Romney: "Obama supporters are dependent on the government"

[FastMan]

Fastman, China directly controls the value of its currency, keeping it purposely low so the price of their goods are lower than the free market would usually allow. If we try to manufacture here, China can just readjust the value of their currency so their products will be the cheapest in the markets again. Now we will have factories that have over produced goods that we can't sell. Free market competition is ideal, but dealing with China isn't a free market when they control the value of their currency.

On top of that, they subsidize some of the product they export. All the more reason to give our guys a hand via the consumption tax I explained. It won't fix the problem completely, but it will help, with China, and every other low wage paying country. The rest we can make up for with tariffs and such. Look for Romney to perhaps do some of that. He's been talking about it.

The competitive help to American businesses is not the only benefit of the consumption tax. Don't forget the benefit I explained about getting all Americans invested in and concerned about Federal fiscal responsibility. Many will balk at the idea, because they're currently not contributing little to the benefits they receive from federal spending and don't want to wreck a good thing, but if we don't change that we're doomed.

[HoneyBadger]

Yes, but wouldn't you lower the rent regardless of debt status in order to get that income?

Yes. Debt status has nothing to do with it.

[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).

[Irving]

Yes. Debt status has nothing to do with it.

But you said that a consumption tax would lower overhead costs for companies, so they would automatically lower the price of their products.

[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.

[HoneyBadger]

But you said that a consumption tax would lower overhead costs for companies, so they would automatically lower the price of their products.

Did I say that? I think you're confusing me with someone else.

I only pointed out the flaws in dwalker's two examples.

[FastMan]

But you said that a consumption tax would lower overhead costs for companies, so they would automatically lower the price of their products.

HoneyBadger was right, he didn't say that, I did. Though not in those exact words.

[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?