Watch your pockets and warn your friends!

Hope of Glory, the reasoning that tax cuts will increase revenue, the Trickle Down Theory aka Voodoo Economics, is based on the assumption that the money in the hands of consumers and, even more to the point, businesses does stimulate the economy so much that people and corporations will earn more thus pay more in taxes, enough so to cover the cut in revenue that lower tax rates bring.

How did you think it was supposed to work, magic?

 

That was the point that I was trying to make all along. That tax cuts increase revenue.

But, when government spending increases at a faster rate, the defecit is going to increase.

So, by association, "increased revenue" and "decreased spending" are not synonymous.

As a result, you raise the tax rates, revenue decreases; how does that help defecit spending.

(Also, as Americans, many people have a short attention span. Most economic actions at the federal level take anywhere from 18 months to 4 years for us to see the results of that action.)

 

Barbarian on why Clinton's tax increases worked:
federal revenue went up so much because the economy grew at a rapid pace.

It's what I've been trying to tell you. Increases in revenue after tax cuts are temporary. If you try to continue, the increased federal debt starts competing with business for investment money. And then, as your article points out, revenue dropped. That's why revenues dropped as Reagan tried to make Keynsian economics a permanent policy. This is also why business picked up after Clinton's tax increases.

Everyone remembers Roosevelt using Keynsian policies, but few remember that Roosevelt dropped them as soon as the economy recovered.

 

Ok, how, by what means, do tax cuts increase revenue when most revenue is collected taxes?

Yes, when spending outpaces income, the deficit increases. However, my point is that government spending tends to stimulate the economy which will increase revenues which will increase the taxes collected. This is why increased government spending during an economic downturn can be a good thing.

Right, increased spending can lead to increased revenue. And if you pay down your debt with the increased revenue, that will lead to decreased spending on debt service. The money which is no longer being paid out in interest becomes, in effect, revenue.

How does raising tax rates decrease revenue when most revenue comes from taxes collected?

I realize that there is a tipping point where taxes become so burdensome that it no longer pays to participate, but I believe we are way far from that point.

According to some Republicans, it took Reagan's tax cuts nigh on fifteen years to see fruition in the Clinton term of office, while Clinton's initiatives took approximately eight years, each one taking a shorter time, unless we hit another economic downturn; in that case, it is clearly a lagging Clinton effect.

What does "GDP" stand for?

 

Gross Domestic Product

 

Actually, it rebutted your argument:

Individuals (as opposed to corporattions) are making more money, and paying more taxes. That's a good thing for everyone.

Why did that happen? Because employment was up.

Why did that happen? Because the federal government was no longer competing with businesses for investment money. So it was cheaper to grow or do a start-up. And therefore, more people were employed. And that means more earnins, and therefore more personal income taxes. BTW, Clinton's increases were progressive, which means the middle class didn't see much of an increase.

Outstanding. It means more people are working and more money is going to consumers, who will buy goods and services, which will prodice more jobs...

Yep. Real personal income took a nosedive in the 80s. The mean income didn't drop a lot, but the median dropped like a rock. Why? Because the money was still being gotten, just more and more of it was going to fewer and fewer people.

That's a bad thing. Bad for families, bad for business, and bad for America.

Understand, now?