than we do in the UK.
We have stealth taxes which means that you pay your low income taxes and get your net pay. THEN you pay taxes on all your services, resulting in the average person paying almost 50% tax.
A Low tax economy will always bring in more tax revenue, unfortunatly, governments don't have any incentive to spend the money effectively. The result is a deficit and a higher tax demand!
Dear Bob Wright,
GHWB raises taxes in '91;
result: huge economic expansion
GWB lowers taxes in '00;
result: also large economic expansion
How do you account for both of these scenarios? If you want to claim that the expansion in the '90s happened DESPITE tax increases, and the expansion in the '00s happened BECAUSE of tax increases, I'd say you were using your internal biases to impose an interpretation upon a situation that is far more complicated than you make it out to be.
Also, why did it take 5 years for this tax policy to affect the economy?
Answer: Because when taxes were lowered, you just wait however long it takes for the inevitable cyclical uptick in the economy to happen, and then loudly claim it was because of your intervention.
Taxes are the brakes on the vehicle of the U.S. economy.
One can apply the brakes and yet the vehicle still moves forward, albeit slower than it otherwise would have.
Here is John F. Kennedy talking about the merits of a tax cut:
http://www.youtube.com/
watch?v=aEdXrfIMdiU
This comment has been removed by the author.
anonymous (comment #1) unloads his/her usual uninformed socialist whine: "WSJ promoted huge increases in outlays in the form of supporting a totally unnecessary war"...
What are you? A general who know something about world condidtions? A former Democratic senator and 9/11 commissioner says a recently declassified Iraqi account of a 1995 meeting between Osama bin Laden and a senior Iraqi envoy presents a "significant set of facts," and shows a more detailed collaboration between Iraq and Al Qaeda
'IF' balancing the budget were so important then maybe we should be dumping the socialist programs who's cost is foisted off onto the productive so politicos (of both major parties) can pander to the parasitic...
Maybe if we dumped some of the overpriced entitlement programs this country's wouldn't need keep extorting more and more money from its working citizens...
After all what part of the Constitution mandates federal intervention in retirement, medical care, education and a whole host of other socialist causes?
When JFK was speaking, the highest marginal tax bracket was a staggering 91%. I can see how this would be a disincentive to work.
Compared to that, today's top rate of 35% is paltry in comparison.
And juandos, your evidence does not at all prove the war was justified. Right off the bat, the NY f'in Post? Whatever. I'd counter with a substantive argument, but this is off the point of tax policy. More succinctly, and without involving opinion, I can say merely that the war is costing a fortune, and that most Americans want it to end as soon as possible.
I don't call it paltry when the federal government takes 35% of the money I make.
Costs are only paltry when someone else pays the bill.
Post a Comment
<< Home