Should the poor pay more taxes to fund tax breaks for the rich? (Romney tax plan)

[BoltNut]

Since tax revenue are to be used for the good of the citizens of this country, shouldn't all citizens pay into that system? I am not suggesting the amount of that contribution, only that it should be shared by all. For the moment, I'm not talking about anyone's specific tax proposals. I am speaking about each citizens 'contribution to the cause' so to speak....

Romney's plan is stated to be a revenue neutral plan. This isn't a matter of "we need more revenue, who should be asked to pay?" but "Should rich people pay less at the expense of poor and middle income people who have to pick up the balance?"

Do you want to pay, say, $2000 more a year so that someone making a million dollars a year more than you can pay less?

I am sorry but as I stated, I wasn't necessarily speaking of Romney's plan. I was speaking more in generality. I don't think anyone in my income bracket would want to pay more in order for the wealthy to pay less. I also don't think that is the intention of Romneys tax plan either. I am not posting the things I have because I "support" Romney's plan. I am trying to convey the idea that we all should share in the cost of government. No matter how much we earn.

 

[Rion]

The brookings institute is a nonpartisan organization. You've got 1 out of 3 authors who once worked as a senior economist for the CEA under a democratic president.

You know what would destroy this argument? If another writer served as a senior economist at the CEA under a republican?

William Gale

Aww snap

Aww snap, you didn't read below the advertisement.

 

[FreeinChrist]

MOD HAT - a small thread clean up was done. Please stay on topic.

 

[HalfoffSale]

My point was to do with Federal Income Tax. Whatever is collected through "other taxes" is irrelevant to my point. I pay those "other taxes", and I am sure you do as well. Bill Gates pays those taxes too, and probably more than you and I make in a year. That is all irrelevant to my point.

I don't really see why there is a distinction, other than to make one side look worse. At the end of the day, 20-30% of your yearly money is 20-30% of your income, regardless of at which point you pass it over. It's like with my roommate. I pay the internet bill, and he pays the electric bill. It's disingenuous to say "You should pay more since you don't pay the electric bill."

I also see a few issues that make me question the data in the link you posted. I'm not saying that it is incorrect all the way through, however I know that I pay quite a bit more in State and Local taxes than the chart indicates. (I think we all try to find our own situation in these graphs and charts as a means of a quick check.) Even if the information cited is trustworthy, it doesn't take away from my point. I'm talking about federal income tax. This is what the OP was talking about.

I dont know, the differences in total income's are pretty large jumps between each of the categories. I'd be willing to believe sales, gas, and non income federal taxes add up to 16% of 12.5k per year. If you have other numbers I'll look though.

 

[[serious]]

Aww snap, you didn't read below the advertisement.

I did miss that.

Senior economist for the CEA under Obama = Obama staffer
Senior economist for the CEA under Bush = Obama ally

After all, Gale did talk to Obama. That's proof, right?

 

[[serious]]

But anyway, is the criticism just that the authors are allegedly biased, or is there something wrong with the math.

 

[jgarden]

..... Oh yeah, remember that Clinton "inherited a strong economy" from Reagan and Bush I. That's why Clinton was able to reap the benefit of paying down the debt.

If "Clinton "inherited a strong economy" from Reagan and Bush I," then why did they add 33.6% to the federal debt/GDP ratio over 12 years, while he reduced it by 9.7%?

You keep saying "their end of the bargain". What bargain? Who made this bargain? I find your figures to be very dubious. Romney pays a lower income tax rate than those who are considered "average wage earners"? Really.

The rationale for "tax cuts" was based on "trickle dowm (voodoo) economics whereby it was assumed that the tax cuts directed to the wealthy would be reinvested and stimulate the American economy.

Given that this was all financed with borrowed money that dramatically increased the national debt, the Republicans should be held accountable as to why they made no effort to place financial conditions on those cuts, to ensure that this money was actually being reinvested into the US private sector - as intended.

Notice that while "BoltNut" chooses to characterize my "figures to be very dubious," he fails to do us the courtesy of researching the topic and providing us with a documented version that would substantiate his claim!

 

[Viren]

And when Reagan enacted the tax cuts, they did translate into improvement in the economy. Unemployment went down and tax revenues increased.

When FDR tripled taxes on the wealthy it also led to an improving economy and lower unemployment. So there really isn't any correlation with lower taxes on the rich and an improving economy. The one thing that Reagan and FDR had in common is that they drastically increased government spending which acted as a stimulus to the economy. Reagan increased the national debt by 75%.

 

[RedPaddy]

Why are we soley focusing on increasing taxes rather than focusing on reducing spending?

 

[Viren]

Why are we soley focusing on increasing taxes rather than focusing on reducing spending?

Because the economy is still too weak.

 

[TheQuietRiot]

One day the poor will have nothing left to eat but the rich!

 

[[serious]]

Why are we soley focusing on increasing taxes rather than focusing on reducing spending?

Romney's plan is claimed to be revenue neutral with marginal tax rates reduced offset by elimination of deductions. Romney's plan, as it has been described thus far, would result in a net decrease in tax payments by the rich which would have to be made up by a net increase in taxes for either the poor or the middle class.

As far as spending cuts, there is 1.2 trillion in cuts coming up from sequestration. That's substantially larger than anything else in my life time.

 

[BoltNut]

If "Clinton "inherited a strong economy" from Reagan and Bush I," then why did they add 33.6% to the federal debt/GDP ratio over 12 years, while he reduced it by 9.7%?

The rationale for "tax cuts" was based on "trickle dowm (voodoo) economics whereby it was assumed that the tax cuts directed to the wealthy would be reinvested and stimulate the American economy.

Given that this was all financed with borrowed money that dramatically increased the national debt, the Republicans should be held accountable as to why they made no effort to place financial conditions on those cuts, to ensure that this money was actually being reinvested into the US private sector - as intended.

Notice that while "BoltNut" chooses to characterize my "figures to be very dubious," he fails to do us the courtesy of researching the topic and providing us with a documented version that would substantiate his claim!

Saying your figures were a bit "dubious" wasn't meant to be derogatory. I mean that they don't really present an accurate picture. Middle class and poor people paying a higher tax rate than someone like Romney.... that statement is what I find to be questionable. Here's a link to an article that explains it:

Fact Check: The Rich, Their Secretaries and Taxes - ABC News

In regard to Reagan, shouldn't we also keep in mind the economic situation at his point in history. High Inflation was the main reason for his victory in 1980. Inflation was a real problem at the time. Conventional "wisdom" at that time was only making the Inflation problem worse instead of better. This is another interesting article that explains it much better than I can.

Lessons From the Great Inflation - Reason.com

Reagan wasn't some kind of "superman" as much as we conservatives would like to think. He was a man that was unconventional and had an undying love for his country. That is the part of him that conservatives like to remember. Some of the policies enacted during his tenure did not work out as "planned". Do the policies of any President every work out as they plan them? No. Deficit spending rose during the Reagan administration but inflation, the "enemy" of the economic time he presided over, was "beaten". The second "enemy", as was seen by voters at that time, was the perceived "weakness" of our military in light of the massive build up of the military in the USSR. Spending on our military was necessary in order to keep pace and not expose the US to any "threat" the USSR could bring about. In order to deal with both the economy AND the military, deficits were necessary.

The issues of today were effected by the continued deficit spending of government. The Bush tax cuts have been a bone of contention for quite a while. When these tax cuts were enacted, we were not at war. Of course, 9/11 changed all that. Deficits were increased yet again and the Bush cuts, by that time were a sort of "sacred cow". By the time Obama was elected, the spending was out of control and deficits had increased drastically. I agree that Obama "inherited" a mess. He chose a somewhat unconventional approach in the stimulus packages he enacted. At the time, it could be seen as a somewhat "logical" approach, but has had a rather lackluster result. Are Romney's ideas any better? Well, they are different ideas, but it remains to be seen. He may get a chance to try it all out. The tax structure needs work. Romney wanting to "revamp" it a little could just be the groundwork being laid from which other changes could be added or deleted in order to fine tune it.

Your numbers regarding the ratios of GDP vs. debt are only "dubious" in that the economic conditions change throughout time, and the "picture being painted" with those figures is "incomplete". The "reasons" for economic policy changes are in response to a "threat". When Clinton was elected in 1992, he immediately enacted policies to pay down the debt and balance budgets. He could not do that unless the economy was in good enough condition to do so. Just as Obama "inherited" a bad economy, Clinton "inherited" a fairly stable and somewhat strong economy. His continued economic policies helped to continue the ability to pay down the debt. It wasn't ALL his predecessors doing, but what they had done in the past had created an environment to where Clinton could take advantage of them and use them correctly. This is where I believe Clinton was very good. I hope you don't think that all conservatives cannot see when someone does a good job, just because they don't have an "R" after their names.

I don't want to go on and on, but your points needed to be addressed in a way that didn't sound disrespectful. Your opinion is just as valid as my own.

 

[Rion]

I did miss that.

Senior economist for the CEA under Obama = Obama staffer
Senior economist for the CEA under Bush = Obama ally

After all, Gale did talk to Obama. That's proof, right?

He did visit the WH 12 times.

As for the criticism, it's the idea that it's supposedly independent, when at least two of the authors are pro-Obama and seem to be in favor of his actions. It doesn't mean the math is necessarily wrong, but when the authors are definitely partisan, one should wait for peer-reviews and other such things before claiming it's definitive proof of one's position. Let's use global warming as an example. A study that questions man-made global warming from a group that is known to be against the belief of man-made GW would have less pull with me than a similar one from a group which believes in it.

 

[HalfoffSale]

.

 

[BoltNut]

Romney's plan is claimed to be revenue neutral with marginal tax rates reduced offset by elimination of deductions. Romney's plan, as it has been described thus far, would result in a net decrease in tax payments by the rich which would have to be made up by a net increase in taxes for either the poor or the middle class.

As far as spending cuts, there is 1.2 trillion in cuts coming up from sequestration. That's substantially larger than anything else in my life time.

After reading, and re-reading and trying to decipher the data in the Brooking Institute article you posted, I thought that it mainly comes down to the projected growth in revenues as a result of this base broadening plan. Did you get the same impression? According to one of the cited studies:

"Nevertheless, even if one were to use the model from Mankiw and Weinzierl (2006) and assume that after five years 15 percent of the $360 billion tax cut is paid for through higher economic growth, the available tax expenditures would still need to be cut by 56 percent; on net lower- and middle-income taxpayers would still need to pay higher taxes.[11]"

The assumption of "15% over five years" seems conservative, I could be wrong however. (I'm also assuming that the bolded is a typo?.. should be "or") There are a lot of "assumptions" in the report, as there has to be when considering a plan with no details available and projecting it over uncertain economic situations. I'm not an economics major, so I'm the last one to say anything against the article. It just seems that it makes assumptions that cast the plan in a fairly bad light. Was this done intentionally? Who knows. I'm not going to think that way but there is a lot of data being concluded without knowing. The "Romney Plan" isn't something on paper that can be referred to and scrutinized. It does, however present supposed discrepancies in a plan derived from past statements and information from the candidate. I don't know how accurate, or "fair" they are being in their analysis. The $1.2 trillion in cuts is over time. Discretionary spending is $1.3 trillion annually and this needs to be cut. Non-discretionary spending will not be immune to the budget cut "axe" either. It's gonna be a rough ride in the future no matter who is elected. At some point these things need to be done, better now than later.

 

[[serious]]

After reading, and re-reading and trying to decipher the data in the Brooking Institute article you posted, I thought that it mainly comes down to the projected growth in revenues as a result of this base broadening plan. Did you get the same impression? According to one of the cited studies:

"Nevertheless, even if one were to use the model from Mankiw and Weinzierl (2006) and assume that after five years 15 percent of the $360 billion tax cut is paid for through higher economic growth, the available tax expenditures would still need to be cut by 56 percent; on net lower- and middle-income taxpayers would still need to pay higher taxes.[11]"

The assumption of "15% over five years" seems conservative, I could be wrong however. (I'm also assuming that the bolded is a typo?.. should be "or") There are a lot of "assumptions" in the report, as there has to be when considering a plan with no details available and projecting it over uncertain economic situations. I'm not an economics major, so I'm the last one to say anything against the article. It just seems that it makes assumptions that cast the plan in a fairly bad light. Was this done intentionally? Who knows. I'm not going to think that way but there is a lot of data being concluded without knowing. The "Romney Plan" isn't something on paper that can be referred to and scrutinized. It does, however present supposed discrepancies in a plan derived from past statements and information from the candidate. I don't know how accurate, or "fair" they are being in their analysis. The $1.2 trillion in cuts is over time. Discretionary spending is $1.3 trillion annually and this needs to be cut. Non-discretionary spending will not be immune to the budget cut "axe" either. It's gonna be a rough ride in the future no matter who is elected. At some point these things need to be done, better now than later.

There are a number of factors, but ultimately, there are cuts in rates which must be balanced by growth and removal of deductions. Out of these, growth assumptions are the hardest to nail down, but they look at ranges from what they consider plausable to implausibly high:

Although reasonable models would show that these tax changes would have little effect on growth, we show that even with implausibly large growth effects, revenue neutrality would still require large reductions in tax expenditures and would likely result in a net tax increase for lower- and middle-income households and tax cuts for high-income households.

In the section addressing the effect of growth, they give 2 models.
(disclaimer, I'm a bit out of my depth in this section so I may be reading some of this wrong, but this is what I get from it)

The reasonable model (Brill and Viard 2011) which factors in only normal baseline growth. (traditional calculations are discussed prior to this near the start of the section titled Discussion: Achieving Revenue Neutrality Using Optimistic Assumptions about Economic Growth)

While lower tax rates provide a stronger incentive for employment and saving, base-broadening measures would increase the portion of Americans’ income that is subject to tax, and this would create incentives that would work in the other direction. At the end of the day, the net effects on labor supply and saving behavior would likely be small. As Brill and Viard summarize, “lowering statutory tax rates while broadening the income tax base generally does not reduce work disincentives because it leaves the relevant effective tax rates unchanged” (Brill and Viard 2011).[20] To the degree that tax expenditures were reduced by proportionately larger amounts for high-income groups, as assumed in this exercise, the Brill-Viard observation would be even stronger.

Basically, they are assuming no apreciable ADDITIONAL growth from the changes as they aren't tax cuts, just revenue neutral changes to the code.

The second is the optimistic model (Mankiw and Weinzerl 2006) which is based on the principle of "tax cuts pay for themselves"

Nevertheless, the above results are not qualitatively different even if one were to assume that tax cuts pay for themselves according to the rule of thumb estimates from Mankiw and Weinzerl (2006). This model, which is based on an assumption that saving is infinitely elastic, may well overstate the capital income response, in addition to the other concerns raised above. Moreover, this model that assumes that rate reductions are paid for with lump sum tax increases, which means their model would overstate the growth effects in the context of a tax plan that included progressive reductions in tax expenditures.

If we assume, as in their model, that 21.3 percent of capital income taxes and 13.5 percent of labor income taxes are offset by higher growth after five years this would imply a revenue offset of 14.7 percent. (Assuming the tax cuts are 85 percent labor and 15 percent capital, which is roughly the share of labor and capital income reported on individual tax returns).

As I read it, that 15% is the portion of the marginal rate deduction which they are assuming would be paid for by additional growth above and beyond normal baseline growth of the economy. That seems VERY generous to me.

 

[jgarden]

Why are we soley focusing on increasing taxes rather than focusing on reducing spending?

Regan, GHW Bush and GW Bush were all supposedly supporters of "small" government until they were elected and then each dramatically increased the federal debt - with borrowed money!

As for the current economic "malaise," if elected Romney would inherit the same economic "straight-jacket" that Obama is in.
1. You can be rest assured that the Democrats have no reason to be more cooperative with a GOP Administration than the Republicans have been for the past 4 years.
2. Romney will also find that the success of his economic policies are closely tied with the European Union - an organization over which neither he nor Obama have a great deal of influence.

 

[Publius]

The brookings institute has published an article analyzing the effects of Romney's tax plan.

Tax Reform – An Analysis | Brookings Institution

To put their findings in a single sentence,

The title of your thread is misleading. Tax breaks are not funded.

A tax break doesn't cost anything. It is simply the government allowing a person to keep more of the money they've earned.

 

[someguy14]

Flat tax percentage.