Romney: "Obama supporters are dependent on the government"

[Aloha_Shooter]

Which Reaganesque rates? The 50% maximum marginal rate with 20% capital gains tax of his first trem or the 28% maximum marginal rate with maximum of 28% capital gains tax that ended his second term? I can't see any rich people wanting to return to those rates, especially with no loopholes/exceptions.

Then you need to open your eyes and ears. Of course, people talk about "Bush tax cuts" these days but the so-called Bush tax cuts were a return to the Reagan tax rates by eliminating the Clinton tax rate hikes. Lots of commentators in the WSJ, Fox Business News, even CNBC who think the country would be better off by returning to lower marginal rates because they spur productivity and the federal government actually collects higher revenues with the lower marginal rates.

Rates != revenues and what matters to the budget deficit are revenues but what matters to Marxists and the politics of envy are rates. God forbid anyone bring up the fact that Ted Kennedy paid about $1000 in income tax annually because he "donated" all his income to the "non-profit" Kennedy foundation. Punitive tax RATES are an article of faith for the Left regardless of how counterproductive they are.

[Rucker61]

Then you need to open your eyes and ears. Of course, people talk about "Bush tax cuts" these days but the so-called Bush tax cuts were a return to the Reagan tax rates by eliminating the Clinton tax rate hikes. Lots of commentators in the WSJ, Fox Business News, even CNBC who think the country would be better off by returning to lower marginal rates because they spur productivity and the federal government actually collects higher revenues with the lower marginal rates.

Not sure what you're saying here. You said in a previous posts "return to Reaganesque rates". I asked which of the rate schemes you were referencing, and pointed out the rates that were in existence at the time. If you meant "tax revenues" instead of rates, I do understand the difference. I can't, however, read your mind.

Tax receipts as a percentage of GDP have typically been around an average of 18%, regardless of tax rates. We're low now, but with the recovery of the economy expected to be back at 18% by 2020.

http://www.heritage.org/federalbudge...t-tax-receipts

Rates != revenues and what matters to the budget deficit are revenues but what matters to Marxists and the politics of envy are rates. God forbid anyone bring up the fact that Ted Kennedy paid about $1000 in income tax annually because he "donated" all his income to the "non-profit" Kennedy foundation. Punitive tax RATES are an article of faith for the Left regardless of how counterproductive they are.

This is a clouded issue, with many knowledge studies showing different anticipated results, primarily (in my opinion) because you can't isolate historical economic forces to see how action A created result B. Economics is about an accurate of a field as weather forecasting.

Some interesting phenomena and studies to look at include the Laffer Curve, the CBO's 2005 paper "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates", Hauser's Law, the think tank American Enterprise Institute's study that showed that a corporate tax rate of 26% is the revenue maximizing rate, the Adam Smith Institute's 2010 report on the reduction of capital gains tax by 50% in Ireland and the follow-up report by Teather and Young of that organization that showed that the optimal capital gains tax, at least in Ireland during the period of the study, was 20%.

[Aloha_Shooter]

Not sure what you're saying here. You said in a previous posts "return to Reaganesque rates". I asked which of the rate schemes you were referencing, and pointed out the rates that were in existence at the time. If you meant "tax revenues" instead of rates, I do understand the difference. I can't, however, read your mind.

Most commentators I've read or heard in the past 10-15 years have referred to the rates at the end of Reagan's second term, i.e., 28%. I'm not sure why you think "Reaganesque revenues" would have clarified a difference in your mind or why you think of 50% as a Reaganesque rate.

Tax receipts as a percentage of GDP have typically been around an average of 18%, regardless of tax rates. We're low now, but with the recovery of the economy expected to be back at 18% by 2020.

http://www.heritage.org/federalbudge...t-tax-receipts

When you say this, it comes across like there's some magic that hold tax receipts at 18% of GDP. In fact, the chart you link to shows quite the opposite with a high degree of variability ranging from 14.4% to 20.6% of GDP. In other words, actual receipts vary around the presumed long term average of 18.1% of GDP by roughly 14%.

Tax receipts decreasing with rate increases have been well documented for a long time. This relationship was thrown off in the mid 90s because the economic stimulus of the dot-com boom was largely (and somewhat uniquely) independent of tax rate increases under Bush I and Clinton. You can see from that graph that tax receipts increased from roughly 16% to over 18% of GDP after removal of the Clinton tax rate increases, tax receipts dropped after Johnson's Great Society tax rate increases, etc.

Economics is about an accurate of a field as weather forecasting.

On this point we agree. To quote Pournelle, we may as well have a Chief Astrologer at the White House as a Chief Economist (and yes, he said that before the kerfuffle about Nancy Reagan's astrologer).

[Rucker61]

Most commentators I've read or heard in the past 10-15 years have referred to the rates at the end of Reagan's second term, i.e., 28%. I'm not sure why you think "Reaganesque revenues" would have clarified a difference in your mind or why you think of 50% as a Reaganesque rate.

I didn't have any idea of the tax rates under Reagan, so I went to look them up. Reagan held office from 1981 to 1989. From 1981 to Tax Act 1986, the highest tax rate was 50% - longer than the entire first term. They were lowered over the remainder of his second term each year to hit 28%. Until the Tax Act, capital gains were taxed at 20%; afterwards, at the nominal income tax rate. All of those could be considered "Reaganesque". If you want the lower rates of the second term to be considered, then you should include the 28% capital gains rate, too.

When you say this, it comes across like there's some magic that hold tax receipts at 18% of GDP. In fact, the chart you link to shows quite the opposite with a high degree of variability ranging from 14.4% to 20.6% of GDP. In other words, actual receipts vary around the presumed long term average of 18.1% of GDP by roughly 14%.

No magic, just interesting. Have you compared the spikes and troughs to changes in tax rates, normalized for outside economic events? Me neither.

Tax receipts decreasing with rate increases have been well documented for a long time. This relationship was thrown off in the mid 90s because the economic stimulus of the dot-com boom was largely (and somewhat uniquely) independent of tax rate increases under Bush I and Clinton. You can see from that graph that tax receipts increased from roughly 16% to over 18% of GDP after removal of the Clinton tax rate increases, tax receipts dropped after Johnson's Great Society tax rate increases, etc.

The Laffer Curve also shows that too low of a tax rate also negatively affects tax revenues. The trick is finding the optimal rate. Given that it's Economics, it's a moving target, in the dark, and that's only if it's isolated from political forces. Since it isn't, it's worse.

On this point we agree. To quote Pournelle, we may as well have a Chief Astrologer at the White House as a Chief Economist (and yes, he said that before the kerfuffle about Nancy Reagan's astrologer).

He or she would likely have a better looking hat.

[Aloha_Shooter]

I didn't have any idea of the tax rates under Reagan, so I went to look them up. Reagan held office from 1981 to 1989. From 1981 to Tax Act 1986, the highest tax rate was 50% - longer than the entire first term. They were lowered over the remainder of his second term each year to hit 28%. Until the Tax Act, capital gains were taxed at 20%; afterwards, at the nominal income tax rate. All of those could be considered "Reaganesque". If you want the lower rates of the second term to be considered, then you should include the 28% capital gains rate, too.

I sometimes forget some of you either weren't alive or weren't paying attention during the Reagan administration. The reduction to 50% was all he could get through Tip O'Neill's Congress until the new Congress was elected. The cap gains rate was a Congressional compromise (again). Reagan accepted it to get the rate reductions he considered to be more important to spur economic progress. It was reduced in an attempt to increase business investment as another economic spur but even a return to 28% cap gains would be an improvement over where Obama/Pelosi/Reid wanted to push it (since only "evil greedy businessmen" make any capital gains in their worldview).

[FastMan]

I sometimes forget some of you either weren't alive or weren't paying attention during the Reagan administration. The reduction to 50% was all he could get through Tip O'Neill's Congress until the new Congress was elected. The cap gains rate was a Congressional compromise (again). Reagan accepted it to get the rate reductions he considered to be more important to spur economic progress. It was reduced in an attempt to increase business investment as another economic spur but even a return to 28% cap gains would be an improvement over where Obama/Pelosi/Reid wanted to push it (since only "evil greedy businessmen" make any capital gains in their worldview).

Nice post. Spot on. Reagan was pragmatic.

[Rucker61]

I sometimes forget some of you either weren't alive or weren't paying attention during the Reagan administration. The reduction to 50% was all he could get through Tip O'Neill's Congress until the new Congress was elected.

Yet those are the rates for "Reaganesque". If you want "intentions" rather than "data", it might make it easier for those of us who weren't alive or paying attention to understand you better.

The cap gains rate was a Congressional compromise (again). Reagan accepted it to get the rate reductions he considered to be more important to spur economic progress. It was reduced in an attempt to increase business investment as another economic spur but even a return to 28% cap gains would be an improvement over where Obama/Pelosi/Reid wanted to push it (since only "evil greedy businessmen" make any capital gains in their worldview).

According to my research, long term capital gains tax will increase to 20% (10% for the 15% tax bracket) with 5 year long term capital gains at 18%. Positively Reaganesque. Of course, short term capital gains gets hit pretty hard, but that should encourage investment rather than speculation. Do you think anyone in the 36% and 39.6% tax brackets will stop trying to make as much money as they can?