Toro
Diamond Member
Cutting tax rates can have the effect of increasing the amount of money available to the government.
Jeez. You libs are a slow and stubborn stupid lot.
Cutting income taxes would merely add to the deficit. In the OP's case, massively so. You can't raise tax revenues for the government for the government by decreasing income tax revenues when the average rate of income tax in the economy is 17%. 70% maybe, but not 17%. It might increase the marginal amount of tax collected on a given amount of income but it does increase the absolute amount of revenue for the government. It decreases it.
The OP would see a loss of $600 billion in tax revenues. Let's say $500 billion to make the math easy. That's a 50% decline from the $1 trillion collected. Income taxes are half of all revenues raised by the government, which is $2 trillion. The economy is $14 trillion. Currently, $7 trillion of GDP supports the income tax and $7 trillion supports all other revenues. The marginal rate of tax on the economy is ~14% (2/14). Cutting the income tax in half lowers the tax rate from 14% to 10% (.5x.5x1/7+.5x1/7~.1). To get back to the same amount of revenues after the tax cut, GDP would have to rise to $20 trillion. ($2T/.1=$20T). That means to pay for the tax cut, the economy would have to grow over 40%. Given that the long term trend in economic growth in the US is about 3% - 2% productivity growth and 1% population growth - there is no way at all the economy can grow that fast to make up for the lost revenues.