No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves

[Susan45]

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves

Republicans claim to be deeply concerned about the budget deficit and the national debt, yet repeatedly demand additional large tax cuts. For example, former Minnesota Gov. Tim Pawlenty, a candidate for the Republican presidential nomination, supports a balanced budget amendment to the Constitution but also wants an $8 trillion tax cut. He rationalizes this contradiction by asserting that his tax cut will not actually lose any revenue. As Pawlenty told Slate reporter Dave Weigel on June 13:

“When Ronald Reagan cut taxes in a significant way, revenues actually increased by almost 100 percent during his eight years as president. So this idea that significant, big tax cuts necessarily result in lower revenues – history does not [bear] that out.”

In point of fact, this assertion is completely untrue. Federal revenues were $599.3 billion in fiscal year 1981 and were $991.1 billion in fiscal year 1989. That’s an increase of just 65 percent. But of course a lot of that represented inflation. If 1981 revenues had only risen by the rate of inflation, they would have been $798 billion by 1989. Thus the real revenue increase was just 24 percent. However, the population also grew. Looking at real revenues per capita, we see that they rose from $3,470 in 1981 to $4,006 in 1989, an increase of just 15 percent. Finally, it is important to remember that Ronald Reagan raised taxes 11 times, increasing revenues by $133 billion per year as of 1988 – about a third of the nominal revenue increase during Reagan’s presidency.

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves | Capital Gains and Games

The bolding is mine. But somehow we need to try and destroy the myth that Reagan cut taxes and revenue increased. It's just a myth and keeps hanging on. Zombie economics.

 

[Susan45]

MR. GREENSPAN: Look, I'm very much in favor of tax cuts, but not with borrowed money. And the problem that we've gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day, that proves disastrous. And my view is I don't think we can play subtle policy here on it.

MR. GREGORY: You don't agree with Republican leaders who say tax cuts pay for themselves?
Advertise | AdChoices

MR. GREENSPAN: They do not.

Aug. 1: Mullen, Bloomberg, Greenspan, Rendell - Meet the Press - Transcripts - msnbc.com

Meet The Press, Aug 2010

 

[auditor0007]

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves

Republicans claim to be deeply concerned about the budget deficit and the national debt, yet repeatedly demand additional large tax cuts. For example, former Minnesota Gov. Tim Pawlenty, a candidate for the Republican presidential nomination, supports a balanced budget amendment to the Constitution but also wants an $8 trillion tax cut. He rationalizes this contradiction by asserting that his tax cut will not actually lose any revenue. As Pawlenty told Slate reporter Dave Weigel on June 13:

“When Ronald Reagan cut taxes in a significant way, revenues actually increased by almost 100 percent during his eight years as president. So this idea that significant, big tax cuts necessarily result in lower revenues – history does not [bear] that out.”

In point of fact, this assertion is completely untrue. Federal revenues were $599.3 billion in fiscal year 1981 and were $991.1 billion in fiscal year 1989. That’s an increase of just 65 percent. But of course a lot of that represented inflation. If 1981 revenues had only risen by the rate of inflation, they would have been $798 billion by 1989. Thus the real revenue increase was just 24 percent. However, the population also grew. Looking at real revenues per capita, we see that they rose from $3,470 in 1981 to $4,006 in 1989, an increase of just 15 percent. Finally, it is important to remember that Ronald Reagan raised taxes 11 times, increasing revenues by $133 billion per year as of 1988 – about a third of the nominal revenue increase during Reagan’s presidency.

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves | Capital Gains and Games

The bolding is mine. But somehow we need to try and destroy the myth that Reagan cut taxes and revenue increased. It's just a myth and keeps hanging on. Zombie economics.

There is another issue to this. In 1980, when Reagan started pushing for tax cuts, the top marginal rate was 70%. Today it is only 35%. Pawlenty wants to cut that to 25%, but he also wants to cut corporate taxes to 15%. The net result would be much lower revenues than we have currently, which aren't enough. This guy is beyond cookoo.

Pawlenty Plan Would Quadruple Tax Cuts For Richest Americans: CBPP

 

[Susan45]

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves

Republicans claim to be deeply concerned about the budget deficit and the national debt, yet repeatedly demand additional large tax cuts. For example, former Minnesota Gov. Tim Pawlenty, a candidate for the Republican presidential nomination, supports a balanced budget amendment to the Constitution but also wants an $8 trillion tax cut. He rationalizes this contradiction by asserting that his tax cut will not actually lose any revenue. As Pawlenty told Slate reporter Dave Weigel on June 13:

“When Ronald Reagan cut taxes in a significant way, revenues actually increased by almost 100 percent during his eight years as president. So this idea that significant, big tax cuts necessarily result in lower revenues – history does not [bear] that out.”

In point of fact, this assertion is completely untrue. Federal revenues were $599.3 billion in fiscal year 1981 and were $991.1 billion in fiscal year 1989. That’s an increase of just 65 percent. But of course a lot of that represented inflation. If 1981 revenues had only risen by the rate of inflation, they would have been $798 billion by 1989. Thus the real revenue increase was just 24 percent. However, the population also grew. Looking at real revenues per capita, we see that they rose from $3,470 in 1981 to $4,006 in 1989, an increase of just 15 percent. Finally, it is important to remember that Ronald Reagan raised taxes 11 times, increasing revenues by $133 billion per year as of 1988 – about a third of the nominal revenue increase during Reagan’s presidency.

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves | Capital Gains and Games

The bolding is mine. But somehow we need to try and destroy the myth that Reagan cut taxes and revenue increased. It's just a myth and keeps hanging on. Zombie economics.

There is another issue to this. In 1980, when Reagan started pushing for tax cuts, the top marginal rate was 70%. Today it is only 35%. Pawlenty wants to cut that to 25%, but he also wants to cut corporate taxes to 15%. The net result would be much lower revenues than we have currently, which aren't enough. This guy is beyond cookoo.

Pawlenty Plan Would Quadruple Tax Cuts For Richest Americans: CBPP

Good article and terrific graph, thanks.

 

[theal3]

Yepper, if tax cuts created jobs and increased revenue..... we should be rolling in cash since 2001, and have shortage of workers. imho. Our great American citizens who do have jobs are worker harder, with productivity increased (heard on a show today) 80% since 1979, but workers making less, but CEO making 240% more.

Workers create the wealth, and the top skims it off the top and keeps it. imho

 

[editec]

Yoiu people speak about the economy as though it operated like MAGIC.

Tax breaks might increase revenues if the SUPPLY side was lacking enough capital to invest.

Then if they took that extra dough they now have an reinvest it wisely, and if their investments create more economic avtivity, hence more taxes will be paid, THEN one can say that the tax creaks raised revenue.

God! what is wrong with some of you people?


MACRO ECONOMICS is not magic.

There is no single incantation or magic formula that will always give one the same effect on the macroeconomy because the e macroconomy is an ever changing circumstance.

 

[Skull Pilot]

Tax cuts do not cost anything so by definition they do not need to be paid for.

 

[Rozman]

To speak of tax cuts as needing to be paid for implies that the government is giving away something that was theirs first.Something that belonged to them so now they need to find a way to make up the difference....Yeh cut spending.The money is not the governments first.It belongs to the person who earned it then the Governments gets some of it.

 

[NYcarbineer]

Tax cuts do not cost anything so by definition they do not need to be paid for.

Paying for tax cuts means cutting government spending by the amount of the tax cuts in order to keep the budget balanced.

You're saying that doesn't need to be done?

 

[Anachronism]

Of course they don't. That's why the Tax Cuts should be partnered with a COMPLETE AND TOTAL removal of ALL UnConstitutional programs, funding, and expenditures from the US Budget.

 

[Skull Pilot]

Tax cuts do not cost anything so by definition they do not need to be paid for.

Paying for tax cuts means cutting government spending by the amount of the tax cuts in order to keep the budget balanced.

You're saying that doesn't need to be done?

Spending less is not the same as paying for.

And I'm all for slashing government to the bone and then slashing a little more but to imply that tax cuts cost money is ridiculous.

Tax cuts SAVE the taxpayer money. Period.

 

[DiamondDave]

Skull is right here...

This is grandstanding, when someone like the OP or the article writer takes this sort of approach...

Tax cuts don't cost a thing... the continued and increasing spending costs...

Slash government down to where it is supposed to be... end entitlements and subsidies... quit this uber-redundancy within the bureaucracy... that is a good place to start... then start working on the simplified and equalized tax code

 

[Quantum Windbag]

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves

Republicans claim to be deeply concerned about the budget deficit and the national debt, yet repeatedly demand additional large tax cuts. For example, former Minnesota Gov. Tim Pawlenty, a candidate for the Republican presidential nomination, supports a balanced budget amendment to the Constitution but also wants an $8 trillion tax cut. He rationalizes this contradiction by asserting that his tax cut will not actually lose any revenue. As Pawlenty told Slate reporter Dave Weigel on June 13:

“When Ronald Reagan cut taxes in a significant way, revenues actually increased by almost 100 percent during his eight years as president. So this idea that significant, big tax cuts necessarily result in lower revenues – history does not [bear] that out.”

In point of fact, this assertion is completely untrue. Federal revenues were $599.3 billion in fiscal year 1981 and were $991.1 billion in fiscal year 1989. That’s an increase of just 65 percent. But of course a lot of that represented inflation. If 1981 revenues had only risen by the rate of inflation, they would have been $798 billion by 1989. Thus the real revenue increase was just 24 percent. However, the population also grew. Looking at real revenues per capita, we see that they rose from $3,470 in 1981 to $4,006 in 1989, an increase of just 15 percent. Finally, it is important to remember that Ronald Reagan raised taxes 11 times, increasing revenues by $133 billion per year as of 1988 – about a third of the nominal revenue increase during Reagan’s presidency.

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves | Capital Gains and Games

The bolding is mine. But somehow we need to try and destroy the myth that Reagan cut taxes and revenue increased. It's just a myth and keeps hanging on. Zombie economics.

Funny, it worked in Indiana.

By the way, there is no need to pay for tax cuts, we only have to pay for spending.

 

[Quantum Windbag]

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves

Republicans claim to be deeply concerned about the budget deficit and the national debt, yet repeatedly demand additional large tax cuts. For example, former Minnesota Gov. Tim Pawlenty, a candidate for the Republican presidential nomination, supports a balanced budget amendment to the Constitution but also wants an $8 trillion tax cut. He rationalizes this contradiction by asserting that his tax cut will not actually lose any revenue. As Pawlenty told Slate reporter Dave Weigel on June 13:

“When Ronald Reagan cut taxes in a significant way, revenues actually increased by almost 100 percent during his eight years as president. So this idea that significant, big tax cuts necessarily result in lower revenues – history does not [bear] that out.”

In point of fact, this assertion is completely untrue. Federal revenues were $599.3 billion in fiscal year 1981 and were $991.1 billion in fiscal year 1989. That’s an increase of just 65 percent. But of course a lot of that represented inflation. If 1981 revenues had only risen by the rate of inflation, they would have been $798 billion by 1989. Thus the real revenue increase was just 24 percent. However, the population also grew. Looking at real revenues per capita, we see that they rose from $3,470 in 1981 to $4,006 in 1989, an increase of just 15 percent. Finally, it is important to remember that Ronald Reagan raised taxes 11 times, increasing revenues by $133 billion per year as of 1988 – about a third of the nominal revenue increase during Reagan’s presidency.

No, Gov. Pawlenty, Tax Cuts Don't Pay for Themselves | Capital Gains and Games

The bolding is mine. But somehow we need to try and destroy the myth that Reagan cut taxes and revenue increased. It's just a myth and keeps hanging on. Zombie economics.

There is another issue to this. In 1980, when Reagan started pushing for tax cuts, the top marginal rate was 70%. Today it is only 35%. Pawlenty wants to cut that to 25%, but he also wants to cut corporate taxes to 15%. The net result would be much lower revenues than we have currently, which aren't enough. This guy is beyond cookoo.

Pawlenty Plan Would Quadruple Tax Cuts For Richest Americans: CBPP

They said the same thing in 1980, yet the net result was more revenue for the government.

 

[Quantum Windbag]

Yoiu people speak about the economy as though it operated like MAGIC.

Tax breaks might increase revenues if the SUPPLY side was lacking enough capital to invest.

Then if they took that extra dough they now have an reinvest it wisely, and if their investments create more economic avtivity, hence more taxes will be paid, THEN one can say that the tax creaks raised revenue.

God! what is wrong with some of you people?


MACRO ECONOMICS is not magic.

There is no single incantation or magic formula that will always give one the same effect on the macroeconomy because the e macroconomy is an ever changing circumstance.

I agree with your statement, I just enjoy pointing out how the opposite of what people say.

 

[Robert]

Tax cuts do not cost anything so by definition they do not need to be paid for.

Paying for tax cuts means cutting government spending by the amount of the tax cuts in order to keep the budget balanced.

You're saying that doesn't need to be done?

Are you suggesting it has been?

 

[Quantum Windbag]

Tax cuts do not cost anything so by definition they do not need to be paid for.

Paying for tax cuts means cutting government spending by the amount of the tax cuts in order to keep the budget balanced.

You're saying that doesn't need to be done?

We need to cut spending down to the levels of government revenue before you can start arguing about cutting spending to keep it at the level of projected revenue. In other words, until we actually have a balanced budget there is no sense about talking about "paying" for tax cuts.

 

[The Rabbi]

In 1980 you could deduct credit card interest. Actually any interest paid. You could also average your income over several years if you had a big bonus or a big capital gain one year. There were plenty of other tax shelters and deductions available that don't exist today.
So comparing rates is misleading.
Even so, the top 5% of taxpayers pay much more of the total bill under the lower tax rates than they did under the higher rates.

Some tax cuts pay for themselves. When Bush cut capital gains taxes the tax brought in far more money on the lower rate. It's an "unlocking" phenomenon that benefits the economy.
Personally I would be OK with revenue neutral simplification. Just the time it takes to fill out all the forms is a form of tax.

 

[NYcarbineer]

Tax cuts do not cost anything so by definition they do not need to be paid for.

Paying for tax cuts means cutting government spending by the amount of the tax cuts in order to keep the budget balanced.

You're saying that doesn't need to be done?

We need to cut spending down to the levels of government revenue before you can start arguing about cutting spending to keep it at the level of projected revenue. In other words, until we actually have a balanced budget there is no sense about talking about "paying" for tax cuts.

You can balance the budget by

1. Raising taxes

2. Cutting spending

3. Doing both.

What you CANNOT balance the budget by is cutting taxes without matching the lost revenue from the tax cuts with spending cuts;

that, however is the Republican modus operandi for 30 years now. And yes, the Democrats, when they act like Republicans, are doing it too.

Cutting taxes is politically easy. Cutting spending or raising taxes are politically difficult. Give politicians a choice and they will always do what's easy and rarely do what's difficult...

...that's why taxes are at historic lows and deficits are at historic highs.

 

[NYcarbineer]

Tax cuts do not cost anything so by definition they do not need to be paid for.

Paying for tax cuts means cutting government spending by the amount of the tax cuts in order to keep the budget balanced.

You're saying that doesn't need to be done?

Spending less is not the same as paying for.And I'm all for slashing government to the bone and then slashing a little more but to imply that tax cuts cost money is ridiculous.

Tax cuts SAVE the taxpayer money. Period.

Yes it is. That is the terminology that is used. Don't quibble in semantics.