[Budget 2017] A self perpetuating unoriginal right wing myth: Lowering taxes grows the economy.

ShinnerBot No.32564844524

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As FF and FG wrangle to reduce taxes(namely USC) in the upcoming budget so that they might gain a few votes, the economic realities are not kind. An already constrained fiscal space in a country facing multiple crises across its public services will only be further reduced for the sake of an extremely cynical political outlook that will neither increase their collective vote share nor will it stimulate the consumer economy.

But the worst part of this? It's dogma. Unoriginal, and derived from the political right in other countries. Neither the policies appropriateness nor its effectiveness are questioned as the mantra is repeated endlessly: "Reducing Taxes is good for the economy."

A basic understanding of economics will highlight that the idea is that reducing taxes will improve the consumer economy leading to a lift in domestic spending leading to further employment and economic growth. But a key fallacy in this line of thought is twofold: The politicisation of economics as a science, and the failure to add factors such as inflation and existing economic factors in to the mix. The reality of economic science is that it is a dismal existence endlessly reviewing data and attempting to fit it to models of expected outcomes. A life of endless spreadsheets where minor variations can completely rubbish your months of work only to restart again....most people don't understand this.

And so it is, the public and body politic twist and manipulate economics as a science to match their own world view. Laissez faire policy is as old as Adam Smith and Trevelyan, so to call it neo-liberal is misnomer of the highest order, but I digress and return to the topic at hand: How effective are tax cuts in stimulating the economy, and conversely can tax cuts harm economic growth.

In terms of a small bit of context in an extremely condensed format, western society post WWII created the welfare state and for a brief period of time the wealthy paid extremely high taxes and even accepted it at the time as being positive for the society they were a part of. But by the 70's this was starting to wear off as neo-liberal economics and libertarian idealism started to influence mainstream politics - Margaret Thatcher for instance carried a well worn book by Frederick Hayek. And so the stage was set...

Enter Reagan and the Laffer Curve:

[video=youtube;fw5rp7MfD-Q]https://www.youtube.com/watch?v=fw5rp7MfD-Q[/video]

Criticism:

The key problem with the laffer curve that there is an assumption of correlation equals causation. Tax cuts worked for the Reagan administration at the time because the US was emerging from a period of stagflation. Further factors to consider:

The Reagan tax cut did have a positive effect on the economy, but the prosperity of the ’80s is overrated in the Republican mind. In fact, aggregate real gross domestic product growth was higher in the ’70s — 37.2 percent vs. 35.9 percent.

Moreover, GOP tax mythology usually leaves out other factors that also contributed to growth in the 1980s: First was the sharp reduction in interest rates by the Federal Reserve. The fed funds rate fell by more than half, from about 19 percent in July 1981 to about 9 percent in November 1982. Second, Reagan’s defense buildup and highway construction programs greatly increased the federal government’s purchases of goods and services. This is textbook Keynesian economics.

Third, there was the simple bounce-back from the recession of 1981-82. Recoveries in the postwar era tended to be V-shaped — they were as sharp as the downturns they followed. The deeper the recession, the more robust the recovery.

https://www.washingtonpost.com/news/posteverything/wp/2017/09/28/i-helped-create-the-gop-tax-myth-trump-is-wrong-tax-cuts-dont-equal-growth/?tid=sm_rd&utm_term=.c3aaae5c363a
Emphasis: We cannot reduce Interest rates because they have been reduced as low as possible and additionally with Central banks now starting to increase interest rates it makes no sense to cut your tax base as inflation allows you to tackle your national debt.

So this presents numerous challenges to what has become a multi-decadal pillar of right wing belief, namely that the laffer curve is a valid model for the real world, and secondly that tax cuts somehow magically grow the economy without the influence of other external economic factors. As the excerpt above shows, other factors were critical in allowing the US economy to grow at the time Reagan introduced his tax cuts....but that didn't stop the dogma being born.

Other problems with the Laffer Curve:

Apologies for quoting wikipedia, but since this is a rather long and detailed post, a bit of copy paste is required.

In 2012, economists surveyed by the University of Chicago rejected the viewpoint that the Laffer Curve's postulation of increased tax revenue through a rate cut applies to federal US income taxes of the time in the medium term. When asked whether a “cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut”, none of the economists surveyed agreed and 71% disagreed.[18]

Laffer assumes that the government would collect no income tax at a 100% tax rate because there would be no incentive to earn income. However, in some theoretical models, the Laffer curve can slope continuously upwards all the way to 100%.[19] Additionally, the Laffer curve depends on the assumption that tax revenue is used to provide a public good that is separable in utility and separate from labor supply, which may not be true in practice.[20]

The Laffer curve as presented is simplistic in that it assumes a single tax rate and a single labor supply. Actual systems of public finance are more complex, and there is serious doubt about the relevance of considering a single marginal tax rate.[2] In addition, revenue may well be a multivalued function of tax rate; for instance, an increase in tax rate to a certain percentage may not result in the same revenue as a decrease in tax rate to the same percentage (a kind of hysteresis). Furthermore, the Laffer curve does not take explicitly into account the nature of the tax avoidance taking place. It is possible that if all producers are endowed with two survival factors in the market (ability to produce efficiently and ability to avoid tax), then the revenues raised under tax avoidance can be greater than without avoidance, and thus the Laffer curve maximum is found to be farther right than thought. The reason for this result is that if producers with low productive abilities (high production costs) tend to have strong avoidance abilities as well, a uniform tax on producers actually becomes a tax that discriminates on the ability to pay.[21]

https://en.wikipedia.org/wiki/Laffer_curve#Criticisms
Further to this are the failures of empirical data to match the Laffer theory, but if you're like me and the type to worry about this kind of thing, I'm sure you can also look it up. But it's worth noting the American Congressional Budget's office study: "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates"

In the paper's most generous estimated growth scenario, only 28% of the projected lost revenue from the lower tax rate would be recouped over a 10-year period after a 10% across-the-board reduction in all individual income tax rates. In other words, deficits would increase by nearly the same amount as the tax cut in the first five years, with limited feedback revenue thereafter. Through increased budget deficits, the tax cuts primarily benefiting the wealthy will be paid for—plus interest—by taxes borne relatively evenly by all taxpayers. The paper points out that these projected shortfalls in revenue would have to be made up by federal borrowing: the paper estimates that the federal government would pay an extra US$200 billion in interest over the decade covered by the paper's analysis.
And that's just the start until we start to look at the dogma as applied to reality, and from this I present: The Kanas experiment.

Sam Brownback as Republican governor of Kansas took the tax cutting dogma to the extreme and in doing so showed how harmful cutting taxes without due consideration can be in the real world. In May 2012 the Kansas Senate Bill Substitute HB 2117 was signed in to law.

The bill introduced vast tax cuts along with promises which included:
  • Supporters of the cuts pointed to projections from the Kansas Policy Institute which predicted that it would lead to a $323 million increase in tax revenue.
  • The cuts would bring 25,000 new jobs to Kansas.

In reality, the cuts were a disaster, and predictably neither the new jobs materialised, and tax revenue declined precipitously. Instead the following happened:

The state’s budget deficit was expected to hit $280 million this year, despite major spending reductions. Kansas falls well below national averages in a wide range of public services from K-12 education to housing to police and fire protection, according to an analysis by the Urban Institute’s State and Local Finance Initiative. Under order from the state Supreme Court, the legislature has voted to increase funding for public schools by $293 million over the next two years.

https://www.forbes.com/sites/oppenheimerfunds/2017/06/15/what-is-esg-investing-and-why-should-you-care/#ffc0dce5e509
Finally, it should be worth noting that economic growth has happened under higher tax rates as the example below shows:

The flip-side of tax cut mythology is the notion that tax increases are an economic disaster — the reason, in theory, every Republican in Congress voted against the tax increase proposed by Bill Clinton in 1993. Yet the 1990s was the most prosperous decade in recent memory. At 37.3 percent, aggregate real GDP growth in the 1990s exceeded that in the 1980s.

Despite huge tax cuts almost annually during the George W. Bush administration that cost the Treasury trillions in revenue, according to the Congressional Budget Office, growth collapsed in the first decade of the 2000s. Real GDP rose just 19.5 percent, well below its ’90s rate.

We saw another test of the Republican tax myth in 2013, after President Barack Obama allowed some of the Bush tax cuts to expire, raising the top income tax rate to its current 39.6 percent from 35 percent. The economy grew nicely afterward and the stock market has boomed — up around 10,000 points over the past five years.

https://www.washingtonpost.com/news/posteverything/wp/2017/09/28/i-helped-create-the-gop-tax-myth-trump-is-wrong-tax-cuts-dont-equal-growth/?tid=sm_rd&utm_term=.c3aaae5c363a
And to top it all off, a survey during GE16 showed that most Irish people prefered increased services over tax cuts...yet FG persist with this naked populism and right wing dogma. USC tax was reduced last year, but yet in 2017 there is no empirical evidence to support that this in anyway contributed to economic growth. It is also counter intuitive that FG continue to seek cuts at a time when USC has become accepted and normalised with the Irish tax paying public.

And now we get the joy of Tweedledee and dum arguing over cuts to the USC both of which erode the tax base in a year where services are under pressure, state services are in decline and facing multiple crises, while youth emigration continues as state employment remains closed off to the current generation.

As we can see from the above, there is little understanding of economics from either FG or FF, and budget 2017 looks to continue the decline of state services and the overall welfare of the nation.
 


ShoutingIsLeadership

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Well, tax on income was hiked, and we moved from a country in depression, to the fastest growing economy in Europe.
 

JimmyFoley

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Tax isn't the problem; government spending is.

The OP is far too long to go through point by point, but one egregious misrepresentation is that 'the US was emerging from a period of stagflation'. Eh, no; it didn't just 'emerge'. It recovered because Reagan stopped the addiction of several administations' to printing money. And why did they print money? So they could keep on increasing government spending.

Reduce tax and you reduce the ability of government to spend; that's why it's so important in a thriving economy.
 

Dimples 77

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Tax isn't the problem; government spending is.

The OP is far too long to go through point by point, but one egregious misrepresentation is that 'the US was emerging from a period of stagflation'. Eh, no; it didn't just 'emerge'. It recovered because Reagan stopped the addiction of several administations' to printing money. And why did they print money? So they could keep on increasing government spending.

Reduce tax and you reduce the ability of government to spend; that's why it's so important in a thriving economy.

Reagan replaced the addicition with printing money, to an addiction to borrowing money. And his government kept on spending money.
 

JimmyFoley

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Reagan replaced the addicition with printing money, to an addiction to borrowing money. And his government kept on spending money.
Reagan didnt act the way he promised he would; that's another story. But he stuck with the 'painful medicine' approach that was needed to curb inflation.
 

Fractional Reserve

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Reagan replaced the addicition with printing money, to an addiction to borrowing money. And his government kept on spending money.
It doesn't matter weather the governments are left or right they will borrow anyways , it's called buying votes and career politicians it ain't their money they just keep loading it up until it explodes .
 

ShinnerBot No.32564844524

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It doesn't matter weather the governments are left or right they will borrow anyways , it's called buying votes and career politicians it ain't their money they just keep loading it up until it explodes .
Borrowing works in an inflationary setting...or so goes the monetary theory. But in the context of this thread, eroding the tax base isn't prudent should you wish to avoid borrowing and yearly deficits.

Sadly, this year's budget will be about buying votes, but the pathetic part is that the reductions will be so minor most taxpayers won't notice as they didn't last year, and an already strained system will be put further under pressure meaning ongoing crises are now a permanent feature of Irish life. Oh joy.
 

gleeful

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The cut in Irelands corporate tax rate to 12.5% certainly grew the economy.

Some taxes, like tge US bonkers corporate tax rate on foreign earnings do certainly restrain investment.
 

Fractional Reserve

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Did you notice they printed billions in the Eu and still have no inflation as such ,so much for monetary theory .Money can be printed without interest for the running of its country , of course there have to be parameters set and strictly adhered too .
Borrowing works in an inflationary setting...or so goes the monetary theory. But in the context of this thread, eroding the tax base isn't prudent should you wish to avoid borrowing and yearly deficits.

Sadly, this year's budget will be about buying votes, but the pathetic part is that the reductions will be so minor most taxpayers won't notice as they didn't last year, and an already strained system will be put further under pressure meaning ongoing crises are now a permanent feature of Irish life. Oh joy.
 

ShinnerBot No.32564844524

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The cut in Irelands corporate tax rate to 12.5% certainly grew the economy.

Some taxes, like tge US bonkers corporate tax rate on foreign earnings do certainly restrain investment.
Fair point, but this is largely aimed at domestic revenue and policy. And just because I disagree with a singular mindless right wing trope doesn't mean it isn't appropriate to use lower taxes as an incentive in certain circumstances. The 12.5% policy was a good incentive, but now that our human resource has grown, it's a valid question if it's too low...but before we can even ask that question it might be an idea to actually enforce the tax rate in the first instance.

Another good tax cut I could think of would be a separate rate of CGT for domestic start up investments...and there's a tonne more where targeted lower CGT rates could push investment towards more productive use of capital instead of letting it sit idle.

But hey...the parochial shopkeepers in FG seem to think they know everything about business...:lol:
 

venusian

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The cut in Irelands corporate tax rate to 12.5% certainly grew the economy.

Some taxes, like tge US bonkers corporate tax rate on foreign earnings do certainly restrain investment.
If only the incredibly low full rate of corporation tax of 12.5% was actually collected! Corporation tax in Ireland is charged at only 12.5% on worldwide trading income. This is on condition that the company is considered tax resident in Ireland. The effective rate is even lower at about 6.5% when tax breaks and incentives are considered. FF/Fg/"labour" Neo liberal Corporate Welfare of the worst sort!
 

Patslatt1

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As FF and FG wrangle to reduce taxes(namely USC) in the upcoming budget so that they might gain a few votes, the economic realities are not kind. An already constrained fiscal space in a country facing multiple crises across its public services will only be further reduced for the sake of an extremely cynical political outlook that will neither increase their collective vote share nor will it stimulate the consumer economy.

But the worst part of this? It's dogma. Unoriginal, and derived from the political right in other countries. Neither the policies appropriateness nor its effectiveness are questioned as the mantra is repeated endlessly: "Reducing Taxes is good for the economy."

A basic understanding of economics will highlight that the idea is that reducing taxes will improve the consumer economy leading to a lift in domestic spending leading to further employment and economic growth. But a key fallacy in this line of thought is twofold: The politicisation of economics as a science, and the failure to add factors such as inflation and existing economic factors in to the mix. The reality of economic science is that it is a dismal existence endlessly reviewing data and attempting to fit it to models of expected outcomes. A life of endless spreadsheets where minor variations can completely rubbish your months of work only to restart again....most people don't understand this.

And so it is, the public and body politic twist and manipulate economics as a science to match their own world view. Laissez faire policy is as old as Adam Smith and Trevelyan, so to call it neo-liberal is misnomer of the highest order, but I digress and return to the topic at hand: How effective are tax cuts in stimulating the economy, and conversely can tax cuts harm economic growth.

In terms of a small bit of context in an extremely condensed format, western society post WWII created the welfare state and for a brief period of time the wealthy paid extremely high taxes and even accepted it at the time as being positive for the society they were a part of. But by the 70's this was starting to wear off as neo-liberal economics and libertarian idealism started to influence mainstream politics - Margaret Thatcher for instance carried a well worn book by Frederick Hayek. And so the stage was set...

Enter Reagan and the Laffer Curve:

[video=youtube;fw5rp7MfD-Q]https://www.youtube.com/watch?v=fw5rp7MfD-Q[/video]

Criticism:

The key problem with the laffer curve that there is an assumption of correlation equals causation. Tax cuts worked for the Reagan administration at the time because the US was emerging from a period of stagflation. Further factors to consider:



Emphasis: We cannot reduce Interest rates because they have been reduced as low as possible and additionally with Central banks now starting to increase interest rates it makes no sense to cut your tax base as inflation allows you to tackle your national debt.

So this presents numerous challenges to what has become a multi-decadal pillar of right wing belief, namely that the laffer curve is a valid model for the real world, and secondly that tax cuts somehow magically grow the economy without the influence of other external economic factors. As the excerpt above shows, other factors were critical in allowing the US economy to grow at the time Reagan introduced his tax cuts....but that didn't stop the dogma being born.

Other problems with the Laffer Curve:

Apologies for quoting wikipedia, but since this is a rather long and detailed post, a bit of copy paste is required.



Further to this are the failures of empirical data to match the Laffer theory, but if you're like me and the type to worry about this kind of thing, I'm sure you can also look it up. But it's worth noting the American Congressional Budget's office study: "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates"



And that's just the start until we start to look at the dogma as applied to reality, and from this I present: The Kanas experiment.

Sam Brownback as Republican governor of Kansas took the tax cutting dogma to the extreme and in doing so showed how harmful cutting taxes without due consideration can be in the real world. In May 2012 the Kansas Senate Bill Substitute HB 2117 was signed in to law.

The bill introduced vast tax cuts along with promises which included:
  • Supporters of the cuts pointed to projections from the Kansas Policy Institute which predicted that it would lead to a $323 million increase in tax revenue.
  • The cuts would bring 25,000 new jobs to Kansas.

In reality, the cuts were a disaster, and predictably neither the new jobs materialised, and tax revenue declined precipitously. Instead the following happened:



Finally, it should be worth noting that economic growth has happened under higher tax rates as the example below shows:



And to top it all off, a survey during GE16 showed that most Irish people prefered increased services over tax cuts...yet FG persist with this naked populism and right wing dogma. USC tax was reduced last year, but yet in 2017 there is no empirical evidence to support that this in anyway contributed to economic growth. It is also counter intuitive that FG continue to seek cuts at a time when USC has become accepted and normalised with the Irish tax paying public.

And now we get the joy of Tweedledee and dum arguing over cuts to the USC both of which erode the tax base in a year where services are under pressure, state services are in decline and facing multiple crises, while youth emigration continues as state employment remains closed off to the current generation.

As we can see from the above, there is little understanding of economics from either FG or FF, and budget 2017 looks to continue the decline of state services and the overall welfare of the nation.
Somewhere on the road to 100% tax, growth would cease. Somewhere on the road back from 100%, growth would revive. Given that most workers work for small businesses,the optimal tax for maximising growth is probably the tax regime that is most encouraging to small business within the broad tax constraints of the government's tax needs. I'd estimate an optimal marginal tax rate of 40 to 45%.
 

Patslatt1

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As FF and FG wrangle to reduce taxes(namely USC) in the upcoming budget so that they might gain a few votes, the economic realities are not kind. An already constrained fiscal space in a country facing multiple crises across its public services will only be further reduced for the sake of an extremely cynical political outlook that will neither increase their collective vote share nor will it stimulate the consumer economy.

But the worst part of this? It's dogma. Unoriginal, and derived from the political right in other countries. Neither the policies appropriateness nor its effectiveness are questioned as the mantra is repeated endlessly: "Reducing Taxes is good for the economy."

A basic understanding of economics will highlight that the idea is that reducing taxes will improve the consumer economy leading to a lift in domestic spending leading to further employment and economic growth. But a key fallacy in this line of thought is twofold: The politicisation of economics as a science, and the failure to add factors such as inflation and existing economic factors in to the mix. The reality of economic science is that it is a dismal existence endlessly reviewing data and attempting to fit it to models of expected outcomes. A life of endless spreadsheets where minor variations can completely rubbish your months of work only to restart again....most people don't understand this.

And so it is, the public and body politic twist and manipulate economics as a science to match their own world view. Laissez faire policy is as old as Adam Smith and Trevelyan, so to call it neo-liberal is misnomer of the highest order, but I digress and return to the topic at hand: How effective are tax cuts in stimulating the economy, and conversely can tax cuts harm economic growth.

In terms of a small bit of context in an extremely condensed format, western society post WWII created the welfare state and for a brief period of time the wealthy paid extremely high taxes and even accepted it at the time as being positive for the society they were a part of. But by the 70's this was starting to wear off as neo-liberal economics and libertarian idealism started to influence mainstream politics - Margaret Thatcher for instance carried a well worn book by Frederick Hayek. And so the stage was set...

Enter Reagan and the Laffer Curve:

[video=youtube;fw5rp7MfD-Q]https://www.youtube.com/watch?v=fw5rp7MfD-Q[/video]

Criticism:

The key problem with the laffer curve that there is an assumption of correlation equals causation. Tax cuts worked for the Reagan administration at the time because the US was emerging from a period of stagflation. Further factors to consider:



Emphasis: We cannot reduce Interest rates because they have been reduced as low as possible and additionally with Central banks now starting to increase interest rates it makes no sense to cut your tax base as inflation allows you to tackle your national debt.

So this presents numerous challenges to what has become a multi-decadal pillar of right wing belief, namely that the laffer curve is a valid model for the real world, and secondly that tax cuts somehow magically grow the economy without the influence of other external economic factors. As the excerpt above shows, other factors were critical in allowing the US economy to grow at the time Reagan introduced his tax cuts....but that didn't stop the dogma being born.

Other problems with the Laffer Curve:

Apologies for quoting wikipedia, but since this is a rather long and detailed post, a bit of copy paste is required.



Further to this are the failures of empirical data to match the Laffer theory, but if you're like me and the type to worry about this kind of thing, I'm sure you can also look it up. But it's worth noting the American Congressional Budget's office study: "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates"



And that's just the start until we start to look at the dogma as applied to reality, and from this I present: The Kanas experiment.

Sam Brownback as Republican governor of Kansas took the tax cutting dogma to the extreme and in doing so showed how harmful cutting taxes without due consideration can be in the real world. In May 2012 the Kansas Senate Bill Substitute HB 2117 was signed in to law.

The bill introduced vast tax cuts along with promises which included:
  • Supporters of the cuts pointed to projections from the Kansas Policy Institute which predicted that it would lead to a $323 million increase in tax revenue.
  • The cuts would bring 25,000 new jobs to Kansas.

In reality, the cuts were a disaster, and predictably neither the new jobs materialised, and tax revenue declined precipitously. Instead the following happened:



.
Somewhere on the road to 100% tax, growth would cease. Somewhere on the road back from 100%, growth would revive. Given that most workers work for small businesses,the optimal tax for maximising growth is probably the tax regime that is most encouraging to small business within the broad tax constraints of the government's tax needs. I'd estimate an optimal marginal tax rate of 40 to 45%.
 

Patslatt1

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Joined
Nov 18, 2009
Messages
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As FF and FG wrangle to reduce taxes(namely USC) in the upcoming budget so that they might gain a few votes, the economic realities are not kind. An already constrained fiscal space in a country facing multiple crises across its public services will only be further reduced for the sake of an extremely cynical political outlook that will neither increase their collective vote share nor will it stimulate the consumer economy.

But the worst part of this? It's dogma. Unoriginal, and derived from the political right in other countries. Neither the policies appropriateness nor its effectiveness are questioned as the mantra is repeated endlessly: "Reducing Taxes is good for the economy."

A basic understanding of economics will highlight that the idea is that reducing taxes will improve the consumer economy leading to a lift in domestic spending leading to further employment and economic growth. But a key fallacy in this line of thought is twofold: The politicisation of economics as a science, and the failure to add factors such as inflation and existing economic factors in to the mix. The reality of economic science is that it is a dismal existence endlessly reviewing data and attempting to fit it to models of expected outcomes. A life of endless spreadsheets where minor variations can completely rubbish your months of work only to restart again....most people don't understand this.

And so it is, the public and body politic twist and manipulate economics as a science to match their own world view. Laissez faire policy is as old as Adam Smith and Trevelyan, so to call it neo-liberal is misnomer of the highest order, but I digress and return to the topic at hand: How effective are tax cuts in stimulating the economy, and conversely can tax cuts harm economic growth.

In terms of a small bit of context in an extremely condensed format, western society post WWII created the welfare state and for a brief period of time the wealthy paid extremely high taxes and even accepted it at the time as being positive for the society they were a part of. But by the 70's this was starting to wear off as neo-liberal economics and libertarian idealism started to influence mainstream politics - Margaret Thatcher for instance carried a well worn book by Frederick Hayek. And so the stage was set...

Enter Reagan and the Laffer Curve:

[video=youtube;fw5rp7MfD-Q]https://www.youtube.com/watch?v=fw5rp7MfD-Q[/video]

Criticism:

The key problem with the laffer curve that there is an assumption of correlation equals causation. Tax cuts worked for the Reagan administration at the time because the US was emerging from a period of stagflation. Further factors to consider:



Emphasis: We cannot reduce Interest rates because they have been reduced as low as possible and additionally with Central banks now starting to increase interest rates it makes no sense to cut your tax base as inflation allows you to tackle your national debt.

So this presents numerous challenges to what has become a multi-decadal pillar of right wing belief, namely that the laffer curve is a valid model for the real world, and secondly that tax cuts somehow magically grow the economy without the influence of other external economic factors. As the excerpt above shows, other factors were critical in allowing the US economy to grow at the time Reagan introduced his tax cuts....but that didn't stop the dogma being born.

Other problems with the Laffer Curve:

Apologies for quoting wikipedia, but since this is a rather long and detailed post, a bit of copy paste is required.



Further to this are the failures of empirical data to match the Laffer theory, but if you're like me and the type to worry about this kind of thing, I'm sure you can also look it up. But it's worth noting the American Congressional Budget's office study: "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates"



And that's just the start until we start to look at the dogma as applied to reality, and from this I present: The Kanas experiment.




.
Somewhere on the road to 100% tax, growth would cease. Somewhere on the road back from 100%, growth would revive. Given that most workers work for small businesses,the optimal tax for maximising growth is probably the tax regime that is most encouraging to small business within the broad tax constraints of the government's tax needs. I'd estimate an optimal top marginal tax rate of 40 to 45% on dividends and about 20% on capital gains without an allowance for phony gains from inflation.
 

Clanrickard

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Cutting certain taxes boosts economic growth. McCreavy cut CGT and the take from that tax increased. Thatcher cut taxes and the UK economy boomed. The OP is utter dog poo. It is obvious that when people have more money in their pocket their spend increases and the economy does better. Listen out for the old "essential public services" line. Code word for hire more jobs for life public sector workers on the highest rates in Europe with increments and lump sum pay outs. This will be followed by the "most vulnerable" line and demands to increase socila welfare rates that are the highest in Europe.
 

Gin Soaked

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Good OP SB. Hence the 'like.

One of the dimensions you must consider is that of tolerance of paying taxes based on return.

If, say, a 10% hike via a second marginal rate of 51% over €80k would yield real benefits that would be visible to those paying it, you could get buy in. But no one trusts the spend to work.

Health gobbles cash with no improvements. SW increases just further disincentivises work and is a two fingers to the working poor, who already pay very little income tax as it is. Only Education may actually show a return on investment.

Basically, as a country, we are terrible with money.

And there is no getting away from the comically low point when one moves onto the marginal rate as it is. And that our income tax is amongst the most progressive in the world.

There is a case for VAT cuts via reappraising what is in scope for the 23% rate and removing some supposed luxuries which have more impact on poor people. Excluding booze and cigs obviously...
 

HarshBuzz

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O'Donoghue should freeze all spending for a year and give each spending department 12 months to get their house in order.

Then, for Budget 2019, allocations should only be given to departments that have (a) proven an ability to budget properly and (b), have met all of their service provision targets, both for quality and quantity.
 

enuffisenuff

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Didn't we turn the corner?
 

SamsonS

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O'Donoghue should freeze all spending for a year and give each spending department 12 months to get their house in order.

Then, for Budget 2019, allocations should only be given to departments that have (a) proven an ability to budget properly and (b), have met all of their service provision targets, both for quality and quantity.
Come on HB that's very simplistic, and takes no account of, for example demographic pressures in Social Welfare on the pension side, and that's aside from any cost of living increase that they but into it.

It takes no account of agreed increased spending in areas of housing, or health or childcare, or even sectors with that.

Its further limited by the likes of the new pay deal, so for example in education where the vast majority of the budget is spent on wages a fixed budget is actually a cut in spending in other areas in the same department.

As I've said on each of these threads, lets get the budget balanced, that simply means that what we take in in tax next year will be greater that the amount we increase spending by.
 


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