United Liberty
Cutting Taxes = Increasing Revenue
Tue, 03/03/2009 - 7:22am | posted by Matt Chancey
Around 150 BC, Emperor Ching Ti came to power in China and immediately faced a major problem: his treasury was empty.
Taxes were very high, but no real revenue was coming in. That’s because the system of taxes at that time was an early form of income tax that centered on the government taking a large percentage of a farmer’s crops.
So Ching Ti did something bold and innovative: he cut taxes.
Overnight, taxes went from over 50% down to about 3%. Farmers, who had fled to the hills to escape draconian tax rates, now came home and began farming again. To make a long story short, Ching Ti’s greatest problem while governing was trying to keep all the grain in his barns from spoiling.
It seems that ancient Chinese history is good for more than just cutesy script on a fortune cookie.
Today, Democrats in Congress are defending Barack Obama’s plan to increase taxes on people making more than $250,000 a year. These are the folks Democrats consider “rich.” They represent white-collar America—small-town doctors, lawyers, small business owners. In short, they are some of the most productive people in our country.
These are the people who create most of the jobs in America. They are also some of the biggest spenders in our consumer-based economy. Raising taxes on these people will create the same problem that Ching Ti’s predecessor faced— people stopped hiring, producing, and spending, and revenue plummeted.
After an initial spike in revenue (which may not even happen, since we’re in the greatest economic downturn since the Great Depression), tax collections for President Obama’s government will not meet expectations. And since our government perpetually spends more than it takes in, our deficit will continue to grow unless massive spending cuts are enacted.
And that brings up a related point.
Speaker of the House Nancy Pelosi and her liberal colleagues blame the Bush tax cuts for the present deficit disaster. But they’re wrong—100% wrong.
Tax cuts did not create our current deficits—over-spending did. Federal Revenue collection during the Bush years went through an initial drop (down to mid-1990s levels) but gradually angled up during his second term to eventually exceed collections prior to implementing the tax cuts Democrats blame for the deficit problem. However, federal spending kept exceeding revenue collection during all eight years of the Bush administration.
Chart Credit: The Heritage Foundation
The bottom line is that we don’t have a revenue problem in Washington—we have a spending problem.
But President Obama and Nancy Pelosi’s answer is to increase revenue through tax increases—not spending cuts. The result will be disaster. Over the long run, less revenue will come in to the treasury, but people will not get any richer.
Cutting taxes means people get to keep more of their own money. Tax cuts on the “rich” mean the people who produce the most wealth in the country can continue to be rewarded for creating wealth. This incentivizes them to keep creating jobs and investing in our country.
Reaganomics has not failed. Reaganomics has never been fully implemented—even under Reagan! Which leads to my final point: Republicans don’t get off the hook.
One major reason we’re in the mess we’re in is because of President Bush’s duel-personality political convictions. On the one hand, Bush wanted to be the fiscal conservative, cutting taxes. On the other hand, he wanted to be the “Compassionate Conservative,” doling out government funds like they were going out of style.
To say Bush spent money like a drunken sailor is a slam on the good name of drunken sailors everywhere. Even if you remove spending for the Iraq War, Bush was one of the biggest spending presidents in modern history.
Republicans in Congress today are blasting President Obama’s budget and stimulus package for its excessive spending on liberal wealth redistribution—and rightly so. But their credibility is severely damaged when one considers that for several years, many of these same Republicans gave President Bush whatever he wanted—including several $ trillion in new debt to finance his own version of “compassionate conservative” wealth redistribution.
If Republicans are to gain back any trust from the American people, they must honestly and candidly admit (as Gov. Bobby Jindal did recently before a national television audience) that Republicans governed badly when they held the reins in Washington.
I am glad to see a renewed vigor among many conservatives in Washington to tread the “ancient paths” once again and fight tax and spending increases. The current path President Obama and Nancy Pelosi has us on will likely make Americans pine away for the “good ol’ days” of the Carter Administration.
My recommendation is that Republicans nominate a Ching Ti for President in 2012.
Related Webpage: Useful Facts on Who Pays the Nation’s Taxes
Listen, the small town doctors, lawyers retail shop owners do not exist anymore in the image that you convey of white collar business people. So your whole premise of who is going to get hurt by these tax increases is out the window! There is no clear cut answer, the Chinese parable is historically significant but not relevant. “The times they are a changin’” as Bob Dylan once said is the understatement of the century.
If we don’t need a combination of spending stimulus and tax raises,(at least for some that can afford it) then I’ll eat my hat. Hell, a couple cents increase on a gallon of gas, a pack of cigarettes and a bottle of booze would work really well and not hurt anyone. Jeez, we survived $4.00 gasoline we can certainly raise the “sin taxes” and see what happens. (P.S. leave the bar owners out of this) This cannot be an all or nothing stimulus package. We are all going to feel some pain. And, those that can endure the most will feel some too.
By the way
By the way there are few innovators in our society left. Most are in IT. And those that are left, are not sitting there waiting for tax incentives in order to move into your community, with tax free incentives anymore, and employ 1 or 2000 people and away we go. The model has changed. Now, I’m not smart enough to put the model together the way it actually will work in the next 30 40 years. I can tell you some of the ingredients and how those ingredients will ferment: Service providers mostly Telecom cable, and ISP providers, Internet Marketers,National Chain Box Stores, and Restaurants Theatres and Entertainment venues, Tourism, Resort Destinations, Health Care and Health Care related providers, Entrepreneurs with few if any employees and Speculators.
The Small business entrepreneur cannot shouldeer the preponderance of the healthcare ticket for each employee. And, that includes the pay in for workman’ comp, enough taxing on the small business owner. They need an unbalanced tax advantage to get revenue stream going and profits rolling. This is, and needs to be a form of domestic protectionist strategy.
The service industries can mostly be left to their own competitive devices. It is fun to watch and painful if you work in sales for any of them.
The box stores, god bless’em, they are going to finally provide negative customer service, and then what’ll happen!
The Health Care Industry. WEll,Well,well. Regulate, Restrict,restrict, more and more. Don’t put labels on it. This an industry that has made money much like those preying on the educational system country wide, - - when no one was looking. The chains of purch. and selling, - no one was home, to check prices and they just kept getting paid! - and now that it is out of hand. We don’t know what to do. Get them (pharmaceuticals co.’s)off their fannies and start producing disease restricting, managing and curing drugs only- - and let them go elsewhere to produce and advertise their erectile disfunction candy. Restrict their advertising, to trade only! Allow Hospitals and Doctors to purchase drugs abroad (while accepting some liability)Witch Doctors Brew’s not recommended. And let’s get a handle on these costs to the employer and consumer.
I don’t know anything about the hardware co.’s in the medical system
Insurance co.’s need to be ordered to pay higher percentage on all medical and dental/ vision procedures, by 25% across the board. We will call it the temporary second coming of the depression Insurance production act.
And Insurance companies need to have a price fix of $250 per mo for a family plan, shoved down their throat on the same emergency bill. If they are indeed the richest co.’s in the world then they can do their share on some limited basis to help us out of this global recession.
Matt Emery
Hmmm. So historical parable not relevant but somehow Bob Dylan is, sounds about right.
Let’s get started
I will start by saying I am from the small town areas that you refer to (Rural Iowa) and YES small town doctors, lawyers, and ESPECIALLY shop owners still DO exist in the small town I live in and the ones near me there are PLENTY. I am talking actual small town 600 or less. Yes six hundred people, however there are many towns near me and others I drive through on a regular basis in Nebraska, Kansas, and Eastern Colorado with populations in the 5000 or less range and they also have PLENTY. I’m not sure if you actually don’t know this or you actually are trying to spread propaganda. When you have populations this low there is no possibility for a chain store of any kind to even consider coming to your town. They DEPEND on the mom and pop shops. I’m sure you’re going to say “I’ve been to small towns and I know small town people and they say the opposite” well my friend then there must be a big town about 5-10min away otherwise they HAVE to have these shops. This is not the case for the community I am a part of and also not for 90% of the rural communities I am near or travel though.
As for your second statement, I hope you have a mesh hat so it will go down easy. It DOESN’T WORK! ESPECIALLY in this irresponsible manner (yes I am VERY aware that Bush spent irresponsible too enough with Bush you wanted CHANGE you got it, except it’s the same manner of spending except on a radical agenda). You may ask “how can you say it doesn’t work” may answer is that we have tried it before after the great depression and it did NOT work. I will give you a quote from Henry Morgenthau, Franklin D. Roosevelt’s treasury secretary, testifying before the House Ways and Means Committee in May 1939 (6yrs after passing the New Deal spending).
“We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot.”
But of course you probably have an excuse for that too huh? When in all actuality it was WWII that did it for us. Or how about Japan in the 90’s? After 8 “stimulus” packages they have hundreds of rural roads that are now paved and tons of infrastructure work that was done only to delay the inevitable. Please don’t give me the “they didn’t spend fast enough” line because FDR DID!!! We need TAX CUTS!! And MUCH LOWER GOV spending. Reaganomics works the only problem is that it has never been fully implemented not even by Reagan so the full benefit was not seen, but it was still better than FDR. Even Jim Cramer (NOT A CONSERVATIVE) said on the today show this morning that Obama’s policies are the cause of “the greatest wealth destruction I’ve ever seen by a president”. You are dreaming, to think we NEED tax increases, and I will tell you this, you are having nightmare I hope you wake up.
I want to comment on something you wrote above “By the way there are few innovators in our society left.” Where to start… I will keep it simple; you are absolutely 100% wrong. An Innovator is not only someone who works in IT; innovators are people who think of new and better ways to do… ANYTHING!! And I will say with confidence we are the leaders in that. Whether it is a new website created by a student that connects other students to restaurants around campus, or ifs it’s the 23yr old that just started a door to door steak and seafood delivery business in my neighborhood WE STRIVE TO INNOVATE!! We do this because there is an incentive, and damn all of us for wanting to make $ so we can better our lives. We deserve it we put in the work and we do the INNOVATING! Because this is the land of opportunity, how long that is going to remain is unclear. YOU CAN NOT HAVE VALUE WITH OUT EFFORT, AND YOU CANNOT MULTIPLE WEALTH IF YOU ARE DIVIDING IT!!!
In reading what you wrote on the health care industry I don’t even know if it deserves a response. You are just throwing up bad idea after bad idea and it is very obvious that you have not a single clue about the health care field. TRY JAMMING ANYTHING like that radical crap you say down the throats of the insurers see how far that gets you, it will get you to socalized medicine, and horrible care for EVERYONE but I actually know that is your motive so you are happy to do it.
Question, why do so many people love to hate the insurers especially when they refuse care to someone who has very little time to live and the cost to keep them alive relative to their age is not feasible? I know you answer; they have SOOO much money they can afford it.
Ok well guess what is going to happen when we have nationalized health care? Instead of a company making the decision you will have a bureaucrat or a group of bureaucrats telling you it costs too much for you to be alive. Why are people so anxious to trade one decision making body for another? You should hear former D-Gov. Dick Lamm of Colorado talk about this he might change some minds.
All in all your comments were very entertaining, VERY unsubstantiated, but never the less entertaining. Next time you reference the rural community, do not do so in a vacuum, do the research GO TO THE TOWNS, and go to the ones away from any cities 20,000+.
Zach Lahn
My comment above it to Matt Emery.
People in America just want the same benefits that the rich already have: free health care and a very favorable tax structure. Ask any politician who pays for their health care…WE DO! Every business person knows that to stay in business you must maximize your revenues and minimize your expenditures…if expenditures exceed revenues for any length of time you are going bankrupt!! Unless someone loans you money so it will delay the inevitable bankruptcy. To balance expenditures and revenues is not rocket science…it is survival.
Ancient Chinese parable not relevant? Well, how about the fact that history shows that every time there has been a significant tax cut in this country over the last 60 years, revenue has increased. Forget looking at deficits for a moment, and focus on revenue only. There was a tax cut under JFK and revenues went up. Everybody remembers the Reagan tax cuts, and revenues went up. And as was previously mentioned, revenues went up with the Bush tax cuts. Yes, the deficit increased, but that was because spending was increased. If we could ever get a president/congress to cut taxes and at the same time hold the line on spending (or better still, cut spending), we’d see huge reductions in the deficit. Tax increases are NOT the answer.
No, no, no. Tax cuts do NOT equal increased revenues. In fact, as a general statement (i.e., even in theory), that is nonsensical. As a practical statement, it is just stupid and ignorant.
Anyone interested in actually thinking and learning and reaching conclusions based on information and reason rather than on what feels good should visit my posts (as “B Rational”) at http://swordscrossed.org/diary/20081017/no-bush-tax-cuts-have-not-genera… and at http://swordscrossed.org/node/1672
Or you could just continue listening to others who have no clue telling you what you want to believe. It’s your choice.
Looking at the data from census we are only talking about 1.5% of the population making more than $250000 per annum. It is about time they pay their share!!!
Could not agree more. It’s time to stop talking about what’s “fair” and start taking some **** responsibility for this country. My grandparents lived with a top marginal that hovered around 90%. Why? Because that’s what it cost us to liberate France and fight the cold war.
Now we’ve got people complaining about a tax hike ALL THE WAY UP TO 39%? I say it’s time for people to man up and start paying the bill for the wars we’ve been fighting.
Now, I know y’all are thinking that it’s not fair for the rich to have to pay a greater percentage of their income than anyone else, but there are 3 quick counters to that argument.
1. Adam Smith (I think he wrote the communist manifesto, but I might be wrong about that) argued in favor of “progressive” taxation on the assumption that poor people put more money into food and clothing and thus have a smaller percentage of discretionary income.
2. The middle class pays a higher percentage of their income in taxes overall when you include state and local taxes. So we don’t really have a balanced system anyway.
3. The rich have all the money. It’s kinda dumb to tax people who can’t pay. If you want to get our country back on track with any kind of fiscal responsibility, then it’s time to fork over the cash.
Okay, I’m done with my rant now.
Look forward to the responses.
HAHA!! PAY THEIR SHARE!?!?!
The top 1% of taxpayers pay about 40% of all income taxes, the top 10% pay 71%, and the top 50% pay 97% of all taxes. The bottom 50% pays less than 3% of all income taxes paid.
This is the mentality that got Obama elected. I hate to have to say this but YOU ARE AN IDIOT!!!
http://mjperry.blogspot.com/2008/08/tax-facts-of-day.html
Zach,
Idiot, no I do vote. An idiot (from the Greek)is one that does not participate in government. The pecenteges you state are ridiculous, I would like to see the supporting data. The rich use lawyers to do their income taxes (on the money they leave in the U.S., most is offshore) so the money they pay is nothing. The middle class (under $250,000) are the ones that carry the burden.
“Class warfare” comes in many flavors. There’s the variety practiced by feudal overlords upon their serfs, and the variety waged by the Jacobins of the French Revolution against the monarchists.
Then there’s the variety that Republicans claim to find in President Obama’s proposed budget — a taking from the rich to reward the undeserving poor. The rhetoric has spread quickly, moving from the libertarian Heritage Foundation to the ranks of GOP presidential hopefuls like flames leaping from tree to tree in the Angeles National Forest.
In 1979, the top 1% of U.S. households earned eight times as much as the middle 20% and 23 times as much as the bottom fifth; by 2005, the Congressional Budget Office found, the upper crust touched 21 times as much as the middle class and 70 times as much as the bottom. Adjusting for inflation, the average American worker made 16% less in 2004 than in the 1970s, according to economist Benjamin M. Friedman.
Will the Obama budget redress this imbalance? Let’s take a measured look at what he proposes.
The budget plan would restore the top income tax brackets to their levels before the 2001 Bush tax cuts, with the topmost rate rising to 39.6% from 35% now, hardly an excessive increase. The higher taxes kick in at $250,000 for a married couple and $200,000 for individuals.
For those taxpayers, Obama would ratchet back itemized deductions. He also would raise more money from hedge-fund managers, shareholders and other recipients of investment income. Obama says the money would help pay for programs aimed chiefly at lower- and middle-income wage earners, including a tax credit, relief from healthcare expenses and more aid for education.
Does this constitute redistribution of income? You bet. That’s what government does. George W. Bush redistributed income too — from the lower- and middle-income wage earners who pay the bulk of Social Security payroll taxes to the higher earners whose income tax cut was financed out of the Social Security surplus.
WHAT? hahaha
I don’t have time to write this all I will copy and paste from the tax foundation.
http://www.taxfoundation.org/research/show/2286.html
“Overall, we find that America’s lowest-earning one-fifth of households received roughly $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle-incomes received $1.30 per tax dollar, and America’s highest-earning households received $0.41. Government spending targeted at the lowest-earning 60 percent of U.S. households is larger than what they paid in federal, state and local taxes. In 2004, between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending policy.”
The low income ALREADY gets 8 TIMES what they pay in!!!!
High income get less than 50 cents for every dollar they put in.
Look at this page, your ignorance will be answered.
http://www.taxfoundation.org/news/show/22652.html
“The table above shows that the top-earning 25 percent of taxpayers (AGI over $62,068) earned 67.5 percent of nation’s income, but they paid more than four out of every five dollars collected by the federal income tax (86 percent). The top 1 percent of taxpayers (AGI over $364,657) earned approximately 21.2 percent of the nation’s income (as defined by AGI), yet paid 39.4 percent of all federal income taxes. That means the top 1 percent of tax returns paid about the same amount of federal individual income taxes as the bottom 95 percent of tax returns.”
Please dont tell me what Obama SAID hes going to do when he is NOT doing ANYTHING to help the country PERIOD. LISTEN to jim cramer who is a financial genius, democrat and supported Obama!!
http://www.youtube.com/watch?v=3c4SyrNdE5E&eurl=http://features.csmonito…
The definition of Idiot is perfect!! Just because you voted doesnt mean your involved in government, it is OBVIOUS by the way you talk and the ignorance you show that you are involved in destroying foundations of our country, or constitution, and our government. That is all
Zach, you need to broaden your information sources, not just the right wing sites. Try some moderate sites as well. You might just get some straight information. You will notice I read this site as well as less right wing sites. That is all.
Alright, Loch… Put your money where your mouth is. Show us the “real” figures on where the tax dollars come from. Please. It’s all well and good for you to disagree with figures that someone has done you the courtesy of digging up and giving you the links to. But at least return that courtesy and do the same.
I will bet you one thing, though. I’ll bet that you are not in the over $250,000 bracket. In fact, I’d wager you’re not even in the over $75,000 bracket. It’s so easy to say there’s nothing wrong with taxing the rich… so long as you’re not the rich guy getting taxed.
Now let’s take a real look at the last 80 years. Once upon a time — not very long ago at all — the average American paid 2% of his income in taxes. At that time, only one person in each household typically had an income as well. Today the average American pays what? 25% of his income in taxes? And on top of that, most families have two people working full time jobs. Americans are working harder and contributing more in taxes than ever before in history. Meanwhile, programs like Medicaid, Medicare, Welfare, and Social Security have grown to their highest budget amounts ever.
So we have more taxes coming in, meaning higher Federal revenues than ever, matched by the greatest expenditures on social programs ever. Given that, one would think we’d have the lowest poverty levels in history. The lowest numbers of needy people. So why don’t we?
The answer is simple: The system doesn’t work. Higher taxes and higher expenditures on social programs don’t work.
Here’s a fact: The government has no money that wasn’t taken from someone who worked for it. When the government spends money, it is therefore stating that the government has more say in where your money gets spent than you do. The poor are perfectly okay with this. After all, most of them not only don’t pay any taxes but are the recipients of that spending as well. Of course they love the system. But you know what? Poor people have been voting Democrat for over 50 years — and they’re still poor.
Don’t want to listen to me? Fine. How about Thomas Jefferson? He said, “The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.” That man was darned near a prophet, given how the truth of his words is seen in action today.
Here’s another little tidbit for you: That rich man living in his supposed mansion on the hill is getting hit with a double whammy. Not only is he paying on more money, but he’s paying a higher percentage. Yet how many votes does he get compared to the guy who didn’t work a day in his life except to walk to the bank with his government check? Not a one. Both get one vote. This may sound perfectly fair to the person who’s getting the welfare check, but the truth is that by getting taxed without getting more of a say in government is quite literally another way of saying “taxation without representation.” One revolution has happened because of that. How much longer before we have another?
listening to the wealthy belly ache about taxes is almost comical. While I agree that government spending is a crucial component of bringing down our deficits, I also believe that many American’s are just uneducated on where their tax money actually goes. 1% on earmarks…John McCain’s way of bringing down the deficit, maybe he should have looked into what his policy truly meant and less about: “you will know their names”. 1% on foreign aid, the complaint of many ignorant Republican’s that their tax dollars are wasted overseas. Health Care, Social Security, Defense spending, & interest on our debt all soak up the majority of our tax revenue (things that are VERY difficult to cut). As the president said on Saturday in Colorado: If you’re a deficit and debt hawk, you should want to see health care reform to help bring our health and human resource spending under control.
The truth can be found in a report just released on Friday. The gap in income inequality in this country has grown tremendously over the last 8 years. in the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth. The top .01 of American earners pulled in 49.7 percent of total wages. Less measurable is the strain this puts on our society (especially during the current economic recession). Outrage over wall street bankers, and the struggles of the shrinking middle class and growing poor in our country lead to more crime, gun sales, and resentment towards the wealthy among us.
Yes, the top 1% also pay more in taxes…but as a relative calculation they have more money which brings in more revenue. A marginal increase from 35% to 39.6% will not keep these folks from buying that filet or new BMW. The top earners also do not stimulate the economy, they invest in T-Bills. They are also able to hire accountants which can find loop holes in the tax codes (I.E. Business tax write offs). These folks will see little change in their lives with a marginal tax increase, while the people on the other end of the spectrum may be able to provide those school supplies for their child with a tax cut.
Closing the wealth inequality in this country will lead to a safer and higher standard of living for all American citizens.
Until we run a surplus, we either cut spending, raise taxes, or do a little of each. You will never get a poltician to cut social security, so what’s left to cut? We can’t keep borrowing money to give the upper class tax cuts.
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