WatchI am sick and tired of propagandist Rush Limbaugh claim, almost on a daily basis, that lower taxes, and he means the rate on the top individual income tax bracket, or marginal tax rate, leads to higher growth. Most right-wing Republicans believe in his lies and never bother to check the facts with the benefit of the hindsight. There is no subject related to the economy in America that has more propaganda than taxes because over time trillions are at stake.
I have known that Limbaugh and other Right-wingers have been lying and finally decided to present the facts in graphical form, as shown below. As you can see, as the top rate has fallen from 90% to 35%, the annual GDP growth rate for the following 8 years has fallen from 5% to 1.5%.
Since the GW Bush tax cuts, all the GDP growth, and lot more, has been bought by $12.5Tr in additional federal govt and household debt. But for the growth due to borrow-and-spend the annual GDP growth in the US since 2001 would have been close to –4% (minus four percent). Can you spell g-r-e-a-t-e-r d-e-p-r-e-s-s-i-o-n? The cost of postponing the greater depression is simply a much worse and longer lasting depression in the future. The time bomb is ticking.
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If I'm a CEO and the IRS lets me keep everything I can grab except for 15%, that seems like a once in a lifetime opportunity to get wealthy in short order. I'd be motivated to stuff my pockets as quickly as I can and screw everyone else. It's the new business model.
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taxee says
God Bless America.
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Um.
By your chart GDP Growth/Decline actually leads changes in tax rate in most of the situations.
Also, note that monetary policy is not factored in anywhere here. The 70's/80's had massive stagflation, the 80's huge interest rate swings and massive government deficit spending, and then the whole Bush 41 "no new taxes" and the rise of the internet. Not to mention the dismissal of bretton-woods and an inflationary standard from that point forward.
Also: Shenanigans on your "Over the next 8 years." Just list GDP year by year. FYI, GDP growth YoY in 2000 was 5%. Your 8 year comparison pulls in the .3% in 2001 and the -2.6% in 2009, skewing your 2001 results significantly downward and impressioning the reader that oh golly, it's all those evil tax reductions!
Excel, some economic stats, and the internet can be a dangerous combination. Just say no!
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47 male
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Are taxes currently at record lows? Yes.
Is growth currently at the worst level since the Great Depression? Yes.
I have but a single question. If cutting taxes is good for the economy, doesn't that mean if the economy is still shit that cutting taxes for rich people is like pissing in the ocean as far as how much practical effect it has?
I think that's a yes but you can clarify if you want. Why keep doing something that doesn't work?
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iwog says
You are mistaken, sir.
You must be. For we are: Taxed Enough Already.
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msilenus says
I agree completely. The real producers are taxed enough already while the people who exploit the producers are given most of the breaks. The people who exploit the exploiters of the producers, Warren Buffett and Wall Street, are given the best breaks of all.
It's insane.
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I think its easy to say taxes should be higher if you are not already paying 43.9% (federal and state), like I am. If you want to make the argument that capital gains should be raised, I can perhaps see an argument to that. Unfortunately, the proposals we have currently are focus on raising income taxes, not capital gain. Thus middle class citizens like myself are affected.
Its so silly that people are using the "buffet rule" as an argument to increase income taxes since the argument used in the Buffet rule is not based on income taxes but rather Buffet's capital gains rates.
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Meccos says
If you're paying 43.9%, then the Buffet rule will have 0 effect on you.
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iwog says
God Bless America.
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Meccos says
American voters are no longer qualified to make informed decisions about the economy. Therefore the easiest way to cut the public's teeth on tax reform is to tax multi-millionaires.
Obama ran on a 5% increase in the capital gains tax rate. It didn't get any traction. The Buffett rule is so dumbed down that Obama is hoping there might be enough public pressure to move it forward.
Regardless of how large a majority supports it, Republicans will kill it and attempt to cut taxes for the rich further. Thus we get abominations like the Ryan bill.
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Obama makes Eisenhower look like a stoned-out hippie.
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Meccos says
Meccos, can I ask how you pay 43.9% of income in ca+fed tax? The top rate in CA is 9.3% for income over 45-96k (depending on filing status). Top fed rate is 35%. This total is 44.3%. But, this is the marginal rate, for income over $388k. So someone making 400k and having no deductions would pay 44.3% on 12k of income, but lower overall. To actually pay 43.9% of income would require a multi-million dollar income, because the first 388k is taxed at a lower rate. Plus, the CA tax is deductible from federal income to some extent. And people making >$1m generally will have some other deductions or adjustments to reduce tax.
There is FICA, but SS tax is only counted on income up to ~100k, so becomes a very small percentage at these levels. Medicare is ~1.9%, but still it's hard to get to 43.9%.
So I'm curious how one could pay 43.9% of income in taxes, particularly if someone is middle-class. Maybe in SFBA, middle class could go to 200k or so, but these people aren't even in the top bracket.
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APOCALYPSEFUCK is Tony Manero says
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I propose a "Buffet rule" that everyone who misspells Buffett has to pay an extra 10%. It would raise a lot of money and promote education at the same time.
Also maybe a national swear jar.
Aside from that, the tax code should apply the same rates to all sources of income: ordinary, capital gains (including Romney's "carried interest"), and estates. Also include Social Security, even in the estate tax: that way, if your kids squander everything you've left them, or "invest" it all in Ponzi schemes and dot-cons, at least they won't become a burden to your grandchildren. Equalizing rates, closing loopholes, and eliminating counter-productive deductions (including mortgage interest) could raise plenty of $ while keeping the top marginal rates (including FICA and state and local income tax) below 50%. People could still keep most of their income, and the budget would balance.
In contrast, the Bush tax shift, extended further during the Obama administration, was never a tax cut. It produced a deficit, which is a tax shift, and public deficits crowd out private investment. It might be very interesting to compare federal deficits to GDP growth over the subsequent 5 and 10 year periods.
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Ellicott City, MD
Let's go back to the graph of Jas Jain, and his proclamation that high federal tax rates drive economic growth in the form of GDP. And his slamming of Rush LImbaugh and anyone who believes in supply-side economics.
I think Jas Jain is delusionally wrong. In the 1940s, '50s and '60s, there were many ways that rich business owners could avoid the highest tax rates, and they did. And there were other reasons after 1945 that the U.S. manufacturing sector was a powerhouse for the world (the infrastructure of Japan, Germany, France, etc) had been decimated for example). High tax rates were NOT the reason our economy succeeded.
And finally, Jas Jain, you appear NOT to believe that our country was all about a limited federal govt, so that the states could establish their own tax rates and programs and compete against each other. Once our federal govt grew to mammoth proportions under FDR, LBJ, Carter, etc......all bets were off. We joined the ranks of the semi-socialist European countries and lost our singularity as the most brilliant design of a nation ever. That's partly, or largely, why we're sinking into the morass that PIGS countries and England, France etc are sinking. Over-bloated federal govts that spend and promise WAY TOO MUCH. It has nothing to do with the fact that federal tax rates aren't high enough in your opinion. How would that solve our problem? You didn't answer your own hypothesis' most obvious question.
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sbourg says
If it reduces income inequality, then it would go a long way towards solving our problems.
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"I have known that Limbaugh and other Right-wingers have been lying and finally decided to present the facts in graphical form, as shown below."
And by calling republican right-wingers liars are you suggesting that left-wingers are honest?
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Meccos says
Well you're lucky. Many of us are paying more than that. And that doesn't include property taxes, sales taxes, hidden taxes (fuel, energy, etc). But in the end, I guess it really doesn't matter because the rich always find a way to pass the tax burden onto the citizens. Either through rent increases (property owners), price hikes (business owners), and layoffs/pay cuts/wage freezes/etc. The ultra rich understand this dynamic, that's why the majority are socialists. Go ahead, vote for taxing the rich. That's what was sold to everyone before the introduction of the Income Tax. It was only meant for rich people. Now everyone pays it. The AMT was only meant for a certain group of rich people, which were in the hundreds back in the 70's, but now 10s of millions of Americans are paying.
Anyone who thinks that capital gains tax is too low should consider inflation-adjusting these supposed gains. What if your investment only keeps up with inflation? Suppose you keep $100,000 in the bank for 10 years and there is no inflation, would it be right for the government to take $15,000 because one day you decide to pull the money out?
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Chicago, IL
Wow! What a load of shit.
For starters your chart shows correlation, not causation.
iwog says
By your own definition, taxes are at an all-time high. You change your own definitions and logical thinking process when moving across the partisan line. Seriously, you're better than this dude. Why engage in this obfuscation game?
tatupu70 says
Income inequality? Wow, so another undefineable, populist, nonsense talking point for team dems?
I believe you mean wealth inequality, which isn't the problem, but is rather a symptom of the larger disease of POWER consolidation.
Wealth, in and of itself, is fine. People who improve the lives of those around them SHOULD accumulate some wealth. Even the extremes are fine, as long as they add an inordinate amount of value to the world (Bill Gates and his ilk are good examples).
When people are able to use POWER rather than innovation to accumulate wealth it becomes a problem.
Historically there has been no better method to create wealth than a free-market system. This is true for everyone involved, not just those at the top.
Concentrated power into a small group of politically well-connected has historically and will continue to benefit the few, at the detriment of everyone else.
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Housing casino,
Can I ask, how can you pay more than 45%? The highest I can imagine is 35% fed, 9% ca, 2.9% Medicare if one is self employed and pays both ends of Medicare tax. The total is 46.9%, but on income over 388k, and assuming no deductions whatsoever. So it looks really difficult to pay this much. I make mid six figures (I won't claim to be middle class with such income), pay about 23% fed and 8% ca, due to deductions. But I don't really have anything warren buffet-like; no carried interest, not much capital gains, no real estate depreciation.
Please educate me, I really don't see how someone could pay that high percentage in taxes under current law.
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housingcasino4865 says
Today's liberals are 1984's republicans. Same game, different era.
The democrats are everything they accuse the republicans of being. It's disgustingly predictable.
The republican religion went through a 30 year power cycle. Milton Friedman was their profit, as Reagan was their general. After decades of blatant raping and pillaging, only the most uneducated red-staters still consider themselves to be republicans. Most of the 1984 republicans choose instead to call themselves "conservatives" or "independents" now.
Today, the "democrats" control the air of sophostication and intellectual support which the republicans had in 1984. This liberal religion is every bit a false god nontheless. Seems like it takes people around 25 years to figure it out though. For the time being, educated people across the nation are breaking their arms as they pat themselves on the back for being "liberal".
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CBOEtrader says
Honestly I have no idea what you're talking about. Example of me saying taxes are at an all time high?
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CBOEtrader says
"profit" -- You, sir, are funny.
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SiO2 says
California tax rate does not max out at 9.3%.
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Larkspur, CA
In the mid six figure income range and pay 38% in CA. Normal deductions and straight income. Also, wife and I both pay max SE tax as we are self-employed. That alone, is about 34k a year.
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Housing casino, Rowemoore, thank you for the replies.
According to CA it is 9.3% for 2011. https://www.ftb.ca.gov/forms/2011_California_Tax_Rates_and_Exemptions.shtml
There is a prop to increase it, but it has not been voted on yet.
In 2012 the top goes to 10.3% for income over $1m, but that was not in effect in 2012.
http://www.tax-rates.org/California/income-tax
Plus there's no local income tax in CA, like there is in NY, PA, or other states.
Rowemore, I can see 38%; 9% CA, 29% fed, if you have few deductions, retirement accts, etc. But I don't understand the 45-50% claims. That's a big jump. Plus I would think that being self employed enables more deductions, like home office, etc. But this may be overblown.
Rowemore, you do pay a lot more on FICA, with both spouses self-employed. I'm the sole earner at a w2 job so pay much less FICA than you do. The worst case for that would be a dual-self-employed where both spouses make $100k. They'd pay around 15% in FICA alone, before fed and state tax. Whereas a sole earner making 200k with a stay-home spouse would pay about 6% since SS tax only goes to 100k. That doesn't seem fair.
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Larkspur, CA
SiO2 says
I have a friend, trust fund baby, who makes more than twice what I make and pays much less in federal taxes. Investment income.
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rowemoore says
And he should pay much less. Chances are the money he's receiving from his trust was already taxed once. Are you in favor of double taxation? Everyone should realize the reason we have estate taxes is to keep the upper middle class and quasi millionaire (5-10 mil) from rising up to the level of the 100+ millionaire and billionaire elites. For obvious reasons. Socialist policies discourage investment and hard work and more importantly: competition, which is a perfect thing for bigwig socialists like Warren Buffett.
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housingcasino4865 says
Corporate taxes should be lower, but investment income taxes should be higher.
Get used to socialist policies -- as the jobs continue to go away and the money continues to flow to those who own the 'robots' that replace those jobs, there will be greater and greater pressure on leveling the playing field (i.e. income redistribution)
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CBOEtrader says
Nope--I meant income. Although wealth probably works just as well. Do you think the US goverment doesn't measure income? For income tax purposes? They have a pretty good incentive to measure it, don't you think?
CBOEtrader says
Again--I'm not talking about fairness or morals. I'm talking about creating and maintaining a functioning economy. I don't care what SHOULD happen, although I think any tax on passive income is a good idea. In any event, when income (or wealth) disparity gets too large, the economy grinds to a halt. That's one of our main problems right now. When 50%+ of the population is on food stamps, then you've got a big problem.
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47 male
Lafayette, CA
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CBOEtrader says
This is only partially true. Unless the free market is constrained by government, it's a total disaster which results in a depression every 20 years and horrible working conditions for the majority. You have no historical examples showing otherwise.
CBOEtrader says
The extremes are not fine. A Monopoly game isn't an abstract mental exercise with no practical applications. The real world actually works like this.
Why did Teddy Roosevelt declare war against robber barons and trusts? (today's holding companies) Because they were benevolent and created wealth or because they were a cancer on American society breeding poverty, company housing, child labor, and death?
As much as you'd like to insist otherwise, it really is a zero sum game. There isn't any significant growth beyond the increase in population. The economy is nothing more than a Monopoly set with limited assets, limited cash, and limited opportunity.
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46 male
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rowemoore says
It's very profitable to own the government.
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According to your chart, it must be true because correlation is causation.
The high GDP of the 50s, due entirely to the US having the only intact economy after the war, is followed by the reduction over time associated with Europe and Asia catching up. This effect presumably then must be due to the reduction in tax rates - although I'm having some difficulty with the actual mechanism involved. Possibly those Rockafella and JP Morgan dudes gambling their ill gotten tax refunds in Monte Carlo?
Given the sure and certain relationship see here, it's kind of a shame that the Democrats didn't push for higher tax rates when they had a clear veto proof chance to do so - early in the Obama administration. Obviously, this was entirely due to Rush Limbaugh, who apparently runs the entire political system. No wonder the left started MSNBC just to counter the guy.
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47 male
Lafayette, CA
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Schultz says
I consider this fiction. I think this is dogma used to justify further tax cuts for the aristocracy. It's handy because it sounds good, but it's false.
I'll prove it by posting two charts. The first one shows the extent of our "domination" of international markets. It lasted about 4 years before returning to normal.
The second chart is data going back to the beginning of the 19th century. As you can see, our advantage after the 1st World War was much greater, yet within 10 years we were deep into a depression.
The claim that our economic prosperity was due to World War II destruction is false and cannot be supported. It's convenient for those who want to claim high taxes kill prosperity, but it's not true. Progressive taxes help an economy because it prevents wealth concentrations and keeps enough money flowing to consumers.
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47 male
Lafayette, CA
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Schultz says
The Democrats had a veto proof majority for exactly 14 weeks, and much of that was during summer break.
It's amazing that they were able to accomplish passing health care reform, and even THAT wasn't possible during the 14 weeks. They had to finish after they had already lost the 60 votes in the Senate.
Another piece of fake dogma passed around by the right.
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iwog says
This is an undermentioned fact. Ted Kennedy made his final vote in March 2009 due to his health. He was able to show up and vote to overcome the filibuster on the stimulus but not on health care reform negotiations lasted longer than his ability to work.
Paul Kirk was there to vote for it though, so you can't exclude the 12 weeks or so he was in Kennedy's seat.
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Chicago, IL
iwog says
Circa 2007 you responded to a Bap comment. I don't think Patrick has records from the old forum, but the conversation was something like:
Iwog: "The republicans spend like a high school girl with Daddy's credit card."
Bap: "The republicans lower taxes, whereas the Democrats raise taxes and spend. The republicans are at least half right."
Iwog: "Taxes are created when the money is spent, not when the bill arrives. Not paying for it as you go is chidish and shortsighted."
...etc...
Your comment resonated with me because IT MADE A LOT OF FUCKING SENSE. So I was left thinking, perhaps I should read this Iwog guy's posts more closely, as he can teach me a thing or two.
-BUT- Now the democrats are in power. Government spending as a % of GDP is at an all time high, deficits are at an all time-high. Any way you measure it, our government is spending more than ever. Not only that, but liberals seem to think we should be spending more, not less.
If your critical thinking was consistent, your only conclusion could be "Taxes are at an all-time high, and the democrats are set on raising them higher still."
You do the same thing with your wordplay. I have read posts where you call someone a liar for referring to increasing government programs as "socialism". Though a bit dramatic, you are technically correct. However, when it comes time to discuss free-markets, you use the term VERY loosely (as do both sides of the debate BTW). You might refer to the problems within our healthare industry as a result of the republican free-market religion, for instance. Meanwhile, the healthcare industry doesn't resemble a free-market. Should I call you a liar when you do this?
iwog says
You're right, which is exactly why we should probably define key terms before discussing. IMHO, you can't have a free-market without PROPER regulation. There have to be rules with an underlying theme of open competition, transparent market price discovery, compensation for risk taking, as well as losses in failure. The government needs to play referree only, rather than referee, coach, quarterback, and league organizer.
iwog says
I am not a history buff like you. However, a monopoly always hinders competition, and should be broken apart. Unfortunately, our most regulated industries result in government enforced oligopolies. In the healthcare and banking industries, for example, this funnels a lot of wealth into the hands of the few and raises costs for everyone.
Regulation should not be discussed like it is salt going into an economic soup. The question is not about more or less regulation. It is only about proper vs improper. Removal of Glass-Steagall was an aweful idea. At the same time, there is more regulation (read: barriers to entry resulting in less han optimal competition) of the banking and finance business than ever.
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rowemoore says
Ha, this made me laugh. Yes, I am a trader, and this was a Freudian slip. I write "profit" at least 10 times per day-- it just flowed out of my fingers without a thought until you pointed it out.
BTW, on Tuesday my partner is doing a bloomberg webinar teaching basic market profile signals and trading strategies (pairs trading, break outs and mean reversion stuff mostly), using some of the tools I use to trade with with every day-- if any of you are interested.
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CBOEtrader says
Bzzzt, wrong!
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Chicago, IL
I stand corrected. I should've checked the graph before I made the comment.
This doesnt change the point, unless you feel a 4 year ww2 period makes it moot?
Our taxes are retardedly high. Our government wastes too many of our resources. The government needs to be smaller. The status quo, as represented by BOTH parties, benefits the super-rich to the detriment of everyone else.