Archive for Taxes

Do Tax Cuts Increase Revenues? No, Tax cuts do not Increase Revenue

Business Cycles: GDP and Revenues Correlating Tax Rates with Revenue
Reagan TaxCuts: The Facts
Bush Tax Cuts: The Facts
Historical Tax Rates
The Laffer Curve
In Conclusion
Further Reading
Limbaugh Tax cuts increase revenues

“The Bush tax cuts led to 50 consecutive months of job growth…It’s demonstrably proven that tax cuts increase revenues” – Rush Limbaugh

The argument that tax cuts create or increase revenue is an old myth that simply refuses to go away. The logic behind this argument is that cutting taxes will stimulate spending (since investors now are now encouraged through reduced tax rates) that will result in GDP growth.  This growth in GDP will result in increased tax revenues so significant that they will more than offset the drop in tax revenues that result from a lowered tax rate. The inverse to this is that increased taxes lower tax revenue by discouraging investment, which in turn lowers tax revenues so drastically, that they offset the added increase coming from the tax rate increase. One of the reasons Republicans and other self-ascribed fiscal conservatives are able to get away with this is, is the superficially plausible argument that the Reagan and/or Bush tax cuts grew the economy and created revenue.  To understand the fallacy of these arguments, it is necessary to understand economic growth during business cycles and over a long period of time, and how this affects tax revenues.

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Eisenhower Tax Rates – 90 Percent

Eisenhower Tax Rates

Eisenhower Tax Rates – 90%? Yes!

In the lead up to the 2016 election, Bernie Sanders mentioned that the top marginal tax rates under Eisenhower were over 90%. This has lead many wrongly believe that Bernie Sanders himself planned to raise the tax rates to 90%, when in fact he (as others have done) was merely making the point that a 90% top marginal tax rate didn’t seem to prevent economic growth. However, there does appear to be some confusion, and some people incorrectly believe that this was a flat 90% tax rate under Eisenhower and others. Read more

Did Jerry Brown call California Tax Payers Free Loaders? Not likely.

jerry brown california

Claim: Jerry Brown called California tax payers freeloaders
Fact: It’s not 100% clear who the “freeloader” comment was directed to. Given the topical order of the article, it seems almost certain he was referring to GOP opponents.

In a recent visit to Orange County (CA) California Governer Jerry Brown defended a gas tax and local legislator. A single quote (“The freeloaders — I’ve had enough of them”) has spurned the outrage of several right-leaning websites, under the assumption that the comment pertains to California tax payers. Since neither video nor transcript seem available, the Orange County Register article seems to be the main source available. Given then order of the content, it seems more likely that Brown is referring to Republican opponents, not citizen taxpayers. Read more

Half of Americans Pay no Taxes – A Myth that refuses to go away

The facts regarding the percentage of Americans are as follows:

  • Roughly half of all Americans pay no federal income taxes specifically
  • About 86% of Americans pay Federal taxes of some sort (because everyone who earns a paycheck pays payroll taxes).
  • Lower income earners still pay local/state taxes
  • Everyone pays a variety of sales taxes
  • Payroll and sales taxes are highly regressive (they account for a much higher percentage of a lower income earner’s paycheck).
  • The reason about 50% don’t pay federal income taxes is because the bottom 50% have seen their real earnings drop over the last few decades, as the top 1% has seen a corresponding increase in wealth

What a standard paycheck looks like

This is what a standard paycheck looks like (in California).  Those who claim that half of Americans pay no taxes are really just referring to the item 1 (federal withholding).
Paycheck and taxes american Read more

Obama’s Tax Increase and Short Term Memory

The ‘Fiscal Cliff’ deal included allowing the payroll tax holiday to expire.  This tax holiday actually began under Obama so it’s merely going back to the same rates they were when Obama was inaugurated.  Nevertheless, many on the right are screaming over the ‘tax increase’  and claiming this is an example of Obama breaking his promise not raise taxes on lower and middle/income earners.

Given the firestorm this has created, one would think that the sources of said firestorm would have expressed elation over the payroll tax holiday and credited Obama with lowering taxes then. One would of course, be wrong…

Obama wants to raise taxes on small business owners – Fact or Myth?

I somehow found myself watching Fox News earlier (for the first time in awhile).  Greta Van Susteren was interviewing Paul Ryan.  Great (who Bill O’Reilly claims is a “liberal”), was throwing softballs for Paul Ryan to knock out of the park and not surprisingly didn’t challenge him on his claim that Barack Obama’s plan to raise the top marginal tax rate (meaning, those making $250,000 or more) would affect small businesses, because many of them file their earnings as income.

As the CCBP noted in 2010 when the debate on allowing the Bush tax cuts to expire on the wealthiest Americans was in full swing:

 In reality, however, extending the tax cuts would do little for small business because only the top 3 percent of people with any business income, let alone income from a small business, would benefit. [1] Over the long term, an extension would likely harm the economy — and thus small business — by adding about $1 trillion to deficits and debt over the next decade and even larger amounts in subsequent decades. [2]

http://www.cbpp.org/cms/index.cfm?fa=view&id=3251

But facts are never a problem for people like Paul Ryan.  His goal isn’t really to help economic recovery so much as keeping true to his small government ideology and keeping his pledge to Grover Norquist.