How do tax cuts affect government revenue as a percent of GDP?
Dimwit. except inflation replaced into at two hundred% the will improve in revenues far outpaced the fee of inflation. In 1999 the tax revenues for the federal authorities replaced into $a million.3 trillion. In 2006 the tax revenues for the federal authorities replaced into $2.40 3 trillion. via fact the inflation fee in this united states of america has in no way BEEN everywhere close to 2 hundred%, your assertion isn't something yet a delusional attempt to misinform the knuckleheads that would desire to even pay attention to you. ----------------- Edit: whether "pastime introduction" quotes have been low throughout Bush's tenure, the unemployment fee replaced into soaring around 5% loads of the time. Which basically means that each and every person ALREADY HAD a job AND did no longer want a job CREATED FOR THEM. A "pastime" is merely "created" whilst somebody accepts a place presented to them. Wow, you're stupid.
How do tax hikes raise tax revenues?
That's funny, you think that taxes are a punishment. Here's your incentive to working harder: You make more money. Paying more in taxes? So what, you're still making more money for YOURSELF. You would have to have a very strange edge case where somehow making a little more money magically made you pay far more taxes than otherwise, in which case I suppose we might resolve that issue somehow. But you'd have to realize that was a single case rather than the default, and as a conservative you can't do that. Businesses are concerned about the government shutting down, especially those run by those who like to leach off the government. But I'm sure they'd love to complain about regulation and harassment and confiscatory taxes. Because HOW DARE ANYBODY THINK OF THE CITIZENS! The fact is conservatives are winning elections because they aren't representative. Notice how it's still FPTP in this country. Thanks for that one!
What effect did the Bush tax cuts have on government revenue?
The effect was probably similar to the effect the JFK and Reagan tax cuts had. But it would have been masked by other factors.For this kind of analysis you need to separate out other economic conditions in order to see what is going on.The Bush presidency lurched from one major crisis to another. 9/11, ramp up of 2 wars, Katrina and the Subprime crisis. So taking the economic impact of those events out of his economic performance would leave a questionable conclusion.The model is the Reagan presidency.In 1980, the last year before the tax cuts, tax revenues were $956 billion (in constant 1996 dollars). Revenues exceeded that 1980 level in eight of the next 10 years. Annual revenues over the next decade averaged $102 billion above their 1980 level (in constant 1996 dollars).Tax Cuts Increase Federal RevenuesAny increase in budget deficits was therefore the result of spending increases rather than tax cut-induced revenue decreases.AlsoJFK, Reagan, and George W. Bush understood, reducing taxes has a stimulative effect on economic activity which leads to an increase in government receipts.The red line represents the top marginal tax bracket while the blue line shows the total amount of Federal government revenue each year. There are two salient points here. First, as the graph illustrates, as tax rates declined, government revenue increased. Second, there is a strong negative correlation between the two. To review, correlation measures the relationship between two sets of data. The scale ranges from negative one to positive one. A correlation of positive one indicates that the two data sets move in concert with each other. A correlation of negative one indicates that as one set of data moves up, or down, the other moves in the opposite direction. Using the data from 1913 through the end of 2011, the correlation between the maximum marginal income tax bracket and total Federal receipts is a negative 0.50. In simple terms, when taxes are cut, Federal revenue has a very strong tendency to rise! And when taxes are raised, government revenue has a strong tendency to fall.Do Tax Cuts Increase Government Revenue?
Do tax cuts raise or lower the interest rate?
Tax cuts are fiscal policy, not monetary policy and do not directly rise or lower interest rates. Interest rates, however, are subject to two different forces - supply and demand of money and secondarily, Fed Reserve policies (which affect monetary supply). As has been mentioned, a tax rate cut should, in theory, put more money into the economy as people take the money associated with the tax cut (through lowered withholdings) and spend it. However, where I disagree with the other poster is here - by placing more money in the economy, you would drive down interest rates - more money should lower the demand for loans, which means that banks will be sitting on cash reserves they can't lend out - much like a retailer who sits on excess inventory, the way to get rid of excess inventory is to lower price, which for banks means lower interest rates. Similarly, when the Fed wants to expand the money supply, they lower interest rates to induce banks to lower interest rates which induces more people to borrow.
Do tax cuts increase tax revenues?
Wow... the age old question of tax cuts creating revenue. I suggest crossing this with economics and looking at elasticity of demand. Basically, you have a curve that on one end, you can increase prices and increase revenue. While on the other end, you increase prices and you actually decrease revenue. This same concept can be applied to tax. For example, if business is good and you raise taxes, revenue should follow. However, in the long run, these will hurt the business. They'll eventually reach a recessionary period and need a "boost." These tax breaks will actually help get the business going. As business picks back up, so do the revenue. With tax it's all about timing and strategy. Think about the Clinton administration. He eliminated tariffs on trade with china, but what did this really do? It flooded the U.S. markets with Chinese goods. So, for his 8 year term, both business and tax revenues went through the roof. In the long term of things, it was one of many factors causing the recession we're in today. Same goes for the Bush administration. We were headed for a recession, so he flooded the economy with "free loans." Basically, every president has been putting off our recession with new policies. So, do tax cuts increase tax revenues? It completely depends on the circumstance and the time range we are looking at. Is the economy health? Are we looking at 1 year or 10 years? Hope this helps, Dawson, CPA
How can tax cuts increase tax revenue?
This is a section of my answer on a related question (Politics of the United States of America: Which is better: a flat income tax or a progressive income tax?)“The Laffer curve visualizes a relationship between tax rates and actual tax revenues collected. The curve is a hump. At the lower end of rates, increasing tax rates yield greater revenue, but the continued increase of tax rates yields diminishing returns as one approaches the peak revenue amount. Increasing the tax rate beyond that which yields the most revenue has the opposite effect. Beyond the peak revenue, increases in tax rates yield progressively larger losses in tax revenue. This is because taxpayers find that the taxed activity in question becomes less profitable the more they have to pay to the government. This happens to the degree that they decide to stop engaging in that taxable activity all together, which results in lower overall revenue. Now this doesn’t prove that lower taxes necessarily stimulate economic growth to the point that they yield greater revenue. In fact I’d argue the same rule of diminishing returns applies to tax cuts as it does to tax hikes. In this way I think the Laffer curve is a double edged sword.DEACREASING tax rates only serves to INCREASE tax revenue up until you reach the rate which yields the highest possible amount of revenue.Likewise INCREASING tax rates only serves to INCREASE tax revenue up until you reach the rate which yields the highest possible amount of revenue.Based on my understanding this would mean that the idea of trickle down economics is only conditionally valid assuming that the relationship between tax rates and tax revenue reflects a similar relationship between tax rates and economic growth (or retained earnings that are reinvested or some other related variable)”.Full disclosure I'm not super well read in taxes, but I do know a bit from my macro class last semester. This is my understanding of the topic.
Tax Cuts Don't Boost Revenues?
This topic is the subject of much debate - you will get answers swearing tax cuts raise revenues and others swearing they do not. The answer is - they can but do not always. Imagine if the tax rate was zero. The government would recieve no revenue. Now imagine the tax rate was 100%. Again the government would recieve no revenue as people would either not work or hide the proceeds from the government (this is not literally true - pure communist states do produce somethings) Yet in between 0 and 100% the government does make revenue from taxes. So logically the relationship between tax rates and taxes must be a curve that slopes upward to a maximum and then slopes downwards. NOBODY denies this. The issue comes with estimating where on that curve we are at any time. Supply side conservatives tend to argue we are generally past the maximum point (hence tax cuts will increase revenues) while Keynsian liberals believe we are still approaching it (and so tax cuts will reduce revenue). Despite your response to Mortimer he is not strictly wrong. The Clinton expansion was related to two things - better fiscal control (attributable both to Clinton and congress) and to the sudden emergence of a new industry through technological advancement. The result was, as Mortimer pointed out, more money being spent both from a consumer point of view and also through investment. The problem Bush has faced in recent years is that America is grossly overcapitalized. We have more means for production than we do demand for that production. So why would tax cuts to the rich see increased growth - nobody is going to invest in an already overcapitalized economy. So much of the investment money went into offshore investment (which brings back profits but does not employ Americans) or speculative investment. This is why despite the reasonable levels of growth, the majority of Americans have not benefited from this expansion as they did the Clinton expansion (where median incomes rose and poverty fell as opposed to this expansion). This is behind Obama wanting to drive tax cuts to the lower end. This will lead to consumption driven growth that should fill the excess capacity of the US economy. He is obviously still driving for a balanced budget and so will increase taxes at the top end.
Why do GRUBERS think that raising taxes increases government revenue?
The following graph clearly reveals the answer. The red line represents the top marginal tax bracket while the blue line shows the total amount of Federal government revenue each year. There are two salient points here. First, as the graph illustrates, as tax rates declined, government revenue increased. Second, there is a strong negative correlation between the two. To review, correlation measures the relationship between two sets of data. The scale ranges from negative one to positive one. A correlation of positive one indicates that the two data sets move in concert with each other. A correlation of negative one indicates that as one set of data moves up, or down, the other moves in the opposite direction. Using the data from 1913 through the end of 2011, the correlation between the maximum marginal income tax bracket and total Federal receipts is a negative 0.50. In simple terms, when taxes are cut, Federal revenue has a very strong tendency to rise! And when taxes are raised, government revenue has a strong tendency to fall. GRUBERS, do you think you are smarter than FORBES? http://www.forbes.com/sites/mikepatton/2012/10/15/do-tax-cuts-increase-government-revenue/
How exactly did the Bush tax cuts increase revenue as some conservatives still claim?
For this kind of analysis you need to separate out other economic conditions in order to see what is going on.The Bush presidency lurched from one major crisis to another. 9/11, ramp up of 2 wars, Katrina and the Subprime crisis. So taking the economic impact of those events out of his economic performance would leave a questionable conclusion.The model is the Reagan presidency. In 1980, the last year before the tax cuts, tax revenues were $956 billion (in constant 1996 dollars). Revenues exceeded that 1980 level in eight of the next 10 years. Annual revenues over the next decade averaged $102 billion above their 1980 level (in constant 1996 dollars).Tax Cuts Increase Federal RevenuesAny increase in budget deficits was therefore the result of spending increases rather than tax cut-induced revenue decreases.AlsoJFK, Reagan, and George W. Bush understood, reducing taxes has a stimulative effect on economic activity which leads to an increase in government receipts.The red line represents the top marginal tax bracket while the blue line shows the total amount of Federal government revenue each year. There are two salient points here. First, as the graph illustrates, as tax rates declined, government revenue increased. Second, there is a strong negative correlation between the two. To review, correlation measures the relationship between two sets of data. The scale ranges from negative one to positive one. A correlation of positive one indicates that the two data sets move in concert with each other. A correlation of negative one indicates that as one set of data moves up, or down, the other moves in the opposite direction. Using the data from 1913 through the end of 2011, the correlation between the maximum marginal income tax bracket and total Federal receipts is a negative 0.50. In simple terms, when taxes are cut, Federal revenue has a very strong tendency to rise! And when taxes are raised, government revenue has a strong tendency to fall.Do Tax Cuts Increase Government Revenue?