| mrstickball said: highway - So the rich should be taxed more than what they earn? I don't think that's a fair system. It'd be far more efficient to close loopholes that allow the rich to glide by without paying, as opposed to taxing those that do. When Regan dropped tax rates on the wealthy, tax income went up. Why? Lowering taxes on the rich has a reverse effect: the lower they are, the more inclined they are to pay them. I think we need to just fix the issue of people being inclined, or not incline to pay taxes, and find ways to tax them without being able to avoid their taxes. |
Of course revenue went up...the economy was growing and there were more taxable dollars out there. If a pool of water gets bigger, and you take out the same percentage of water from the pool as you did before, you will get more water. The same applies when a country's population naturally grows. Your tax base is larger, thus collecting the same percentage of taxes means your revenue amount will be higher.
And revenue can go up in a dollar amount without real revenue actually increasing. Its called inflation.
The most recent Nobel Prize winner in Economics wrote a good little blurb about this.
http://krugman.blogs.nytimes.com/2008/01/17/reagan-and-revenue/
Reagan and revenue
Ah - commenter Tom says, in response to my post on taxes and revenues:
Taxes were cut at the beginning of the Reagan administration.
Federal tax receipts increased by 50% by the end of the Reagan Administration.
Although correlation does not prove causation the tax cut must have accounted for some portion of this increase in federal tax receipts.
I couldn’t have asked for a better example of why it’s important to correct for inflation and population growth, both of which tend to make revenues grow regardless of tax policy.
Actually, federal revenues rose 80 percent in dollar terms from 1980 to 1988. And numbers like that (sometimes they play with the dates) are thrown around by Reagan hagiographers all the time.
But real revenues per capita grew only 19 percent over the same period — better than the likely Bush performance, but still nothing exciting. In fact, it’s less than revenue growth in the period 1972-1980 (24 percent) and much less than the amazing 41 percent gain from 1992 to 2000.
Is it really possible that all the triumphant declarations that the Reagan tax cuts led to a revenue boom — declarations that you see in highly respectable places — are based on nothing but a failure to make the most elementary corrections for inflation and population growth? Yes, it is. I know we’re supposed to pretend that we’re having a serious discussion in this country; but the truth is that we aren’t.
Update: For the econowonks out there: business cycles are an issue here — revenue growth from trough to peak will look better than the reverse. Unfortunately, business cycles don’t correspond to administrations. But looking at revenue changes peak to peak is still revealing. So here’s the annual rate of growth of real revenue per capita over some cycles:
1973-1979: 2.7%
1979-1990: 1.8%
1990-2000: 3.2%
2000-2007 (probable peak): approximately zero
Do you see the revenue booms from the Reagan and Bush tax cuts? Me neither.
We had two bags of grass, seventy-five pellets of mescaline, five sheets of high-powered blotter acid, a salt shaker half full of cocaine, a whole galaxy of multi-colored uppers, downers, screamers, laughers…Also a quart of tequila, a quart of rum, a case of beer, a pint of raw ether and two dozen amyls. The only thing that really worried me was the ether. There is nothing in the world more helpless and irresponsible and depraved than a man in the depths of an ether binge. –Raoul Duke
It is hard to shed anything but crocodile tears over White House speechwriter Patrick Buchanan's tragic analysis of the Nixon debacle. "It's like Sisyphus," he said. "We rolled the rock all the way up the mountain...and it rolled right back down on us...." Neither Sisyphus nor the commander of the Light Brigade nor Pat Buchanan had the time or any real inclination to question what they were doing...a martyr, to the bitter end, to a "flawed" cause and a narrow, atavistic concept of conservative politics that has done more damage to itself and the country in less than six years than its liberal enemies could have done in two or three decades. -Hunter S. Thompson
