Is there evidence of this? Tax reduction proponents often claim some offsetting benefit, but rarely does it seem to come true. Look up the Laffer Curve from the 1980s, when the Reagan administration claimed that tax cuts would spur economic activity and actually increase tax revenue.
Also, to a degree it's based on the premise that these companies are overwhelmed with high taxes and that is determining their behavior. Perhaps they have other motives or the rate isn't really too high for them.
And again, where is the evidence for this claim? I've gone through the last 50 years of US tax cuts, and every time the taxes are cut, revenue decreases. The Laffer Curve may be an interesting theoretical model, but using it to influence any policy decision is laffable.
"The Laffer Curve is a real thing."
there are some assumptions about where on that curve we are.
The balance sheets of most of these companies were at record levels before the tax cuts, and most of the tax benefits will go into share buy backs, which will not do that much to stimulate the weakest parts of this economy.
Before anyone believes this garbage please know that in periods of "high personal tax rates" business owners declared their income through their companies thereby lowering their tax rates. You would have a company car, company vacation, company dinners, you can even make it company policy to pay for the employees children college education, etc...
To understand the tax implications no economic growth you have to look at the tax payments as a percentage of GDP as well as compliance costs. In the US tax payments have held steady at about 18% of GDP since WWII until recently.
There's so much evidence to the contrary, even Obama's own counsel of economic advisories share the view that tax cuts stimulate economic growth. Christina Romer, his former advisor wrote a paper on the subject.
Historically, they do. People talk about high marginal tax rates in the 1950s, but few to nobody actually paid those rates. This was because there were a lot of tax shelter options available, and deductions were a lot looser. Reagan got the tax reductions through Congress by agreeing to eliminate the tax shelters and tightening up a lot on deductions.
The result was a massive shift out of relatively unproductive tax shelter investments into more productive ones. Although I've never seen this opinion in print, I suspect a lot of the economic growth that resulted was a consequence of this shift in investments.
Please know that in periods of "high personal tax rates" business owners declared their income through their companies thereby lowering their tax rates. You would have a company car, company vacation, company dinners, you can even make it company policy to pay for the employees children college education, etc... This is the same reason any comparison of income equality over time is meaningless. Since income was declared through different avenues.
To understand the tax implications of economic growth you have to look at the tax payments as a percentage of GDP as well as compliance costs. In the US tax payments have held steady at about 18% of GDP since WWII until recently. People hunt for loopholes no matter what. But when rates are low you don't have to look for loopholes, so you can deploy your capital more efficiently. Thus generating economic growth. This is why tax cuts often stimulate large economic booms. Capital that was sitting in say tax-protected muni bonds will move into the market and be deployed for business expansion and thereby hiring.
There's so much evidence to the contrary of this article, even Obama's own counsel of economic advisories share the view that tax cuts stimulate economic growth. Christina Romer, his former advisor wrote a paper on the subject. What they do is look at country around the world to collect more data points for a better regression analysis.
Also note that when you say "tax cuts", not all tax cuts are made equal. For a tax cut to be effective it needs to change long-term behavior. So credits and such have a near zero or negative effect while rate cuts have a positive effect. The most beneficial being capital gain rate cuts (ie every time they have been cut, revenues from the tax have increased), corporate, and then final income tax rate cuts.
-Really going to down vote me without refuting any of what I said.
Do we really believe that lowering taxes increases tax receipts ? I don’t think any tax experts believe it anymore. There have been number of examples, like Bush Tax cuts and Kansas tax cuts that didn’t increase tax revenue
> Lower taxes tend to bring in more revenue and create more employment.
Two responses:
1) A bit of an irrelevant point, since we're not talking about RAISING taxes, we're talking about collecting taxes that are due under current rules. (You can argue that's an effective tax increase, but I doubt people/companies that aren't following the rules are a good basis for policy - with lower taxes they'll still cheat)
2) But if we do consider your point...I don't know that your point has been shown at all. Sure, if you're on the far side of the Laffer curve, which is 50-70% tax rate (depending on whose numbers you trust), but we're at 20-38% tax rate in the US (and that's marginal rate, not overall rate). I'd also look to the efforts of politicians like Brownback in Kansas, where a massive tax cut led to...a tanking of the local economy. I don't recall of hearing of a single supply-side success in post-WWII America, but I'll admit to non-perfect knowledge.
Also, as a liberal, I support taxes because I support many govt programs. Taxes themselves are NOT exciting - if we could really raise more govt revenue by cutting taxes, I'd be all for it, but I've not seen any reliable evidence for that (again, unless you're on the other side of the Laffer curve) and I've seen at least limited evidence against it.
Correlation does not imply causation. Can you provide evidence tax cuts stoked existing economic momentum? Or is the economy on fire despite these tax cuts?
Stock buybacks [1] done with these tax cuts, enriching shareholders, does little to stoke economic demand or benefit the middle class [2]. More likely, cheap, loose credit is what has allowed the music to carry on.
At the very least, the idea that any decrease in rates implies a decrease in government tax revenues in short term is debatable, and in the long run is exceeded by increased growth rates [0].
I think it's pretty logical that with lower corporate tax rates, we would see an increase in business activity in the economy therefore not necessarily less revenue, any more than a business decreasing prices always equals lower revenues. I think it depends.
Do we actually have strong evidence that these sorts of tax breaks actually stimulate this kind of economic activity to the degree where it's actually worth it?
It... doesn't seem like we do? I mean, it's not like pre-1990 we had skyrocketing unemployment and underinvestment in business, and lowering capital gains taxes fixed it.
One example is the Laffer curve economics theory with proponents claiming repeteadly over decades no matter how many times it fails that tax cuts will increase government revenue.
There's very little evidence that tax cuts stimulate economic growth. If there was meaningful evidence the investigators would receive the Nobel Prize -- every year. And while economists can be relied upon to provide all sorts of elaborate theoretical "evidence" the actual empirical evidence tends to confirm the opposite: significant tax cuts have zero to negative impacts on growth [1].
It will be interesting though to see what tax cuts do in such a low-growth environment. In the end it seems Wall St. will be the big winner. There's plenty of actual evidence that tax cuts (a) eventually make it back to investors once finance takes its cut and (b) tax cuts lead to most firms adopting a much higher risk profile [2]. Ironically we could see lots of mergers and overseas expansion.
Not more than pre-tax cut trend. The critique was always that companies aren't hurting for cash so a tax cut is pointless and will only balloon the deficit. That's exactly what has happened. We gained nothing but a shorter debt bomb fuse.
Also, to a degree it's based on the premise that these companies are overwhelmed with high taxes and that is determining their behavior. Perhaps they have other motives or the rate isn't really too high for them.
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