San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, December 4, 2015

Myths And Lies About The Republican Tax Plans

If you look carefully through all of the smoke and mirrors associated with the GOP presidential candidate's panel discussions you will find some general level of agreement with the idea that the rich, whoever they are, are taxed too much and deserve some tax relief.  If you continue to pay attention to the issue of taxes you will also discover that most of the citizens in the Socialist Democracy of Amerika are opposed to granting the rich, whoever they are, any sort of tax break.  Indeed, just the opposite is the case.  Both major Democratic candidates for the office of King/Queen of the SDA believe that the rich are not paying their fair share, whatever that means, and need to be taxed even more.  That position plays well with the envy filled masses who populate this greedy and immoral land.
Daniel Chilcoat of Lakewood wrote a letter to the Denver Post a week or so ago in which he took up the cause of the sinfully envious members of our society and staunchly proclaimed his view that Republican proposals to reduce the tax burden on the rich, whoever they are, will "imperil the country."  Allow me to present his argument here in full:
"Beware the 'decreased taxes equals increased tax revenue' snake oil being peddled by the Tax Foundation and most Republican candidates for president.  If it sounds too good to be true, it is because it is.  Based on the same 'voodoo' economics, President Reagan decreased income tax rats for the rich from 70 percent to 28 percent and decreased corporate taxes.  Subsequently, the national debt quadrupled from less than $1 trillion in 1980 to more than $4 trillion 12 years later.  President George W. Bush inherited an annual budget surplus that was reducing the national debt and cut corporate taxes and income taxes; the national debt increased from $5.6 trillion to nearly $10 trillion during his administration.  So the anti-tax crowd continues to push discredited ideas including 'supply-side economics,' the Laffer curve, IRS misconduct, and now 'dynamic scoring' to convince us that taxes should be reduced for corporations and the very, very wealthy.  Drink their snake oil at our country's peril."
I trust all readers of this blog post have already detected the logical flaw in Daniel's specious argument.  It is not hard to find.  Daniel begins by declaring that the belief that reducing marginal tax rates oftentimes results in higher tax revenues as taxpayers take advantage of the lower rates to capture some capital gains, thus resulting in more taxable income and higher tax revenues, is dead wrong.  He presents only one argument in support of his position and that is his assertion that in a time when the marginal tax bracket was reduced from 70% to 28% the national debt quadrupled.
There are two immediate problems with his argument. First, he is comparing apples to oranges.  He uses the eight year period from 1981 through 1989 (the Reagan years) as an example for when the top tax rate was seriously reduced but he uses the 12 year period (including George H.W. Bush's term during which he raised the top tax bracket) for the period of time during which the national debt increased.  Maybe Daniel should have used the same time period for each data point.  The national debt at the end of Reagan's eight years was closer to $3 trillion, a full $1 trillion less than Daniel would have us believe.
Second, the national debt is not a good indicator of the successfulness, or lack thereof, of a federal income tax policy.  All spending bills come from the Congress of the Socialist Democracy of Amerika.  Blaming a King for the spending of his Court is ridiculous.  Congress also sets federal tax rates, although the opinion of the King often weighs heavily upon the final decision about the top rate.  A more valuable indicator of the success of a tax policy would be the rate of economic growth experienced in the land.  I believe most of us would agree that economic growth is good and that any tax policy that hinders economic growth is bad.  Conversely, any tax policy that promotes economic growth would be good, whether it helps the evil "rich" people among us or not.
Daniel also asserts that the belief that lowering tax rates can often increase revenues is "voodoo" economics.  I am already sick and tired of Daniel's stupid ideas.  I am also sick and tired of his outright lying.  Either Daniel is really dumb or he is a flat out liar.  I don't know which it is but neither of them is good.  Here are the facts about the situation Daniel brings up.  Reagan ruled from 1981 through 1989.  Clinton ruled from 1993 through 2001.  King George II ruled from 2001-2009.  And, of course, King Obama has ruled us since 2009.  Look at the chart I have crafted below.  It gives you the marginal tax bracket at the beginning and end of each kingdom as well as the rate of revenue increase, the rate of spending increase and the total rate of economic growth for each period.

     Time Period         Top Tax Bracket         Revenue Change       Spending Change     GDP Growth
     1981 - 1989      70% in 81, 28% in 89             +20%                        +21%                   +80%
     1993 - 2001      40% in 93, 39% in 01             +46%                        +13%                   +60%
     2001 - 2009      39% in 01, 35% in 09              -13%                        +55%                   +40%
     2009 - Now       35% in 09, 40% Now              +38%                           -3%                   +25%

Can we learn anything from this chart? I think so.  Consider the following logically necessary deductions taken from the data presented above:
  • Daniel is wrong when he asserts that reducing the top tax rate does not increase revenues.  The Reagan tax cuts resulted in a 20% increase in federal revenues.  The lie that the Reagan tax cuts also cut revenues has been repeated so many times there is scarcely anyone to be found who does not believe it. Reducing tax rates can, and often does, increase tax revenues.
  • Another myth about King Reagan was that he cut government spending.  As you can see, that is not true.  Despite all of the hand wringing by the liberals at the time, King Ronnie did not turn away millions of mentally ill people, forcing them to roam the streets and commit acts of violence.  In fact, government spending rose more than revenues during Reagan's eight year reign.
  • The very small reduction in the top tax rate during the reign of King George II did not result in an increase in revenues.  Does that prove Daniel to be correct?  No, it does not.  That fact can be attributed to the equally obvious fact that King George II's tenure was during the Great Recession, the second worst period in the economic history of the SDA.  It is to be expected that revenues would drop during a time such as that.
  • The Clinton administration essentially left tax rates alone and revenues increased by 46% during his eight years.  The primary reason for the Clinton era revenue increase was the fact that the late 1990s were the period in this country known as the technology boom.  During that period of time tremendous amounts of capital were being created as a result of dramatic growth in technology companies.  That growth of capital also brought about a dramatic increase in federal revenues.
  • The Clinton era was the last one to experience an annual budget surplus.  The "peace dividend," as it was called, that resulted from the collapse of Soviet Russia allowed Clinton and his Court to increase spending less ferociously and, coupled with the tech boom, brought about a couple of years of budget surplus.  Those were our last.
  • King George II, being the warrior that he is, inaugurated wars against several Middle Eastern countries during his reign and, coupled with the Great Recession, greatly expanded government spending.  It takes a lot of money to expand an empire and King George II was willing to spend it.  Bush II forever put to bed the myth that Republicans do not like to "tax and spend" just as much as the Democrats do. 
  • The most important item, from my perspective, in the chart above relates to the rates of economic growth under each king.  You can clearly see a steady decline in the rate of growth in this envy filled country.  The last three administrations shown above have all dealt with basically the same rate of federal taxation.  The only significant tax reduction took place under King Reagan and it is not a coincidence that the greatest rate of economic growth also took place during his reign.  High taxes hinder economic growth.  Lowering taxes encourages economic growth.  That rule never changes.  We have been experiencing a continually decreasing rate of growth because taxes are too high and the increasing regulatory burden on business is sucking the life and profits out of them.  We need a plan to reduce taxes, just like the Republicans propose.
I conclude that reducing the top tax bracket often does increase federal revenues, although I do not see why anyone would ever promote the idea that government should have more of our money.  I also conclude that lowering the rate of taxation in this land brings about a state of affairs where economic growth can increase more quickly.  Lastly, I conclude that government spending is out of control.  Reagan, Clinton and Bush all presided over Courts that dramatically raised spending, although for different reasons.
Only our current King Obama, praised be his name, has managed to cut the total amount of federal spending during his reign.  That, of course, is a direct result of the reduction in military spending as the SDA has ceased expanding and finds itself bogged down in endless skirmishes in the outer countries of its empire rather than engaging in the expensive task of conquering new territory.  Take heart however, the direct impact of Obamacare is yet to be felt and when it hits us I am sure King Obama will show a nice increase in overall spending as well.  At the very least his successor will be saddled with massive increases in government spending.
Do not confuse the fact that King Obama has decreased spending during his first seven years with the possibility that the federal government has operated under a surplus. It hasn't.  Obama's spending reduction is calculated in real dollars.  If marginal dollars were used he would show an increase in spending as well.  He also was the beneficiary of two accidental realities.  First, expenditures have decreased in real terms only because King George II deficit financed his wars and bailout packages to the tune of trillions of dollars.  Compared to King George II, King Obama looks downright thrifty, but he is not.  He is just not spending as much as the utterly profligate King George II did.  Second, King Obama was inaugurated right as the economy started an expansion that has continued throughout his entire term.  Revenues have increased by 38% during his reign primarily because the economy started at an extremely weak point in 2009 and has grown consistently since then.  Revenues have grown because the economy has grown, no thanks to the career politicians and entirely the result of profit seeking businesses doing what they always do by creating capital, providing jobs, creating goods and services for people and selling those goods and services to people for a price they are willing to pay.  Yet despite all of the recent economic growth King Obama has continued to add to the federal debt.  The national debt when King Obama was coronated was $10.6 trillion.  Today it is $18.7 trillion.  The numbers speak for themselves.
Daniel, I proudly consider myself to be a member of the "anti-tax crowd" you choose to defame.  I do not see why it is a good thing for the federal government to take more of my money.  Your belief that the federal government should have even more of what we earn and own only displays your love for and worship of civil government.  Everybody needs a god to worship and Daniel's god is apparently the SDA Treasury.  The more it takes, the happier he is.

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