Talk:Tax cut

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This is an obvious piece of politcal advertising, but at least it's now a reasonably balenced piece.

Really this should be at Tax rate. DJ Clayworth 15:27, 5 Feb 2004 (UTC)

Thanks, D.J. --Uncle Ed 16:15, 5 Feb 2004 (UTC)

Although in theory this could be international, in practice the "cut taxes and services" philosophy is really only a major political issue in the USA. Can't the article be moved to a namespace that makes that clearer?

jimfbleak 18:39, 5 Feb 2004 (UTC) (not a Democrat, socialist, or American)

I have done a major rewrite on this to try to get it less POV. Where people of honest good will cannot agree about whether something should be done, it is usually because at least one of the following is true:

1. There is an issue of values involved;
2. Theory does not make clear predictions about what will happen if it is done;
3. It is difficult or impossible to collect clear data about what happens when it is done.

All three of these apply to tax cuts, so early agreement is not in prospect. I have tried to make that clear in the revised article (I've downplayed the values issues, but they focus round whether you think income inequality is inherently bad, or taxation is inherently bad). seglea 00:50, 6 Feb 2004 (UTC) (not an American or a Democrat, and while a socialist, always willing to start from the presumption that people of different political persuasion are thinking and acting out of honest good will).

Nice rewrite. Learned a lot. DJ Clayworth 18:04, 6 Feb 2004 (UTC)

[edit] A self-contradictory and unattributed POV

In the United States in recent decades, most "supply-siders" have been Republicans, and both President Ronald Reagan and President George W. Bush are well known for signing tax cuts into law, in the belief that effects (1) and (2) would predominate, with overall beneficial effects. President Reagan's tax cuts were indeed followed by increased growth and substantial job creation, which produced higher tax revenues, helped shrink the deficits and eventually led to the budget surpluses of the 1990s, and supply-side economists argue that the link between the two was causal.

Is it really the belief of supply-siders -- or are anti-supply-siders putting words in their mouths? I never thought Reagan or Bush thought revenues would go DOWN if tax rates were cut. Moreover, the next sentence in the paragraph says that the Reagan/Bush taxt cuts produced higher tax revenues if the article challenges this (footnoted) assertion later on, I must have missed it.

I think we should say that certain advocates believe that tax cuts will reduce revenues, and that certain other advocates believe that they will/have increase revenues. --Uncle Ed 18:23, 6 Feb 2004 (UTC)

Ed, your additions seem more POV than the previous version. Your sentence beginning 'Advocates who want...' is weaselly; it implies that that is the reason they propose this, without actually saying it.

Also, for the unitiated, why is capital gains an obvious example? The only reason I can think of for this is that a reduction triggers sales of capital that otherwise would otherwise be deferred, in which case what you are doing is bringing forward tax revenues from the future that would otherwise be paid later, but at a higher rate. DJ Clayworth 18:29, 6 Feb 2004 (UTC)

DJ, you are probably right. What I assume to be "common knowledge" might merely be the wishful thinking of supply-siders. If so, the solution is to attribute the POV to them.

Do we know for a fact that capital gains cuts have usually resulted in increased revenues from the capital gains tax? Then the article should say so, but probably will need a source (not just a columnist with an axe to grind, either!).

If it's not a known fact, then we better say "Sy Cider, economist at Blah Blah Industries joins Professor Blather at Big University in claiming that... while Mr. X and Professor Y maintain that..." --Uncle Ed 18:48, 6 Feb 2004 (UTC)

I agree strongly with Ed's last point, though it is often depressingly difficult to trace these opinions back to their sources.

But going back to the former discussion, Ed, I think you missed the point I was trying to make. I was trying to distinguish between the immediate effect of a tax cut (which is a matter of logic) and its long term effect (which is a matter of theory, circumstance, etc). It cannot possibly be disputed that the immediate effect of a tax cut is to reduce government revenues and increase consumers' real income. That does not rule out the possibility that there is a subsequent increase in government revenues because the tax cut has had benign effects through the economy - and I certainly did not intend to rule that out; in my view it's (a) an empirical matter that has not yet been settled and (b) likely to depend on the conditions of the economy, degree of internationalisation of trade, etc. Similarly I don't think it is a matter of "some economists believe..." that there will usually be a mixture of the different possible effects of a tax cut (or any other government economic policy action) - the real world is a messy place and pure outcomes are as rare as dodos.

I will re-edit back to what I was saying before, but I will try to make it more explicit, in the hope that the above is not really contentious. seglea 18:55, 6 Feb 2004 (UTC)

When little kids misbehave, sometimes I tell them, "You're being impossible." At the risk of losing the Uncle part of my user name, I'm now going to do the impossible.

You said, It cannot possibly be disputed that the immediate effect of a tax cut is to reduce government revenues and increase consumers' real income. But I think capital gains is an obvious exception. Investors don't sell (and thus no tax is collected) when the rate is too high. As soon as the tax is lowered enough, investors sell; thus (a) immediately increasing government revenues and (b) possibly adding to investor's income (assuming they don't immediately re-invest the proceeds).

But I'm not an economist, merely the offspring of two MBA holders. The "trickle-down" theory of academic excellence has not been shown to hold water (!) so maybe I'm wrong. Anyway, the article can't quote me as an authority because I have no credentials even if I occasionally make a lucky guess!!

How do you want to put it, then, seglea? --Uncle Ed 19:03, 6 Feb 2004 (UTC)

It's looking pretty reasonable to me now, and I'd be content to leave it the way it is - but I'm not an economist either, just someone who works around the fringes of the discipline. And I should learn never to say that something cannot be disputed - that's an open invitation to dispute it! You could be right about capital gains tax, too - stock markets are notorious for being able to move more quickly than the real economy, and even in the real economy tax changes often produce an immediate surge of activity either in anticipation or reaction. A good example is raising the tax on tobacco products - that has been done so often by so many different governments that we have pretty good data on what happens, which is (i) after the increase is announced but before it goes into effect, a surge in demand; (ii) after it goes into effect, an immediate fall in demand; (iii) over a period of months, a gradual return of demand, but to a level that is somewhat lower than previously. In this case too net government revenues can go up or down as a result, of course, but not for the same sorts of reasons as we are discussing in the present article, because the effects are not big enough to be macroeconomic - it's just a standard piece of microeconomic analysis of the effects of a price change. seglea 20:21, 6 Feb 2004 (UTC)

Economics is tricky. I'm not a subscriber to any particular school of thought. I like free markets whenever I want to get a higher-paying job, but I like socialism whenever I think of the enormous inequities between rich and poor. The only thing I'm sure of is that Marx's prediction that Capitalism would make the rich richer AND the poor poorer has been thoroughly disproven in democratic countries with free market economies: the poor got richer, too! --Uncle Ed 20:42, 6 Feb 2004 (UTC)