Perhaps the worst idea during the Bush years was not the war in Iraq, it was the tax-cuts. I bet if you did a graph you would see that the minute Bush and Cheney decided to let rich peoople have a free-ride the economy sputtered to a halt and has really not recovered. Hopefully the Bush tax cuts will expire and start to end the fiasco that was the Bush/Cheney administration.
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Meta
A few economists might disagree with you. Like Christina Romer, Obama’s pick as the head of the CEA:
The resulting estimates indicate that tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes. The large effect stems in considerable part from a powerful negative effect of tax increases on investment. We also find that legislated tax increases designed to reduce a persistent budget deficit appear to have much smaller output costs than other tax increases.
http://www.nber.org/papers/w13264
People like to claim that Clinton raised taxes and we got a surplus. Well, he offset the income tax increase with a capital gains cut. More importantly, if you look at how the Soc Sec surplus was spent, we didn’t really have a surplus overall.
Just sayin.
If tax cuts really were the answer the economy would have grown in the Bush years, it didn’t. Low taxes seem like they might discourage hiring as well; a small business person paying 50% in taxes essentially gets half of the their employment expenses paid for when they hire a new person. Where when they are only paying 15% percent in taxes they are paying 85% of the new hires salary.
Captal gains tax rates are probably good for indaviduals but I don’t see why hedge fund managers should get to claim that their income is from capital gains.
Tax ratesw at a minimum need to get back to where they were in the Clinton years and I would like to see higher rates on incomes over a million dollars, it is time to get serious about eliminating the deficit.
And the death tax is a myth, higher estate taxes on estates over 3.5 millions would also be a good idea.
Have you ever heard of Hauser’s Law? It says that, regardless of tax rates, the government can collect a maximum of 19% of GDP. Domiciles with lower tax rates and lower public spending can also achieve higher economic growth, which reduces poverty.
If a hedge fund manager reinvests his income into his fund, then he is really not taking cash income. And what if his hedge fund tanks? Should the IRS refund him the tax he paid? If clawbacks are good for wall street fat cats (and they might be), well, they should be a two way street, and they should apply to government employees too.
The death tax might not be a bad idea either. But it can also achieve what Richard Gere’s corporate raider in Pretty Woman did: by taking businesses and selling them off piece by piece. Sometimes that can be creative destruction. Other times, it will just be destruction.
I understand the emotions of your view. Just not sure there is any data to back any of it up.
Douglass says it much better than I could:
http://www.americanthinker.com/2010/08/paul_krugman_gives_up_1.html
in years that a hedge fund tanks the manager wouldn’t pay taxes because he wouldn’t have profits.
as for the estate tax most of us don’t pay any taxes on inheritence as their is a 3.5 million dollar excemption. By getting rid of the estate tax system most of us would lose the tax free step up in basis we would have gotten on capital assets. I guess that is an emotional reason in that I don’t think it is fair to raise taxes on the middle class while lowering them dramaticaly for the wealthiest indaviduals.
the other thing, as I stated earlier, we had eight years of historically low taxes and it didn’t work so well. Maybe it is time to go back to something that at least worked in the nineties.
how much of our financial problems attributable to low taxes vs.:
1) AIG and other non-regulated shadow banks loading up on credit derivatives
2) Congressionally chartered ratings agencies enabling subprime mortgage corruption by rating fecal subprime mortgage paper with ‘AAA’
3) Fannie and Freddie driving the demand for subprime mortgages
If you look at how much the banks have been bailed out (taxpayers got a profit) with the bailouts to AIG, Fannie, and Freddie (moving towards half a trillion), I think you start getting the picture.
I agree de-regulation has been a huge part of the problem but part of the reason regs were not enforced is that their was not enough money to pay regulaters and much of the regulatory infrastructure was dismantled in the name of smaller government; all so we could have lower taxes.
Obviously the money raised from from higher taxes should be used to reduce the deficit but also to reestablish regulatory agencies so AIG’s don’t happen again.
AIG was not regulated because it is an insurance company. By regulating the banks a lot (SEC, FINRA, CFTC, etc), and the insurance companies a little, the insurance companies did what banks would do, but less responsibly. So regulating the banks was part of the problem, not the solution.
So you are saying that because banks had a lot of regulations insurance companies had to act irresponsibly to make up for it? Not to mention during the nineties many bank regulations were repealed or modified. Plus, it is pretty well documented the SEC was not enforcing the few regs that were still on the books.
I think a little bit of oversight, a dose of transparency and a few rules would have gone a long way towards preventing some of the bigger financial problems.
What banking rule do you think led to the financial crisis?
No I am saying that AIG, the ratings agencies, the government agencies, the Congress, and the White House (Clinton and Bush) acted irresponsibly, because none of them were regulated.
The banks acted more responsibly than any of the parties or institutions above.
it seems like we mostly agree that the best way to prevent future financial crisis’would be more government oversight and regulation, we just disagree about where the rules and regs should be aimed?
Yes, banking regulations did not prevent the crisis, so they should be unwound. On the other hand, insurance companies, Fannie and Freddie, the Senate, the House, and Clinton and Bush should be caned.
sounds like the regs need some improvement, I don’t think completely deregulating banks would make the situation better.
i don’t either. markets break, just like government.
just because Bush couldn’t do anything right doesn’t mean government will always be a failure
same thing could be said about markets. people can express their preferences more freely by engaging in or avoiding markets. the same cannot be said for government. the more government, the less the freedom.
i’m not for anarchy. i love good government, that protects people so they can express their preferences. but the fact remains, government takes the rights away, for example from smokers, or non-smokers, or both.
the problem with smoking is that a smoker cannot smoke in public without effecting other people. It seems like a ot of small government tpes seem to believe they have the right to make the rest of us breath theirr smoke. Smoke is a metaphore here
ok, what about feeling entitled to entitlements? should one person’s retirement affect another person?
I would think part of a persons retirement is being able to rely on social services that are generally paid for with taxes. That is probably part of the reason libertarian haves like Somalia are not retirement hotspots.