rickyp wrote:steve

"Republicans supported tax cuts in the past, why not now? Is it because they only like rich people getting tax cuts?" is just dumb.

The reason they supported the tax cuts, is that they thought they would stimulate the economy (see quote from Grover N) . Now, apparently only tax cuts for the most wealthy are said to have a stimulative effect. That requires explaining...

Not quite right. They don't favor raising taxes on the so-called job creators. That is different from what you are saying.

Beyond that, it is a balancing act. You seem to be ignoring some pretty substantial changes between 2001 and 2011--like and additional $10T in national debt.

When you promise the working class an average of $29 every two weeks for a year, you can't really expect that to spark a major recovery. On the other hand, it will create even more debt.

Perhaps the President and Democrats should spend more time thinking and less campaigning?

The economy needs to be expanding for anything substantial to be done about the debt. And i think if you check, jobs and the economy are ahead of concerns over the debt. After all, the enormity of the national debt is surreal compared to struggling to pay the mortgage and put food on the table for a lot of people.

If taxes have to be raised across the board in the near future to cover a one year reduction, that's not much of a deal. Please provide analysis that this cut will spur long-term growth and is not merely a political ploy.

Besides all of your caterwauling, the last I knew, Republicans are going to pass the reduction in the House today.

Archduke Russell John wrote:

freeman2 wrote:WIth regard to Archduke's contention that a cut in payroll taxes would not significantlyincrease consumer demand how about the existence of the tax refund loans?

They use them to pay bills like mortgages, car payments and utiilities. They do not use it to buy stuff or go out to eat.

Because all people are homogeneous and act in exactly the same way...

as to your link, which you were so eager to be able to bring in...

Wow. That article was so full of snark. If it hadn’t been swiping at the New Yorker, I’d have though it might be from it. Is the Weekly Standard a known independent magazine, or does it have a particular political standpoint, perchance?

Getting past the aforementioned snark, I have to say that there is a flaw in all three of the surveys/studies referred to, and one that the article alludes to. They are all asking people what they ‘would do’ if something happens. I’m no behavioural scientist, but when I saw the line, “It’s hard to imagine a more thorough repudiation of the behavioralist thesis” I already had a better test in my head. Rather than ask what people ‘would do’, a more thorough test would ask afterwards what they ‘did do’.

Not only is self-reporting a potential issue, so is predicting behaviour based on intention. In a few weeks, millions of people will embark upon their New Year’s Resolutions. They will resolve to do something (often to give up a vice or lose some weight). How many will succeed over the year? How many will get to February? Intent and ‘would do’ does not ‘repudiate’ or ‘refute’ much on its own. You need what they ‘did do’. Now, if there were a study of what people did do with tax cuts, and it showed one thing or another that may well ‘repudiate’.

That’s before we get to the difference between the 2008 and 2009 tax cuts. One was made as the economy was still growing (just), and the other when it was at about the deepest part of the recession. Guess what? Behaviour will not be static in such changing times. People who don’t see a recession coming, and who currently have what they think is security will act differently to people who see a recession and have less security. Do we need studies to prove this, or can we rely upon our mutual understanding of human nature?

The article is also disingenuous if it suggests that the entirety of behavioural economics derives from a single study, or is confined to the question of how people would spend reduced or refunded taxes. It’s a fair deal wider than that. Indeed, either thesis (the one you support, or the one that I have outlined) would be part of a behavioural economic theory. It’s not really all that new an idea, either. No less a figure than Adam Smith was using what we recognise today as psychology to explain individual behaviour in The Theory of Moral Sentiments.

And you still seem to be missing my point. You argued that a cut in payroll taxes of about $60 a month to the average employee would not have any effect at all, and could not. Pretty absolutist. I’ve shown how it could have some effect.

Now, you say that people would pay down debt if they got a tax cut. That seems to be what you are saying, that they’d use it for bills etc. Well, that’s money that they already have to pay, and will do at some point later on othewise (or if they don’t they either get in trouble or the creditor takes a hit, or both). Surely fewer defaulted loans and missed bill payments is also good for the economy. And surely the quicker people pay off outstanding debt, the sooner they will have the security to use money for something else. Surely people paying off debts increases the confidence that lenders have to lend, which we want, given that banks are still much more cautious about lending than they were before (they were too incautious before, but perhaps are overly so now).

What I’m saying is that some will be saved (although savings rates are low, so perhaps not a huge proportion will), some will be used to reduce existing debt which is not a bad thing at all, and some will be spent. More money in the economy and through people’s salaries will go into the economy.

Will the effect of a small tax cut be massive? No, and I never said it would.

Would it be zero? I don’t think so, and I’ve outlined my reasoning.

You say it would be zero, but even your argument fails to show how people using their tax cuts to pay off existing debts would have no effect at all (let alone accept that people are not all whizzes at financial planning and despite all good intentions might spend rather than save or pay off debt).

What I find interesting is that the same political tradition that is usually all for tax cuts is taking up against a cut in payroll taxes. I’m sure that this down to deeply held principle, and nothing to do with who is proposing them. Suddenly supply-side is not ‘cool’ for conservatives, apparently. Similarly, we have the phenomenon of defending to the hilt the Bush Tax cuts, while at the same time bemoaning one of their key effects – the increase in people lifted out of paying Federal Income Tax. I know that liberals can be inconsistent. It’s part of their woolly nature. But conservatives appear to be wavering a bit as well.

American corporations really have it rough when it comes to taxes...http://publicampaign.org/sites/default/ ... ngDec6.pdf (by the way, obviously the 30 major corporations were cherry-picked to make a point, but still....)

freeman2 wrote:American corporations really have it rough when it comes to taxes...http://publicampaign.org/sites/default/ ... ngDec6.pdf (by the way, obviously the 30 major corporations were cherry-picked to make a point, but still....)

So, why not do what GOP proposed? Lower rates, eliminate deductions.

But what is the GOP going to do about the practice of multinationals moving their profits outside the U.S. and claiming that the profits are not subject to U.S. taxation? I think that is the biggest problem and nothing is being done about that. The estimate I see from this article is 20 to 25% effective tax rate for corporations See http://www.huffingtonpost.com/2011/03/0 ... 30361.html and http://www.csmonitor.com/Business/Tax-V ... evenue-pie. If you could get firms to pay their fair share of taxes, i could see lowering the corporate tax rate to 28%.

freeman2 wrote:But what is the GOP going to do about the practice of multinationals moving their profits outside the U.S. and claiming that the profits are not subject to U.S. taxation?

Good question. I will briefly answer with another question: what are the Democrats and the President doing about it?

Now, think about it this way: if you lower the tax rate and remove the motivation to move profits off shore, they won't do it. Raising taxes on corporations is a self-defeating move. Raise the rates and they move more jobs and plants out of the country. Lower the rates, eliminate major deductions, and you will get more revenue. Furthermore, corporations won't have to hire as many tax accountants.

I think that is the biggest problem and nothing is being done about that. The estimate I see from this article is 20 to 25% effective tax rate for corporations See http://www.huffingtonpost.com/2011/03/0 ... 30361.html and http://www.csmonitor.com/Business/Tax-V ... evenue-pie. If you could get firms to pay their fair share of taxes, i could see lowering the corporate tax rate to 28%.

I continue to believe that if it were you, me, and geojanes in Congress, we could make this happen. I think there are a variety of reasons it doesn't happen, but they are not good ones. This is much like the Simpson-Bowles Comission proposed. It should be a no-brainer.

A couple of points. First, corporate profit isn't moved off-shore. It is earned off-shore usually by subsidiaries and kept off-shore. It's just not brought back. A subtle but important distinction.

Second, having very high tax rates, personal or corporate in comparison of the rest of the west is a bad thing. Tax rates should be in a tight distribution clustered around a mean. Picking out a number, like 28% without understanding where it fits into the global (non-tax haven) competitive landscape is dangerous. Of course, there's the difference in services provided, but that should account for much of the variability around the mean.

I continue to believe that if it were you, me, and geojanes in Congress, we could make this happen. I think there are a variety of reasons it doesn't happen, but they are not good ones.

I'll look forward to seeing you both in our freshman class of 2018! One thing that would happen if we taxed the top corporate rate much less than the top personal rate is that people would shelter income in their closely held corporations, and there are millions of these and there would be millions more springing up to take advantage.

You'd have to look at both corporate and personal together. I'd like to see both streamlined, getting rid of many, many deductions and credits and likewise lowering rates, in a revenue neutral fashion so that people and corporations that earn similar amounts pay similar amounts.

It seems as likely as the sky turning purple.

geojanes wrote:You'd have to look at both corporate and personal together. I'd like to see both streamlined, getting rid of many, many deductions and credits and likewise lowering rates, in a revenue neutral fashion so that people and corporations that earn similar amounts pay similar amounts.

Perfect.

Geojanes,

I don't think there is an objection to corporations not being taxed on overseas operations. The problem is shifting profits overseas that are really earned in the U.S. This is partly how GE has reduced its tax burden. From 1996-1998 GE had 73% of its revenue in the U.S and the same amount of profits; over the past three years, 46% of its revenue is in the U.S. but only 18% of its profits. See www.nytimes.com/2011/03/25/business/eco ... wanted=all

Beyond that, they aggressively used tax breaks to reduces the taxes on the profits they claim are made in the U.S. But the reality is that almost certainly a large amount of the profits are really made in the U.S. and are not being taxed.

rickyp wrote:.But I'm still struck by the use of the arguement that a tax reduction for the poor and middle classes, won't have an effect. Are you prepared to say that the same thing would happen if tax rates for the rich are changed? (Up or down...)

Hey dipshit please point to one place where I said any tax reduction for the poor an middle class won't have an effect?

I specificied a $14 a week tax cut wouldn't have an effect.

freeman2 wrote:The problem is shifting profits overseas that are really earned in the U.S. This is partly how GE has reduced its tax burden. From 1996-1998 GE had 73% of its revenue in the U.S and the same amount of profits; over the past three years, 46% of its revenue is in the U.S. but only 18% of its profits. See http://www.nytimes.com/2011/03/25/busin ... wanted=all

Beyond that, they aggressively used tax breaks to reduces the taxes on the profits they claim are made in the U.S. But the reality is that almost certainly a large amount of the profits are really made in the U.S. and are not being taxed.

That article was almost as good as the first time I read it. GE, imagination at work, in everything they do! The real problem is that so many of these breaks treat GE and a tiny handful of corps different than other corps. The inequity of it is what should get us all rankled:

One provision allowed companies to defer taxes on overseas profits from leasing planes to airlines. It was so generous — and so tailored to G.E. and a handful of other companies — that staff members on the House Ways and Means Committee publicly complained that G.E. would reap “an overwhelming percentage” of the estimated $100 million in annual tax savings

Sorry it has taken so long to respond to this Owen. However, it was rather long and I wanted to make sure I had time to read it and respond.

danivon wrote:Wow. That article was so full of snark. If it hadn’t been swiping at the New Yorker, I’d have though it might be from it. Is the Weekly Standard a known independent magazine, or does it have a particular political standpoint, perchance?

And so if it is. Does this mean he is wrong. Isn’t this the logical fallacy you accused me of in response to a ricky post a couple of months ago? What was it….tu quoque?

danivon wrote:Getting past the aforementioned snark, I have to say that there is a flaw in all three of the surveys/studies referred to, and one that the article alludes to. They are all asking people what they ‘would do’ if something happens. I’m no behavioural scientist, but when I saw the line, “It’s hard to imagine a more thorough repudiation of the behavioralist thesis” I already had a better test in my head. Rather than ask what people ‘would do’, a more thorough test would ask afterwards what they ‘did do’.

Yeah, I am pretty sure that it the point he was making. The whole school of behavioral economics is a load of crap because it is primarily based on faulty studies.

danivon wrote:You say it would be zero,

Really? Please point to the place I said it would have zero effect. Because I did not say it would have zero effect.
Now at this point, when something like this is done to you, you get all indignant and start making accusations of the other person being a liar and trying to change your words. Should I start that to you?

danivon wrote:And you still seem to be missing my point. You argued that a cut in payroll taxes of about $60 a month to the average employee would not have any effect at all, and could not. Pretty absolutist.

Again, I didn’t say it would have no effect. I said it would not have the desired effect. I feel pretty solid on that because the exact tax cut we are discussing was done and did not have the assumed effect.

danivon wrote:I’ve shown how it could have some effect.

You did no such thing. You gave your opinion on how you think it could have an effect but you haven’t shown anything (in the sense that showing is providing proof)

danivon wrote:but even your argument fails to show how people using their tax cuts to pay off existing debts would have no effect at all (let alone accept that people are not all whizzes at financial planning and despite all good intentions might spend rather than save or pay off debt).

Again, I didn’t say it would have zero effect. I said it would not increase demand enough to stimulate the economy in the short term. Perhaps I did not fully verbalize the “enough to stimulate…” part; but then, I figured since Freeman’s comment was about increased demand being enough to stimulate the economy in the short term, everybody was intelligent enough to recognize that is what I was specifically responding to.

Archduke Russell John wrote:And so if it is. Does this mean he is wrong. Isn’t this the logical fallacy you accused me of in response to a ricky post a couple of months ago? What was it….tu quoque?

If I had said that the snarkiness and the magazine's avowed right wing stance made them wrong, that would indeed have been a logical fallacy. But I didn't. My later points are why I think it is wrong.

Yeah, I am pretty sure that it the point he was making. The whole school of behavioral economics is a load of crap because it is primarily based on faulty studies.

Well it seemed to be saying that the whole school was based on a single flawed study a few years ago. I agree that the study was flawed. But it also seems that the school has older roots, and I suspect more and older studies are a part of them. Game Theory would have another influence, I expect.

danivon wrote:You say it would be zero,

Really? Please point to the place I said it would have zero effect. Because I did not say it would have zero effect.

You said there was no way it would have an effect, right. That is logically equivalent to saying no effect can result, and zero is a synonym.

Now at this point, when something like this is done to you, you get all indignant and start making accusations of the other person being a liar and trying to change your words. Should I start that to you?

That was a different situation. Firstly, I only did so after the 'gentleman' concerned implied I was lying. Secondly the words and argument he ascribed to me were based on his assumption of a hidden implied argument that I was not making. In this case it seems that I have taken you too literally and not inferred an unstated qualifier.

Again, I didn’t say it would have no effect. I said it would not have the desired effect. I feel pretty solid on that because the exact tax cut we are discussing was done and did not have the assumed effect.

If what you meant was that the effect would be negligible, then fair enough. It's not how it came across in your text, that's all. But the payroll tax cut has only recently been passed in some votes, and has yet to take effect, so I do not see how anyone can say either way.

You did no such thing. You gave your opinion on how you think it could have an effect but you haven’t shown anything (in the sense that showing is providing proof)

Sigh... The use of the word 'could' rather than something more definitive, like 'would' should have given you a clue that I was not claiming to 'prove' something. I was trying to show that there alternatives to your point - the one I thought you'd made in absolute. None are 'proven'.

Perhaps I did not fully verbalize the “enough to stimulate…” part; but then, I figured since Freeman’s comment was about increased demand being enough to stimulate the economy in the short term, everybody was intelligent enough to recognize that is what I was specifically responding to.

I see. That qualifier would have been useful. With it the question is over degree of effect.

Text is not an easy medium in which to imply things, or show tone, and it is easy to miss what is unwritten. Sorry if I did miss what you thought was obvious.

danivon wrote: But the payroll tax cut has only recently been passed in some votes, and has yet to take effect, so I do not see how anyone can say either way.

Uhm, actually no. The payroll cut under discussion, i.e. reducing social security payroll tax went into effect at the beginning of the year. It is actually the second such attempt the current administration as attempted. In 2009, he change the way tax rates were calculated so that people would have more money in their pay checks. It was a temporary measure that expired in Dec 2010. It was replaced with the pay roll tax cut under discussion in January, 2011.

Since neither one of them has had the desired stimulative effect, I still think I am on pretty solid ground when I say the pay cut will not have the desired effect.

danivon wrote: I see. That qualifier would have been useful. With it the question is over degree of effect.

Text is not an easy medium in which to imply things, or show tone, and it is easy to miss what is unwritten. Sorry if I did miss what you thought was obvious.

Well since I quoted Freeman's post about the stimulative effect of the tax cut as part of my answer, I thought it was pretty clear what I was responding to. However, I will strive to be more clear so you don't have to think as much.

Archduke Russell John wrote:Uhm, actually no. The payroll cut under discussion, i.e. reducing social security payroll tax went into effect at the beginning of the year. It is actually the second such attempt the current administration as attempted. In 2009, he change the way tax rates were calculated so that people would have more money in their pay checks. It was a temporary measure that expired in Dec 2010. It was replaced with the pay roll tax cut under discussion in January, 2011.

Man, your tax laws are complicated.

I wonder if a temporary measure is less effective than a permanent one (particularly in terms of forward planning).

Since neither one of them has had the desired stimulative effect, I still think I am on pretty solid ground when I say the pay cut will not have the desired effect.

I don't know that its results are easy to determine, frankly. Has the US economy started to grow? Yes. Has it grown a lot? No. Would the growth have been lower or later without that measure? Don't know.

I can't see how with a complex economy anyone can be so definitive.

Well since I quoted Freeman's post about the stimulative effect of the tax cut as part of my answer, I thought it was pretty clear what I was responding to. However, I will strive to be more clear so you don't have to think as much.

I know what you responding to. I was reading your words which appeared to be wider in scope. Whatever, I think we now both know where we are, right? So no need to labour the point, huh?