Question for Republicans (has Philosophy)

[vikesfankevin1986]

I hate voting day and seeing all the people with the stickers makes me sick. I just wanted to hear some responses to the claims that Republicans make and also bring up some topics that we have talked about in my moral Philosophy class.

First I am going to start with Nozic's arugment about distributive justice. One thing he talks about in there is the entitlement theory. To make it simple I will just post the slide. I guess I need to say that this slide is not my work and was created by Prof. Jason Swartwood at the University of Minnesota.
Claim 2: enforced redistributions of holdings (via taxation) violate people’s property rights. (Exceptions: taxation for protection of property rights, taxation for reparation of unjust acquisitions or transfers (p. 587).)

Self-ownership argument:
People own themselves: they have a right to determine what they do and others have an obligation not to use them for a purpose without their consent.
If people own themselves, then they own their talents and the fruits of their talents, too (i.e. they have absolute property rights):
Absolute property rights: people have a right to use the fruits of their talents as they see fit (as long as it doesn’t violate others’ rights as defined by the entitlement theory) and others have an obligation not to use the fruits of their talents for a purpose without their consent.
Enforced redistribution of income uses the fruits of people’s talents without their consent.
Forced labor analogy: forced labor is wrong because it uses a person and her time without her consent, and redistributive taxation is relevantly similar: it uses a person’s holdings without her consent.

The professor then showed a few videos of people(republicans) talking about taxes and how they are stealing and how they are slavery.

I guess this is my issue...If taxes are bad and wrong and should be eliminated, is it then fair to say that the govenment does not need to provide the things that taxes pay for? Things such as law enforcement, fire department, roads, schools, ect. I mean taxes pay for our govenment officals. Should we get rid of them too? How about just get rid of the govenment? Wow sounds like someone thought that one through...I mean are people aware that govenments make their money BY taxing people? It's the same today as it was 5,000 years ago. There were 2 ways a govenment made money...1. Taxes 2. Plundering and invading new areas. So unless we invade Canada and stuff we NEED taxes.

That leads to my questions for Republicans...
They claim we need to lower taxes and not raise them. Ok so where does this money come from then to pay for the things above? They said "restructuring" needs to be done and that's where the money will come from. By restructure they mean take money from schools and things like that correct? The U of M's budget went down and they raised tuition and cut teachers pay. Is this their way of "restructuring?"
Or do they mean do what Bush did and spend spend spend for a war we shouldn't be in and totally ignore our own economy until it hit rock bottom? Bush did nothing but f*** around with a war. Our national debt went way up. Is this what republicans mean?

Another big stance I hear about is the Democrates and their "failed health care bill, their stimulus and bailouts to large companies, and out of control spending."
Well first off I see these things as an effort. I don't think Bush knew about that word. The new health care bill has barely taken effect so how can it be called a failure?
Yes the stimulus was worthless but at least Obama was trying. I didn't see Bush do anything to help the economy.
Bailouts? Um didn't those start under Bush?
And out of control spending? You mean like a war against Iraq? A war we have no business being in but we are in it for the sole purpose of oil?

Not to mention Tom Emmer, running for Govenor here in Minnesota wants to lessen penelties for DUIs. People are still driving with 2,3,4,13 f*** DUIs. After 2 you should get locked up for a long time. Do I even have to go into how many accidents are caused by drunk driving and how many deaths come out of it? I guess I should mention Tom Emmer has 2 DUIs...go figure. He obviously can't make a decent decsion when it comes to drinking and driving but yet people think he can make decisions in office and "create more jobs?" Well if you are that ignorant...go vote for him.

I just never heard an argument from a republican that doesn't talk about fixings all the f***-ups of Obama when Obama isn't even responsible for this stuff...

I am always pointing out the obvious s*** and I crush about every argument in my Phil class. The problem with Philosophers is they don't read any books. They just sit there and think about things and don't look at the facts. They also don't take into consideration if something is actually plausable. It seems like the Republicans think kind of like this and pray on stupid Americans.

[96Qowner]

Lower tax rates do not typically produce lower tax revenues. Republicans argue for two things: Lower tax rates and smaller government. The private sector makes the money, not the government. When you leave money in the private sector, it earns money and is taxed, producing larger tax revenues.

By reducing rates, you help starve the wasteful government and you produce more economic activity in the private sector.

[vikesfankevin1986]

Thanks for the clairification

[IBCoupe]

Lower tax rates do not typically produce lower tax revenues.

Only if we're high up on the laffer curve. In 2008, Federal Tax receipts were 17.5% of our GDP. That means we're probably low on the Laffer curve; means we go up, not down, to make more money.

[HashiriyaS14]

Lower tax rates do not typically produce lower tax revenues. Republicans argue for two things: Lower tax rates and smaller government. The private sector makes the money, not the government. When you leave money in the private sector, it earns money and is taxed, producing larger tax revenues.

By reducing rates, you help starve the wasteful government and you produce more economic activity in the private sector.

This is, by and large, nonsense.

You can't "starve the government" by reducing tax cuts unless you institute something like PAYGO, a measure that the GOP has repeatedly shot down. The government has and will continue to borrow whatever the shortfall is between spending and tax revenues.

When you're running a deficit, any tax cut not matched by an IMMEDIATE spending decrease is just a dollar that then must be borrowed.

Stimulative tax cuts also only work in very limited circumstances, and they face a very real wall of diminishing returns. In a recessionary environment, if you cut taxes $1 to the middle class, there is a very high likelihood that those people will then go out and spend almost the whole dollar. Rich people will go out and probably invest almost the whole dollar (some percentage of it overseas, likely).

As you increase the amount of the cut, however, people will begin to save more. If you cut another dollar, they might only spend/invest half of it, and then save half of it. The saved half has no impact on tax revenues. This same phenomenon is present with the wealthy, as a higher and higher percentage of each incremental dollar will go overseas rather than here, because putting more money in the system doesn't increase the number of domestic investment opportunities and thus the dollars will just get sent elsewhere after awhile (see: 2002-2008).


Thus, in the grand scheme of things, a tax cut DOES decrease tax revenue. You can't decrease the deficit unless you decrease spending contemporaneously (and by a greater amount) than you are cutting taxes.

You CAN stimulate an economy in time of crisis with a tax cut, although only to a point (i.e. the first few "dollars"). Interest rate manipulation is much more efficient after that point, as the wealthy can't save an interest rate, they have to use it to invest, or lose the opportunity.

If you're serious about reducing the deficit, you should cut spending AND raise taxes. It's not what people want to hear, but math is math. All this "trickle down" horseshxt is a bunch of 1+1=4 nonsense that the GOP has successfully sold it's constituency because people want to believe it. Not true, not so. No pain, no gain.

[96Qowner]

First, a clarification: "this" by and large is NOT nonsense. Lower tax rates do NOT typically reduce tax revenues. One need only check the history of tax rate cuts.

But if future spending grows faster than tax revenues, yeah, you're gonna have a problem. The idea is to reduce present rates and NOT spend all the revenue and more. Unfortunately, whenever the government sees money, it spends it, and more. Money not taxed and wasted by the government remains in the private sector to be borrowed and invested, which produces income which is then taxed. Money confiscated by the government is inefficiently distributed and is not taxed. The higher the tax rates, the less economic activity and the less tax revenue,and vice versa.

One cannot simply posit that the government will always spend more than it takes in, and it's our obligation to pay whatever taxes are require to pay the debt it creates. The two go hand in had, as you've pointed out. Reduced rates will produce increased revenues. Those revenues MUST NOT simply be spent by the government's continuing operations - they MUST be applied to debt. Legislators are perfectly capable of reducing rates AND reducing the size and scope and monetary requirements of our government.

Of course, there are limits, lets' not be absurd. Clearly, reducing rates to 1% will not increase revenues, and increasing rates to 100% will destroy the goose that lays the golden eggs. But if you need to increase immediate revenues, the best way is to reduce rates, not raise them. When economic activity returns, you raise rates.

For those with an opposite opinion, remember: Keynesians believe that if the government "stimulates" the private sector by injecting money into it, (visualize throwing it out the castle window to the gathered mob below, many of which have been forewarned and provided choice spots to stand) economic activity will increase and tax revenues will increase. If one is incorrect, so is the other.

I believe it's best for the government to keep its hands off our money in the first place. Don't collect it from us, count it and package it, and then send it back. I'll just keep it, thank you very much. It's more efficient that way, even if it eliminates a bunch of government jobs.

[IBCoupe]

First, a clarification: "this" by and large is NOT nonsense. Lower tax rates do NOT typically reduce tax revenues. One need only check the history of tax rate cuts.

You're not about to make the specious argument that revenues have always increased after tax cuts, are you? Ignoring the fact that revenues rise on a generally constant trend? And the fact that we see deceleration in revenue growth after tax cuts? And the fact that we do see revenue decreases as a percentage of GDP after a tax cut?

There's no free lunch, Q.

[96Qowner]

Of course, there are limits, lets' not be absurd. Clearly, reducing rates to 1% will not increase revenues, and increasing rates to 100% will destroy the goose that lays the golden eggs. But if you need to increase immediate revenues, the best way is to reduce rates, not raise them. When economic activity returns, you raise rates.

Your example of the 90s is an anomaly. Economies rarely respond positively to a tax rate increase. In this case, the positive effect was produced by an expectation that government debt was going to decline, which reduced long-term interest rates, spurring additional investment.

We cannot perpetually raise tax rates whenever the government fails to be efficient. Government expenditure MUST be scaled back. The reason tax revenues are not currently sufficient is NOT because tax rates aren't high enough - it's because the government spends too much.

Increasing yearly government expenditures by 25% does not imply that tax rates must rise, it implies that government must expend less.

[heliochrome85]

Of course, there are limits, lets' not be absurd. Clearly, reducing rates to 1% will not increase revenues, and increasing rates to 100% will destroy the goose that lays the golden eggs. But if you need to increase immediate revenues, the best way is to reduce rates, not raise them. When economic activity returns, you raise rates.

Your example of the 90s is an anomaly. Economies rarely respond positively to a tax rate increase. In this case, the positive effect was produced by an expectation that government debt was going to decline, which reduced long-term interest rates, spurring additional investment.

We cannot perpetually raise tax rates whenever the government fails to be efficient. Government expenditure MUST be scaled back. The reason tax revenues are not currently sufficient is NOT because tax rates aren't high enough - it's because the government spends too much.

Increasing yearly government expenditures by 25% does not imply that tax rates must rise, it implies that government must expend less.

someone has finally broken with reality...

arguing with yourself is never a good sign 96Q...

[96Qowner]

Heheh, what'd I say ... ?

[IBCoupe]

We cannot perpetually raise tax rates whenever the government fails to be efficient.

Surely this is true, and I don't know who's arguing against it. I'm simply saying that unless taxes are prohibitively high (which, from a historical perspective, ain't the case), you don't intelligently balance your budget by pocketing less money.

Our tax rates are not so high that cutting them will actually do much any good, and they might be low enough that raising them might do good. Nobody on this planet is saying that we only raise taxes. Nobody. Everybody agrees that government needs to become more efficient, and we need to reevaluate government services. It's just that some in this country think that second part will be sufficient to get us back on track, and by and large, they're not particularly interested in looking at the three biggest budget items: Defense, Medicare, and Social Security.

I laughed every time I heard a Republican candidate up here in CT boast about going to Washington to cut waste, fraud and abuse, which was identified to eat a whopping $72 billion of our federal budget in 2008, says the GAO. But being that in 2008 the government spent $2.9 trillion, I have to ask: what do we do with the other 97.5%? That's not particularly directed at you, Q, but being that this is a thread about Republicans, I love the way they lambast Democrats for being "tax and spend," but then in turn become simply "spend."

[HashiriyaS14]

Unfortunately, whenever the government sees money, it spends it, and more.

Which is why Congress should pass something like PAYGO. Funny how the GOP never seems to want to do that.

Money not taxed and wasted by the government remains in the private sector to be borrowed and invested, which produces income which is then taxed.

Some of it. Some of it also gets invested overseas or gets socked away. As I mentioned, more and more of each incremental dollar falls into this latter category.

One cannot simply posit that the government will always spend more than it takes in, and it's our obligation to pay whatever taxes are require to pay the debt it creates. The two go hand in had, as you've pointed out. Reduced rates will produce increased revenues. Those revenues MUST NOT simply be spent by the government's continuing operations - they MUST be applied to debt. Legislators are perfectly capable of reducing rates AND reducing the size and scope and monetary requirements of our government.

One CAN posit this, and one would be correct, historically. Cutting taxes in anticpation of fiscal discipline by Congress is folly, as such discipline will not come unless forced. The spending legislation must come first, via something like PAYGO in concert with some form of legislation mandating that X% of each saved dollar be applied to deficit principal.


There are presently two alternatives:

Dems: Spend lots of money, raise taxes, pay for spending today in cash (generally)

GOP: Spend lots of money, cut taxes, pay for spending tomorrow via borrowing (see: GWB)



I readily acknowledge that both of these alternatives suck, but the GOP alternative sucks more because we pay interest on it, or at least MORE interest. Spending NEEDS to come down, but until it does, you cannot responsibly cut taxes. You can't cut taxes and wait for the legislation to follow, because if it was going to, it would have already. Taxes have been cut over and over again, but spending has *never* come down materially.


Direct Keynesian economic stimulus (i.e. ObamaStimulus) has it's problems too, just like stimulative tax cuts do. Both hit walls of diminishing returns, and so do interest rate cuts, and so does ANYTHING when a problem is as much psychological as it is economic. I didn't claim that there was any panacea of economic stimulus.

[96Qowner]

I just ran across some more information about how tax revenues are affected by tax rates. These data document capital gains tax rates and and their resulting revenues.

http://spectator.org/archives/2010/11/1 ... ax-hikes/1

... in the past 40 years, every time the capital gains tax has been raised, capital gains revenues have declined (while every time the capital gains rate has been cut, capital gains revenues have increased).

In 1968, a 25% capital gains tax rate generated real capital gains tax revenues of $40.6 billion calculated in 2000 dollars. The capital gains tax rate was then raised 4 times in the next 7 years to 35%. By 1975, at the higher rate, capital gains revenues totaled $19.6 billion in constant 2000 dollars, less than half as much.

In 1978, the capital gains tax rate of 35% yielded $29.9 billion in 2000 dollars. The rate was then cut 3 times to 20% over the next 4 years. By 1986, the new rate, 43% lower than the 1978 rate, raised $92.9 billion in 2000 dollars, about three times as much. The capital gains rate was raised by 40% the next year, to 28%. Capital gains revenues fell to $56.2 billion that year, and declined all the way to $34.6 billion by 1991.

In 1997, Congress cut the capital gains tax rate from 28% back down to 20%. Despite this almost 30% cut in the rate, capital gains revenues rose from $62 billion in 1996 to $109 billion in 1999. Revenues over the period 1997 to 2000 increased by 84% over the projections before the tax cut.

Finally, Congress cut the capital gains rate from 20% to 15% in 2003. Capital gains revenues doubled from 2003 to 2005, despite this 25% cut in the rate. Revenues increased by $133 billion during the years 2003 to 2006 as compared to pre-tax cut projections. President Obama's capital gains tax increases will only add to this historical record, resulting in less revenue rather than more.

[IBCoupe]

Bzzt, wrong. Capital gains taxes are not income taxes, and they operate in very different ways. You don't get to really put off your income, but you can delay selling your capital assets if you think there'll be a better deal coming down the line. While, yes, capital gains illustrates your point, it only does so because there's faith that the changes will not be permanent and because people with capital assets have drastically better ability to control when they make a gain or loss on them. Income taxes are an entirely different beast. As you can see, the tax collections were in line with the realizations on the sale of capital assets:


But here's a side-by-side line-up, for you:


The large cut in '97 didn't alter collections - they continued as they had been for the past few years. That realizations went on to see record highs isn't remarkable about 1997 because in the years prior, where we had seen gradual increases in the rates, it went up anyways! So while your theory might have a little more validity in the context of capital gains than it does in income tax, it doesn't actually play out that way.

If there's profit to be made, people will choose to make it. It doesn't matter to them, as it shouldn't how much the government gets to take, as they're still much better off for having made the profit. The fundamental flaw in Republican-thinking shows itself again: people don't cut off their noses to spite their faces.

[96Qowner]

So in fact, lower tax rates typically produce increased economic activity, which increases tax revenue, and vice versa.

If one were to try to predict whether decreasing tax rates would, in fact, decrease revenue, one might be wise to predict that it would not.

Did you see the commission proposal to reform corporate and individual tax rates? It dramatically reduces tax rates while eliminating deductions, notably the mortgage deduction, and imposes new taxes in other areas. One of the most important things about a tax rate level is how it affects the marginal dollar of income, the next dollar you might earn. It has very important effects on whether to take a risk and start a new business, or to expand the business you have. Often, these investments may only bring a few percent yearly return. Maybe a guy is earning $100,000/yr in his existing enterprise. If he invests $100,000 into an expansion he may only net $5000/yr more, after interest and taxes. If his tax rate goes down, his potential income from that investment goes up. If this tax rate is "permanent", he can now calculate a higher return for every future year, which seriously improves the risk/return ratio for the money he's investing or the debt he's taking on. He's far far more likely to make the investment, to hire and pay employees who will be taxed, to buy goods and services which will be taxed, to pay transaction taxes (like sales taxes), and to pay a reduced tax rate himself rather than paying nothing because he never made that investment. Remember that he's only clearing $5000-7000/yr. The rest goes to payroll, supplies and services.

We simply can't get along with reduced tax revenue. There's no way that we can save Social Security and Medicare unless tax revenue goes up dramatically. They're broke, ridiculous, unsustainable - reduced to obvious Ponzi schemes. The only way to get increased revenue is to increase the output of the economy. Lowering tax rates always increases economic activity, and typically increases revenue.

The OP recognizes something that is true. You can't lower tax rates forever. But it's also true that raising tax rates during high unemployment and recession will NOT increase economic activity, which is the only way out of unemployment and recession. Lowering tax rates WILL increase activity. And it's also true that tax rates should be raised when economic activity booms again, which will slow it.

That's the problem with the Republican mantra. Because Democrats typically lobby for ever higher tax rates, Republicans have been using it as a club, whether higher rates are advisable or not. Although looking over the past decade, I'm not sure when it would have been appropriate to raise rates. Bush's term started with the 9-11 economic shock and ended with the housing crash. It might have been appropriate to raise rates in 2005 or so, but that also might have popped the housing bubble earlier.

It would be simply idiotic to rate rates in 2011.

[96Qowner]

Here's that tax simplification plan:

http://www.nytimes.com/2010/11/11/us/po ... al.html?hp

Their proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under one option, individual income tax rates would decline to as low as 8 percent for the lowest income bracket (it is now 10 percent) and to 23 percent for the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would be reduced to as low as 26 percent.

But how low the rates are set would depend on how many tax breaks are reduced or eliminated. Some of them, including the mortgage interest deduction and the exemption from taxes for employees’ health benefits, are political sacred cows.

The 18.4-cents-a-gallon federal gasoline tax would rise by 15 cents between 2013 and 2015 so that transportation spending no longer requires money from the general treasury.

The plan would cut $2 from spending for every $1 in new revenues. Total spending would be about 22 percent of the nation’s gross domestic product, and revenues would be held to 21 percent.

[IBCoupe]

So in fact, lower tax rates typically produce increased economic activity, which increases tax revenue, and vice versa.

What made you come to that conclusion?

Revenues are directly connected to realizations (of course, because that's the basis for the tax), but in actual fact, capital gains realizations have very little to do with the actual capital tax gains rates. Look at 1994 to 1997. Capital gains went up at a pretty constant rate before the tax cut, and that rate didn't visibly alter after the tax cut.

What you can be sure of, though (and here's where looking at all three of the graphs is important), is that if you want gains to go up this year (and with them, tax revenues), make sure everybody knows that there'll be a gain in the capital gains rate next year. There's a big spike in 1967 (as you note, the rates went up in '68), but then in '68, they returned to being very close to their pre-spike rate. There was a small dip afterwards, as you saw people who would have sold their capital assets in '68 do so in '67, instead, but then the realizations actually continued on the same trend that they had before the spike.

That's what's wrong with your statistical analysis: you chose an arbitrarily high year and then picked a normal year and said that there was a downward trend. You went '68 to '72, and if I go from '67 to '71, you see a much different picture.

Lies, damned lies, and...

[stebo0728]

Side note question. Although there has been talk of adjusting capital gains taxes, I think the real taxation at question is income taxes. The graphs you posted reflect capital gains taxes. Im suspecting income taxation may have quite similar curves. Heres the thing. Tax rates and tax revenues have an inverse relationship (criss-crossing graphs) up to a point. At some point the law of diminishing returns comes into play. Thats to say, typically you can expect revenues to increase as you decrease rates, but only up to a certain point where diminishing returns kicks in. I cant speak for Republicans but conservatives generally do NOT demonize taxation in general, only excess taxation. And conservatives believe in the lowest possible taxation level, with the smallest possible government, and allowing the private sector to do everything it possible can, leaving only very limited items for the government to handle. So the ideal tax level for a conservative would be the lowest level before said diminishing returns kicks in.

But heres my take on taxes. I wont go as far as to claim that income tax is unconstitutional as some conservative wing-bats, but I generally do not agree with direct taxation, which the income tax is a form of. Instead I back consumption based taxation, the most widely known version of this is the FairTax. This allows people to control the taxes they pay, but controlling their level of consumption.

Additionally let me say, I agree in large part with the slide you posted, but my belief varies a bit. I agree with all the notions of personal and private property, and the government not using a person or their property without their consent. But I differ in the area of consent. In this republic we have, I believe that voting is your way of consenting to what the representative body will do. You may not agree with everything they do, but when they reach a level that you no longer consent to their actions, you vote accordingly. There is no way for citizens to individually give or withhold consent on measures taken by the representative body on a day to day basis. Instead you levy your consent at the ballot box. Over the decades people have become detached from their political representatives, trusting that whoever they are, they will do what needs to be done. That detachment has fostered an attitude of superiority and "divine right" so to speak among much of the electorate. This did not happen over night. If this election truly shows an awakening of the voters, and I hope it does, but IF it does, it is going to take time to get things corrected, and its going to take a persistence on the parts of the voters to keep the electorate on their toes.

[IBCoupe]

Good post, Steve. I just want to address your sense that capital gains taxes and income taxes have similar graphs, and I'm not sure that it's the same.

The big difference between income and capital gains is that it's a lot easier to manipulate when you sell a capital asset than it is to manipulate when you get paid your salary. Income tax, at the very outside ends, might see some similar trends, but by and large it should be very muted. Capital gains tax manipulation affects much more sophisticated players than income tax does (on average - the same sophisticated people get caught up in income tax, but there's a lot more unsophisticated people involved in that, too), and it's on a subject with a lot more control.

With that in mind, it's notable that we don't actually see drastic drops in capital gains realizations when there's a capital gains tax increase. There's a small drop initially, as people who see the increase coming do their best to dump their assets prior to the implementation, but outside of that, the trend appears to continue unabated by the tax increase. And because the behavior of individuals largely isn't affected by the tax increase, tax revenues increase, too.

[stebo0728]

Well you're quite right, MANY factors go into how people deal with their capital gains issues. Also, statistical delay makes it tough to just stick a thermometer into the turkey.

[IBCoupe]

I don't think statistical delay comes into play when we're talking about a tax cut that occurred in 1997, and a sharp increase in capital gains realization that began in 1994. Because capital assets are subject to a much shorter-term process (you can unload that bulldozer right quick if you wanted to), there's not much of a statistical delay in any case. People do it when they do it.

You might see some gaming in the years immediately before and after the tax shift, but in large part, the trends will stay the same. And if the trends stay the same, a tax cut does not increase revenues - realizations would increase regardless, you've just caused a statistical blip over two years.