USD: When will it stop... falling?

[Final-Fan]

klydwntelos said:
@Final-Fan A "tax cut" occurs when a government "cuts" taxes, that is, "reduces in amount" (M-W again) the "taxes" ("a sum levied on members of an organization (e.g. the government) to defray expenses") that it takes in (i.e. "tax revenue").

Hey, there's no need up the rhetoric here. I do understand the words you're typing. I am going to assume that you're using non-standard definitions of tax rate and tax revenue, because otherwise there is no possible tautology. Let me clarify my definitions:

tax base, B(t): a revenue stream that the government taxes. I am explicitly stating that it is a function of the tax rate to avoid confusion with an argument below.

tax rate, t: the proportion that of a tax base that the government taxes. Usually this refers specifically to the highest marginal tax rate on income a wage earner faces, but it could also refer to average tax rate or corporate tax rate, etc.

tax revenue, T: the amount of revenue a government generates from a tax. This number should be equal to the times the tax base, or

(1) T = t * B(t).

The government has no direct control of the tax revenue, it can only control the tax rate. Thus when we say the government cuts taxes, we mean that it is lower the tax rate for some group.

You are making the assumption that a higher tax rate, t, implies higher tax revenue, T. As we can see from the equation (1), this would be true if you make the assumption that the tax rate has no effect on the tax base, B.

However, there is no reason to assume that this is the case, and if you make that assumption you must certainly justify it. Therefore it is not a tautology; it is possible that in some ranges of t and for some economies decreasing the tax rate would actually increase the tax revenue. However unlikely you may find this scenario, the possibility that it exists means that it is not a tautology.

Most people will agree that B(t) is likely to be a decreasing function of t for most of the domain of the function, but that its exact behavior is difficult to describe/ascertain. If you want to discuss this further, I'd be happy to do so in private messages.

@Final-Fan "Also, your use of the Laffer curve implies that you support "supply-side" economic theory, which no leading economist takes seriously, and which Reagan tried to utilize to no apparent effect."

Bringing up an economic concept doesn't mean that I support it. I merely said that this is the intuition behind the concept of the Laffer curve, not that it was correct or an absolute law of economics. Many economists discuss the assumptions behind the Laffer curve and other simple economic models; simply talking about them doesn't automatically mean that they ardently adhere to a specific dogma.

I haven't responded to the rest of your comments for several reason. The first is that I haven't had time the time to give them a decent reading, the second is that I'm not entirely certain I want to co-opt this thread, and the third is that I don't think we can have a coherent discussion on the topic if you do not agree that "higher taxes = higher tax revenue in all cases" is a fundamentally flawed argument.

I freely concede that, at extremely high levels of taxation, increased taxation ultimately causes economic repression that erases the revenue increase. However:
-- 1) I would argue that we are nowhere near that level, and that, therefore, for the purpose of discussing taxes in the present-day United States my statement is a tautology.
-- 2) The statement you attribute to me is not what I said! I think it's notable that the statement you attributed to me was in fact the inverse of what I actually said.

I said that LOWER tax rates, by definition, lower tax revenue. You may say that you are in favor of lowering tax rates in the hope that, eventually, your tax-cutting will increase the tax base so much that more revenue will be generated at the lower rate. But this is a long range plan. Timmah!'s argument -- which my statement was in response to -- was that in the six years since Bush's tax cuts went into effect, they have already more than paid for themselves. This is ridiculous and contrary to known facts. In the short term, my statement is a tautology.

Also, even if that gambit worked -- which it has not, nor will it -- there is still the matter of the damage done in the interim; that is, the massive debt.

P.S.  I do apologize for mistaking you for a supply-side proponent; and I respect that you may not want to spend that kind of time on this thread; however, as for taking it over, I think Timmah!, myself, and you have already done that.