Tag Archives: cato institute

President Obama ignores warnings about Laffer Curve

The Laffer Curve – Explained

Uploaded by on Nov 14, 2011

This video explains the relationship between tax rates, taxable income, and tax revenue. The key lesson is that the Laffer Curve is not an all-or-nothing proposition, where we have to choose between the exaggerated claim that “all tax cuts pay for themselves” and the equally silly assumption that tax policy doesn’t effect the economy and there is never any revenue feedback. From http://www.freedomandprosperity.org 202-285-0244

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President Obama truly does not believe the Laffer Curve is correct. We will have to wait and see if his ideas work. It is my view that the Laffer Curve is correct and raising tax rates does not always give you more revenue. We will just have to wait and see how it works out this time around. I have emailed and mailed letters to the White House in the past about the Laffer Curve but I doubt if President Obama ever was convinced.

Being a thoughtful and kind person, I offered some advice last year to Barack Obama. I cited some powerful IRS data from the 1980s to demonstrate that there is not a simplistic linear relationship between tax rates and tax revenue.

In other words, just as a restaurant owner knows that a 20-percent increase in prices doesn’t translate into a 20-percent increase in revenue because of lost sales, politicians should understand that higher tax rates don’t mean an automatic and concomitant increase in tax revenue.

This is the infamous Laffer Curve, and it’s simply the common-sense recognition that you should include changes in taxable income in your calculations when trying to measure the impact of higher or lower tax rates on tax revenues.

No, it doesn’t mean lower tax rates “pay for themselves” or that higher tax rates lead to less revenue. That only happens in unusual circumstances. But it does mean that lawmakers should exercise some prudence and judgment when deciding tax policy.

Moreover, even though I’m a strong believer in the importance of good tax policy, it’s also important to understand that taxation is just one of many factors that determine economic performance. So lower tax rates, by themselves, are no guarantee of economic vitality, and higher tax rates don’t necessarily mean the world is coming to an end.

With those caveats in mind, take a look at this table from the Congressional Budget Office’s most recent Budget and Economic Outlook. Taken from page 109, it shows what will happen if the economy grows just a tiny bit less than the baseline projection. Not a recession, by any means, just a drop in the projected growth rate of just 1/10th of 1 percent.

As you can see, the 10-year impact is $314 billion, mostly due to lower tax receipts, though there is some impact on outlays because of  higher interest costs and a bit of additional entitlement spending.

So why am I sharing these numbers? Because let’s now think about President Obama’s proposed class-warfare tax hike. He wants higher tax rates on investors, entrepreneurs, small business owners and other “rich” taxpayers. And he wants more double taxation of dividends and capital gains. And a higher death tax rate, even higher than the ones imposed by France and Venezuela.

I think some opponents are exaggerating when they claim that this tax hike will cause a recession and cripple the economy. But I do think that it’s reasonable to contemplate the degree to which the Obama tax hikes will slow growth. More than 1/10th of 1 percent? Less than that? Would the damage occur in the first few years? Would it be spread out over time?

Those questions are hard to answer. Ask five economists and you’ll get nine answers, but there is compelling evidence that higher tax rates do have a negative impact.

But some people assume that taxes don’t matter at all. Using models that, for all intents and purposes, naively assume a simplistic linear relationship between tax rates and tax revenue, the number-crunching bureaucrats in Washington estimate that Obama’s proposed tax hikes will generate about $800 billion over 10 years.

I’m not going to pretend I know the economic impact of those higher tax rates, but for the sake of argument, let’s assume that the impact is minor. Indeed, let’s assume that it’s only 1/10th of 1 percent. Based on the CBO sensitivity analysis above, that means that about 40 percent of the projected deficit reduction will fail to materialize.

And that’s not even considering the fact that politicians will probably increase the burden of government spending because of the expectation of additional tax revenue.

Just something to keep in mind as this debate unfolds.

P.S. I actually shared this exact same data when testifying to the Senate Budget Committee earlier this year. Needless to say,  in some cases I think my testimony went in one ear and out the other.

P.P.S. The revenue-maximizing tax rate is not the ideal point on the Laffer Curve.

___________

Related posts:

Harding,Kennedy and Reagan proved that the Laffer Curve works

 I enjoyed this article below because it demonstrates that the Laffer Curve has been working for almost 100 years now when it is put to the test in the USA. I actually got to hear Arthur Laffer speak in person in 1981 and he told us in advance what was going to happen the 1980′s [...]

The Laffer Curve Wreaks Havoc in the United Kingdom

I got to hear Arthur Laffer speak back in 1981 and he predicted what would happen in the next few years with the Reagan tax cuts and he was right with every prediction. The Laffer Curve Wreaks Havoc in the United Kingdom July 1, 2012 by Dan Mitchell Back in 2010, I excoriated the new [...]

Liberals act like the Laffer Curve does not exist.

Raising taxes will not work. Liberals act like the Laffer Curve does not exist. The Laffer Curve Shows that Tax Increases Are a Very Bad Idea – even if They Generate More Tax Revenue April 10, 2012 by Dan Mitchell The Laffer Curve is a graphical representation of the relationship between tax rates, tax revenue, and [...]

I have done everything in my power to get Republicans in Congress to vote against debt ceiling increase

It is obvious to me that if President Obama gets his hands on more money then he will continue to spend away our children’s future. He has already taken the national debt from 11 trillion to 16 trillion in just 4 years. Over, and over, and over, and over, and over and over I have [...]

Open letter to Speaker of the House John Boehner (Part 12)

John Boehner, Speaker of the House H-232, The Capital, Washington, DC 20515 Dear Mr. Speaker, I know that you will have to meet with newly re-elected President Obama soon and he will probably be anxious for you to raise taxes and  federal spending, but he will want you to leave runaway entitlement programs alone. If we want the economy [...]

Open letter to President Obama (Part 168.7)

President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here. As a [...]

Open letter to Speaker of the House John Boehner (Part 6)

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Open letter to my congressman Tim Griffin

November 12, 2012 Congressman Tim Griffin, c/o Little Rock Office, 1501 N. University, Suite 150, Little Rock, AR 72207 Dear Congressman Griffin, I have met you several times and I have always enjoyed visiting with you. I got to hear you speak at a town meeting at Shannon Hills about a year ago and I [...]

More Leftists Let Their Masks Slip, Admit They Want Big Tax Hikes on the Middle Class

Washington Could Learn a Lot from a Drug Addict Uploaded by WashingtonCouldLearn on Jul 8, 2011 Washington’s chronic overspending is just like a junkie’s addiction to drugs. Unless the cycle of addiction is broken, our economic and unemployment situation will continue to suffer. Washington is out of time. To avoid hitting rock bottom, Washington must [...]

 

Federal government loves to eat up our money: “Yum Yum Eat em up”

The federal government loves to eat up more and more of our money. Back in the first few years of the 20th century our federal government usually spent about 3% of our money per year unless we were involved in a war, but now the percentage of GDP is up to almost 25%. It reminds me of the “Yum Yum Eat em up” short film I saw many years ago.

Federal Spending Is Outpacing Inflation

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

Prices of goods and services normally rise year to year, but federal spending has risen even faster. Although spending grew substantially after 9/11, less than half of the increase can be attributed to defense and homeland security spending.

YEAR-TO-YEAR PERCENTAGE CHANGE

Download

Federal Spending Is Outpacing Inflation

Source: U.S. Bureau of Labor Statistics and White House Office of Management and Budget.

Chart 4 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

Wild Man From Borneo – YUM YUM EEAAAAT EM UP!

Are rich people as bad as “Dirty Dan?”

Are rich people as bad as “Dirty Dan?”

The Little Rascals – “Fly My Kite” (1931) Part 1-2

Uploaded by on Apr 6, 2011

The gang loves Grandma, but her slimy son-in-law loves her money.When Dirty Dan tries to take away her retirement fortune, it’s the kids (and Pete the Pup) to the resue! Soon, the chase is on and Dan is caught faster than you can say “Granny get your gun”!

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I enjoyed seeing that “Dirty Dan” got what was coming to him at the end of the episode below. If you listen to President Obama, and other liberals like John Brummett and Max Brantley then would get the impression that the mean rich folks don’t need to be so selfish and hand over the money to run the government for the rest of us.

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The state of our economy under President Obama according to Cato Institute

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Is soaking the rich fair?

Is soaking the rich fair? Five Key Reasons to Reject Class-Warfare Tax Policy Uploaded by afq2007 on Jun 15, 2009 President Obama and other politicians are advocating higher taxes, with a particular emphasis on class-warfare taxes targeting the so-called rich. This Center for Freedom and Prosperity Foundation video explains why fiscal policy based on hate [...]

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Obama wants to raise taxes on job creators

Uploaded by TheYoungTurks on Aug 6, 2010 Cenk Uygur (host of The Young Turks) filling in for Chris Jansing on MSNBC talks to Dan Mitchell of the Cato institute to compare Reaganomics to Obamanomics. __________________________ What should we do when we are caught in a slow economy? What did Reagan do in 1981? He lowered [...]

Cato’s Jeffrey Miron: “The liberal hatred of the rich is a minority view…”

Maybe the tide is turning. Americans do not hate the rich like liberals would have us believe. Take a look at this article: Soaking the Rich Is Not Fair by Jeffrey A. Miron This article appeared on The Huffington Post on September 2, 2011. What is the “fair” amount of taxation on high-income taxpayers? To liberals, the [...]

The Little Rascals – “Fly My Kite” (1931) Part 2-2

Brantley agrees with Obama that the rich should pay more

The Laffer Curve, Part I: Understanding the Theory

Max Brantley is fond of accusing Republicans of coddling the rich and here comes Warren Buffett and validates both what President Obama and Brantley have been saying. However, will the increase in taxes have the desired result that they are wanting?

Higher Tax Rates on Rich Won’t Increase Revenues

by Alan Reynolds

Alan Reynolds, a senior fellow with the Cato Institute, is the author of Income and Wealth (Greenwood Press 2006).

Added to cato.org on September 13, 2011

This article appeared on Investor’s Business Daily on September 12, 2011.

In last week’s campaign speech disguised as an address to Congress, President Obama said, “Warren Buffett pays a lower tax rate than his secretary — an outrage he has asked us to fix.”

Writing recently in The New York Times, the famed chairman of Berkshire Hathaway complained that his federal income tax last year was “only 17.4% of my taxable income” — less than $7 million on a taxable income of about $40 million.

Buffett claimed that, like himself, other “mega-rich pay income taxes at a rate of 15% on most of their earnings,” but that is not at all common. The average income-tax rate of those earning between $1 million and $10 million was 29.5% in 2009.

Obama used Buffett’s uniquely low 17.4% tax as proof that “a few of the most affluent citizens and most profitable corporations enjoy tax breaks and loopholes that nobody else gets.” That is not true.

To hold out the tax policies of 1977 or 1992 as examples of effective ways to raise more revenue is ludicrous.

Anyone whose income is almost entirely composed of realized capital gains or dividends would “pay income taxes at a rate of 15% on most of their earning.” Investors with modest incomes also pay a tax rate of 15% on dividends and capital gains, although that rate is scheduled to rise to 18.8% under the Obama health law (and much higher if Congress enacted the “reforms” Obama will propose next Monday).

Before 2003, when the tax on dividends was made the same as the tax on capital gains, Berkshire Hathaway was a handy tax dodge — a way to own dividend-paying stocks without paying taxes on the dividends. Buffett is famous for collecting stocks with a generous dividend yield without Berkshire itself paying any dividend.

The dividends Berkshire receives are reinvested in buying more stocks, so the holding company ends up with more assets per share which results in capital gains that would be taxable only if the shares are sold.

Warren Buffett is the second wealthiest person in America, but he reports surprisingly little taxable income for someone who owns more than $50 billion of Berkshire shares. Increasing the tax rate on salaries and interest income would barely affect him.

He pays himself a salary of just $100,000, which explains how he pays less than his employees do in payroll taxes. He dodged the estate tax by donating his wealth to the Bill and Melinda Gates Foundation. He doubtless reduces his taxable income with other donations to charity, which explains why he repeatedly refers to taxable income rather than adjusted gross income.

Mr. Buffett ends by appointing himself tax czar and declares he “would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more … (he) would suggest an additional increase in rate.”

Since he only reports $100,000 of salary, he has nothing to lose by advocating a higher tax rate on salaries. Nearly all of his income in 2010 consisted of capital gains on sales of Berkshire shares, because those shares pay no dividends. But Buffett could just as easily hang onto appreciated shares rather than selling them, or he could donate them to charity.

Raising tax rates on dividends and capital gains sounds easier than it is. Nobody with substantial wealth can be forced to realize taxable gains by selling appreciated assets. A realized gain is no more valuable than an unrealized gain. On the contrary, it is less valuable by the amount of the tax.

Nobody can be forced to hold dividend-paying stocks either. They can instead buy Berkshire Hathaway shares if the tax on dividends goes up, as Buffett understands.

Despite his personal and professional dependence on capital gains, Buffett nevertheless feigns total ignorance of who pays the capital gains tax and why. He says, “I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9% in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain.”

Well, the Dow Jones industrial average was 831 at the end of 1977 — down from 969 at the end of 1965 — so somebody was having trouble finding investments that would still look sensible after paying a 39.9% tax.

In any case, for Buffett to focus on the act of buying stocks or property is all wrong. The capital gains tax is not a tax on buying assets. It is a tax on selling assets. If you don’t sell, there is no tax. And when the capital gains tax is high, very few people are willing to sell.

In 1977, when the capital gains tax was 39.9%, realized gains amounted to less than 1.57% of GDP. From 1987 to 1996, when the capital gains tax was 28%, realized gains rose to 2.3% of GDP. Since 28% of 2.3 is larger than 39.9% of 1.57, the lower tax rate clearly raised more tax revenue.

From 2004 to 2007, when the capital gains tax was 15%, realized gains amounted to 5.2% of GDP. Since 15% of 5.2 is larger than 28% of 2.3, the lower tax rate again raised more tax revenue. The government cannot afford to raise this tax, particularly on those most likely to pay it.

Buffett focuses on the 400 tax returns with the highest reported incomes, which are often one-time capital gains from the sale of a business or real estate.

“In 1992,” he writes, “the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2% on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5%.”

In 1992 only 39% of reported income of the top 400 came from capital gains and dividends because those tax rates were so high. With most reported income coming from salaries, the average tax rate was high.

Alan Reynolds, a senior fellow with the Cato Institute, is the author of Income and Wealth (Greenwood Press 2006).

 

More by Alan Reynolds

By 2008, 67% of reported income of the top 400 came from capital gains and dividends because both were taxed at 15%. That diluted the average tax rate, yet nevertheless resulted in much more taxes paid because the amount of reported income was so much larger.

The big change was not in actual income, but merely in what the IRS counts as income. People were hiding more of their wealth in 1992 than they did in 2006-2008, and they were hiding even more in 1977.

It is easy to advocate a higher tax rate on capital gains, but it is even easier to avoid paying that higher tax rate. Simply hold onto assets that went up and sell those that went down, and never realize gains until you have offsetting losses.

The evidence is undeniable that affluent investors and property owners report far fewer gains whenever the capital gains tax goes up. Choosing to pay tax on capital gains and dividends is usually voluntary, and when the rate gets too high we run short of volunteers.

With the super-high 1977 tax rates of 39.9% on capital gains and 70% on dividends and salaries, federal revenues were 18% of GDP. In 1992, revenues were only 17.5% of GDP. In 2007, thanks in large part to a 15% tax rate on capital gains and dividends, revenues were 18.5% of GDP.

To hold out the tax policies of 1977 or 1992 as examples of effective ways to raise more revenue is ludicrous. It didn’t work then, and it wouldn’t work now.

The Laffer Curve, Part III: Dynamic Scoring

Uploaded by on May 28, 2008

A video by CF&P Foundation that builds on the discussion of theory in Part I and evidence in Part II, this concluding video in the series on the Laffer Curve explains how the Joint Committee on Taxation’s revenue-estimating process is based on the absurd theory that changes in tax policy – even dramatic reforms such as a flat tax – do not effect economic growth. In other words, the current system assumes the Laffer Curve does not exist. Because of congressional budget rules, this leads to a bias for tax increases and against tax cuts. The video explains that “static scoring” should be replaced with “dynamic scoring” so that lawmakers will have more accurate information when making decisions about tax policy. For more information please visit the Center for Freedom and Prosperity’s web site: http://www.freedomandprosperity.org.

Brantley agrees with Obama that the rich should pay more

The Laffer Curve, Part I: Understanding the Theory

Max Brantley is fond of accusing Republicans of coddling the rich and here comes Warren Buffett and validates both what President Obama and Brantley have been saying. However, will the increase in taxes have the desired result that they are wanting?

Higher Tax Rates on Rich Won’t Increase Revenues

by Alan Reynolds

Alan Reynolds, a senior fellow with the Cato Institute, is the author of Income and Wealth (Greenwood Press 2006).

Added to cato.org on September 13, 2011

This article appeared on Investor’s Business Daily on September 12, 2011.

In last week’s campaign speech disguised as an address to Congress, President Obama said, “Warren Buffett pays a lower tax rate than his secretary — an outrage he has asked us to fix.”

Writing recently in The New York Times, the famed chairman of Berkshire Hathaway complained that his federal income tax last year was “only 17.4% of my taxable income” — less than $7 million on a taxable income of about $40 million.

Buffett claimed that, like himself, other “mega-rich pay income taxes at a rate of 15% on most of their earnings,” but that is not at all common. The average income-tax rate of those earning between $1 million and $10 million was 29.5% in 2009.

Obama used Buffett’s uniquely low 17.4% tax as proof that “a few of the most affluent citizens and most profitable corporations enjoy tax breaks and loopholes that nobody else gets.” That is not true.

To hold out the tax policies of 1977 or 1992 as examples of effective ways to raise more revenue is ludicrous.

Anyone whose income is almost entirely composed of realized capital gains or dividends would “pay income taxes at a rate of 15% on most of their earning.” Investors with modest incomes also pay a tax rate of 15% on dividends and capital gains, although that rate is scheduled to rise to 18.8% under the Obama health law (and much higher if Congress enacted the “reforms” Obama will propose next Monday).

Before 2003, when the tax on dividends was made the same as the tax on capital gains, Berkshire Hathaway was a handy tax dodge — a way to own dividend-paying stocks without paying taxes on the dividends. Buffett is famous for collecting stocks with a generous dividend yield without Berkshire itself paying any dividend.

The dividends Berkshire receives are reinvested in buying more stocks, so the holding company ends up with more assets per share which results in capital gains that would be taxable only if the shares are sold.

Warren Buffett is the second wealthiest person in America, but he reports surprisingly little taxable income for someone who owns more than $50 billion of Berkshire shares. Increasing the tax rate on salaries and interest income would barely affect him.

He pays himself a salary of just $100,000, which explains how he pays less than his employees do in payroll taxes. He dodged the estate tax by donating his wealth to the Bill and Melinda Gates Foundation. He doubtless reduces his taxable income with other donations to charity, which explains why he repeatedly refers to taxable income rather than adjusted gross income.

Mr. Buffett ends by appointing himself tax czar and declares he “would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more … (he) would suggest an additional increase in rate.”

Since he only reports $100,000 of salary, he has nothing to lose by advocating a higher tax rate on salaries. Nearly all of his income in 2010 consisted of capital gains on sales of Berkshire shares, because those shares pay no dividends. But Buffett could just as easily hang onto appreciated shares rather than selling them, or he could donate them to charity.

Raising tax rates on dividends and capital gains sounds easier than it is. Nobody with substantial wealth can be forced to realize taxable gains by selling appreciated assets. A realized gain is no more valuable than an unrealized gain. On the contrary, it is less valuable by the amount of the tax.

Nobody can be forced to hold dividend-paying stocks either. They can instead buy Berkshire Hathaway shares if the tax on dividends goes up, as Buffett understands.

Despite his personal and professional dependence on capital gains, Buffett nevertheless feigns total ignorance of who pays the capital gains tax and why. He says, “I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9% in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain.”

Well, the Dow Jones industrial average was 831 at the end of 1977 — down from 969 at the end of 1965 — so somebody was having trouble finding investments that would still look sensible after paying a 39.9% tax.

In any case, for Buffett to focus on the act of buying stocks or property is all wrong. The capital gains tax is not a tax on buying assets. It is a tax on selling assets. If you don’t sell, there is no tax. And when the capital gains tax is high, very few people are willing to sell.

In 1977, when the capital gains tax was 39.9%, realized gains amounted to less than 1.57% of GDP. From 1987 to 1996, when the capital gains tax was 28%, realized gains rose to 2.3% of GDP. Since 28% of 2.3 is larger than 39.9% of 1.57, the lower tax rate clearly raised more tax revenue.

From 2004 to 2007, when the capital gains tax was 15%, realized gains amounted to 5.2% of GDP. Since 15% of 5.2 is larger than 28% of 2.3, the lower tax rate again raised more tax revenue. The government cannot afford to raise this tax, particularly on those most likely to pay it.

Buffett focuses on the 400 tax returns with the highest reported incomes, which are often one-time capital gains from the sale of a business or real estate.

“In 1992,” he writes, “the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2% on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5%.”

In 1992 only 39% of reported income of the top 400 came from capital gains and dividends because those tax rates were so high. With most reported income coming from salaries, the average tax rate was high.

Alan Reynolds, a senior fellow with the Cato Institute, is the author of Income and Wealth (Greenwood Press 2006).

 

More by Alan Reynolds

By 2008, 67% of reported income of the top 400 came from capital gains and dividends because both were taxed at 15%. That diluted the average tax rate, yet nevertheless resulted in much more taxes paid because the amount of reported income was so much larger.

The big change was not in actual income, but merely in what the IRS counts as income. People were hiding more of their wealth in 1992 than they did in 2006-2008, and they were hiding even more in 1977.

It is easy to advocate a higher tax rate on capital gains, but it is even easier to avoid paying that higher tax rate. Simply hold onto assets that went up and sell those that went down, and never realize gains until you have offsetting losses.

The evidence is undeniable that affluent investors and property owners report far fewer gains whenever the capital gains tax goes up. Choosing to pay tax on capital gains and dividends is usually voluntary, and when the rate gets too high we run short of volunteers.

With the super-high 1977 tax rates of 39.9% on capital gains and 70% on dividends and salaries, federal revenues were 18% of GDP. In 1992, revenues were only 17.5% of GDP. In 2007, thanks in large part to a 15% tax rate on capital gains and dividends, revenues were 18.5% of GDP.

To hold out the tax policies of 1977 or 1992 as examples of effective ways to raise more revenue is ludicrous. It didn’t work then, and it wouldn’t work now.

The Laffer Curve, Part III: Dynamic Scoring

Uploaded by on May 28, 2008

A video by CF&P Foundation that builds on the discussion of theory in Part I and evidence in Part II, this concluding video in the series on the Laffer Curve explains how the Joint Committee on Taxation’s revenue-estimating process is based on the absurd theory that changes in tax policy – even dramatic reforms such as a flat tax – do not effect economic growth. In other words, the current system assumes the Laffer Curve does not exist. Because of congressional budget rules, this leads to a bias for tax increases and against tax cuts. The video explains that “static scoring” should be replaced with “dynamic scoring” so that lawmakers will have more accurate information when making decisions about tax policy. For more information please visit the Center for Freedom and Prosperity’s web site: http://www.freedomandprosperity.org.

All candidates respond to last question in Republican debate of October 11, 2011 (with video clip)

You can get a good comparison of the candidates from this clip above. Below is a very good summary of the candidates from early this summer.

The 2012 Contenders and the Debt Ceiling

by Michael D. Tanner

Michael Tanner is a senior fellow at the Cato Institute and coauthor of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

Added to cato.org on June 29, 2011

This article appeared on National Review (Online) on June 29, 2011.

You can tell that we are getting close to the deadline for a deal on raising the debt ceiling, because President Obama has finally noticed the issue. Not a “put forward an actual plan” notice, but at least a “denounce the Republicans as immoral” notice. Republicans rightly criticize this lack of presidential leadership. But what about Republicans who want to be president? Republicans in Congress, of course, have been willing to put specific ideas on the table, and, since the responsibility for voting on the debt limit will actually fall on them, that’s key. But Republicans should also want to know where the would-be 2012 presidential candidates stand on this vital issue.

At one end of the Republican spectrum are those who would answer the question with “Yes, but …” These candidates agree that the debt ceiling will eventually have to be raised. But in return they demand Democratic concessions on spending or other policy matters.

Generally, these candidates are seeking some sort of restraint on future spending. Jon Huntsman, for example, wants to cap spending at 18 to 19 percent of GDP. Similarly Newt Gingrich would raise the debt limit only in exchange for — unspecified — spending cuts. Gingrich has suggested that in the absence of a grand compromise, Congress could pass a series of three-week increases, sort of like the series of continuing resolutions that substitute for a budget. Other Republicans would tie their agreement to raise the debt ceiling to other policy matters. For example, Rick Santorum would demand the repeal of Obamacare. And sometimes potential candidate Sarah Palin has suggested that drilling in Alaska could be attached to any debt-ceiling vote.

[R]epublicans should also want to know where the would-be 2012 presidential candidates stand on this vital issue.

At the other end of the line are those who respond, “Hell, no.” For the most part though, this appears to be a tactical position — more a matter of tone rather than policy from those above. When really pressed, most of these candidates leave room to eventually vote for an increase if the concessions are big enough.

For example, Michele Bachmann is firmly in the “Hell, no” camp, saying that she will vote against any increase in the debt ceiling. What if the Republican leadership cuts a deal? She would “have to tell you then. But right now I’m a no vote.” Tim Pawlenty also opposes any increase, writing in the Washington Post, “Don’t raise the debt limit — reform entitlement spending.” That does leave a problem, however. While he is entirely correct about the need for entitlement reform, any changes to those programs will involve long-term, not short-term savings, meaning they won’t solve the immediate debt-ceiling problem.

Unsurprisingly, the two libertarians in the race, Ron Paul and Gary Johnson, oppose raising the debt ceiling regardless of any Democratic concessions. Paul, who has always voted against debt increases, will do so again this time. Similarly, Johnson cannot foresee circumstances under which he would support an increase.

In between these two camps are those whose position is, well, a bit fuzzy. Mitt Romney, for example, has “repeatedly refused to answer multiple questions from reporters about whether the nation’s debt ceiling should be raised,” according to news reports. Romney has, however, praised Republicans for insisting on spending cuts as a precondition for a debt-ceiling increase. At the same time, he has not said what conditions he would demand or whether he would support raising the debt ceiling if those conditions were (or were not) met. And, Herman Cain started out as a firm “Hell, no,” but has since backed away, saying that he agreed with Federal Reserve chairman Ben Bernanke that failing to raise the debt limit would mean financial chaos.

Of course, with the exception of Bachmann and Paul, none of these candidates will actually have to vote on the issue. Nonetheless, with so much on the line, its time for those who want to be president to step up and be heard.

Related posts:

All candidates respond to last question in Republican debate of October 11, 2011 (with video clip)

You can get a good comparison of the candidates from this clip above. Below is a very good summary of the candidates from early this summer. The 2012 Contenders and the Debt Ceiling by Michael D. Tanner Michael Tanner is a senior fellow at the Cato Institute and coauthor of Leviathan on the Right: How [...]

Mitt Romney attacked for Romney Care (with video clip from October 11, 2011 Republican debate)

I have been against Romney because of the reasons found in this article below which I read 3 years ago: Lessons from the Fall of RomneyCare By Michael Tanner Michael Tanner is director of health and welfare studies at the Cato Institute. He is the author of Leviathan on the Right: How Big-Government Conservatism Brought [...]

Video clip of Michele Bachmann in interview after October 11, 2011 Republican debate

I do like Michele Bachmann a lot and I love what she has to say in the article below too. Slate.com vs. Tea-Party/Christians/Bachmann Posted by Andrew J. Coulson Slate worked itself into a lather yesterday over the insidious education policy implications of Michele Bachmann’s Iowa Straw Poll victory: As recently as a decade ago, Republicans [...]

Rick Perry’s answer in Republican debate of October 11, 2011 (with video clip)

I really like Rick Perry because he was right when he called Social Security a “Ponzi Scheme” which it is. How did he do in the last debate? You be the judge by watching his response above. Rick Perry’s Moment Posted by Roger Pilon Last night POLITICO Arena asked: Who won the Reagan debate? My [...]

Romney attacked in Republican debate of October 11, 2011 (with video clip)

I am not too pleased with Mitt Romney and the article below shows one good reason to oppose him. Can Mitt Romney Escape His Romneycare Albatross? by Doug Bandow Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to Ronald Reagan, he is the author of Foreign Follies: America’s New [...]

Barney Frank and Chris Dodd mentioned in October 11, 2011 Republican debate with video clip

Dodd and Frank are the real villians of the mortgage mess and I knew that 3 years ago after reading this article below. Who did the Democrats get to clean up this mess? You guessed it. What a joke. Who Are the Villains of the Mortgage Mess? by Daniel J. Mitchell  Daniel J. Mitchell is [...]

Reagan’s 1982 tax increase mentioned during the Republican debate of October 11, 2011 with video clip

Reagan’s statement concerning 1982 tax increase is responded to by Republican Candidates in this clip below: Washington Could Learn a Lot from a Drug Addict Concerning spending cuts Reagan believed, that members of Congress “wouldn’t lie to him when he should have known better.” However, can you believe a drug addict when he tells you [...]

Ron Paul on Fed during the Republican debate of October 11, 2011 with video clip

I really like Ron Paul a lot and the reasons I like him are in this article below and in the clip above. Ron Paul’s Success Posted by David Boaz The Washington Post reports that Ron Paul “is enjoying a surge in support and the most high-profile campaign of his life. ” Paul’s unwavering ideals [...]

Cain’s 9-9-9 plan center stage at Republican debate of October 11, 2011 (with video clip)

Herman Cain’s 9-9-9 plan did steal the show at the Republican debate of October 11, 2011. Take a look at this article below: The Republican presidential debate in Hanover, N.H. (AP) There was one clear winner from Tuesday’s Republican presidential debate, based on the simple metrics of name recognition: businessman Herman Cain’s “9-9-9 Plan.” Virtually [...]

Romney not conservative enough (clip from Republican debate of 10-11-11)

Mitt Romney is not a true conservative. Exhibit #1 Romney wants to start trade wars. Romney for Panderer-in-Chief? by Gene Healy  Gene Healy is a vice president at the Cato Institute and the author of The Cult of the Presidency: America’s Dangerous Devotion to Executive Power. Added to cato.org on October 11, 2011 This article [...]

Federal government loves to eat up our money: “Yum Yum Eat em up”

The federal government loves to eat up more and more of our money. Back in the first few years of the 20th century our federal government usually spent about 3% of our money per year unless we were involved in a war, but now the percentage of GDP is up to almost 25%. It reminds me of the “Yum Yum Eat em up” short film I saw many years ago.

Federal Spending Is Outpacing Inflation

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

Prices of goods and services normally rise year to year, but federal spending has risen even faster. Although spending grew substantially after 9/11, less than half of the increase can be attributed to defense and homeland security spending.

YEAR-TO-YEAR PERCENTAGE CHANGE

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Federal Spending Is Outpacing Inflation

Source: U.S. Bureau of Labor Statistics and White House Office of Management and Budget.

Chart 4 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

Wild Man From Borneo – YUM YUM EEAAAAT EM UP!

Romney not conservative enough (clip from Republican debate of 10-11-11)

Mitt Romney is not a true conservative. Exhibit #1 Romney wants to start trade wars.

Romney for Panderer-in-Chief?

by Gene Healy 

Gene Healy is a vice president at the Cato Institute and the author of The Cult of the Presidency: America’s Dangerous Devotion to Executive Power.

Added to cato.org on October 11, 2011

This article appeared in The DC Examiner on October 11, 2011

Memo to the Rick Perry campaign: If your guy can’t win an exchange with Mitt Flippin’ Romney over who’s stuck to principle more consistently, his debating skills need serious work.

That’s what happened at Sept. 22’s Republican debate in Orlando. After deflating Perry with a “nice try,” Romney brazenly proclaimed, “One reason to elect me is that I know what I stand for, I’ve written it down. Words have meaning.”

“I’ve written it down” — I love that. I’m put in mind of the great New Yorker cartoon, featuring a Washington bigwig behind an enormous desk, the Capitol looming through his office window. “I keep my core beliefs written on the palm of my hand for easy reference,” he tells his visitor.

[I]f there’s any case to be made for Romney, it’s that he’s a full-spectrum panderer.

With New Jersey Gov. Chris Christie out and Perry floundering, it’s looking ever more likely that the alternative to President Obama will be a candidate who needs a cheat sheet to remember his core beliefs.

Taking to heart the Stoic principle that we shouldn’t lament what we can’t control, I’m going to try to convince you — and myself — that things could be worse.

In their 2007 editorial endorsing Romney, National Review argued — hilariously — that the former Massachusetts governor was a “full-spectrum conservative.”

But if there’s any case to be made for Romney, it’s that he’s a full-spectrum panderer. Paradoxically, Romney’s faults — his incessant flip-flopping and desperate quest for approval — might make him a less-dangerous-than-average president.

True, from a limited-government perspective, Romney’s stated platform is pretty awful. You can judge a candidate’s budget-cutting bona fides by the specificity of his proposed cuts.

Romney’s only gotten specific on what he’ll spend. He wants 100,000 new troops and a minimum of 4 percent of GDP lavished on our already outsized military.

On the campaign trail, Romney has savaged Obama’s proposed Medicare cuts — the sign “keep your hands off our Medicare” is “absolutely right,” he insists — and he has attacked Perry for questioning the constitutionality of Social Security.

The good news, I suppose, is that there is no better reason to take Romney at his word here than there is anywhere else.

Romney’s strategically timed ideological conversions are well-known. On the road to the presidency, he’s had convenient epiphanies about stem-cells, gay rights and immigration, and gone from being a staunch gun-controller to, in 2007, buying a lifetime NRA membership and awkwardly bragging about blasting rabbits with a single-shot .22 rifle (do those come with laser sights?).

But, having suffered through two ideologically charged presidencies in a row, to many Americans the poll-tested pandering of the Clinton era doesn’t look so bad by comparison.

Our 42nd president wanted national health care, but the country wanted welfare reform and prosperous normalcy — and the country got what it wanted.

Before this year, no one would have mistaken House Speaker John Boehner for a Tea Partier. Yet the political facts on the ground have forced him into a more confrontational posture than he’d otherwise favor.

Given how far the Republican Party and the electorate as a whole have shifted toward distrust of big government and crony capitalism, a pliable president, desperate for approval, might be restrained from doing too much harm, and even forced to do some good.

If Romney becomes president, the governor who pioneered the individual mandate will be pressured to push its repeal.

As David Brooks recently argued, “The strongest case for Romney is that he’s nobody’s idea of a savior.” He’s right: no one could possibly build a cult of personality around a candidate who’s so transparently insincere.

These aren’t inspiring reasons for a Romney candidacy, but, over the last decade, Americans may have gotten their fill of presidential inspiration.

Related posts:

Rick Perry’s answer in Republican debate of October 11, 2011 (with video clip)

I really like Rick Perry because he was right when he called Social Security a “Ponzi Scheme” which it is. How did he do in the last debate? You be the judge by watching his response above. Rick Perry’s Moment Posted by Roger Pilon Last night POLITICO Arena asked: Who won the Reagan debate? My [...]

 

Romney attacked in Republican debate of October 11, 2011 (with video clip)

I am not too pleased with Mitt Romney and the article below shows one good reason to oppose him. Can Mitt Romney Escape His Romneycare Albatross? by Doug Bandow Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to Ronald Reagan, he is the author of Foreign Follies: America’s New [...]

 

Barney Frank and Chris Dodd mentioned in October 11, 2011 Republican debate with video clip

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Reagan’s 1982 tax increase mentioned during the Republican debate of October 11, 2011 with video clip

Reagan’s statement concerning 1982 tax increase is responded to by Republican Candidates in this clip below: Washington Could Learn a Lot from a Drug Addict Concerning spending cuts Reagan believed, that members of Congress “wouldn’t lie to him when he should have known better.” However, can you believe a drug addict when he tells you [...]

 

Ron Paul on Fed during the Republican debate of October 11, 2011 with video clip

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Cain’s 9-9-9 plan center stage at Republican debate of October 11, 2011 (with video clip)

Herman Cain’s 9-9-9 plan did steal the show at the Republican debate of October 11, 2011. Take a look at this article below: The Republican presidential debate in Hanover, N.H. (AP) There was one clear winner from Tuesday’s Republican presidential debate, based on the simple metrics of name recognition: businessman Herman Cain’s “9-9-9 Plan.” Virtually [...]

 

Romney not conservative enough (clip from Republican debate of 10-11-11)

Mitt Romney is not a true conservative. Exhibit #1 Romney wants to start trade wars. Romney for Panderer-in-Chief? by Gene Healy  Gene Healy is a vice president at the Cato Institute and the author of The Cult of the Presidency: America’s Dangerous Devotion to Executive Power. Added to cato.org on October 11, 2011 This article [...]

 

Ron Paul speaking at Values Voter Summit

Ron Paul speaking at Values Voter Summit In this speech above Ron Paul repeats his view that we should not have a Dept of Education and the article below does the same thing. Beating Back Big (Ed.) Brother? Posted by Neal McCluskey It certainly seems quixotic to try to reverse the federal invasion of American [...]

 

Mitt Romney’s religion is becoming an issue

This issue concerning Mitt Romney’s religion is heating up. Baptist pastor taken to task Russ Jones and Chad Groening – OneNewsNow – 10/10/2011 11:05:00 am Popular radio and television commentator Glenn Beck wrapped up the Values Voter Summit in Washington, DC, Sunday in a wave of anti-Mormonism comments lodged towards GOP presidential hopeful Mitt Romney.   [...]

Are rich people as bad as “Dirty Dan?”

Are rich people as bad as “Dirty Dan?”

The Little Rascals – “Fly My Kite” (1931) Part 1-2

Uploaded by on Apr 6, 2011

The gang loves Grandma, but her slimy son-in-law loves her money.When Dirty Dan tries to take away her retirement fortune, it’s the kids (and Pete the Pup) to the resue! Soon, the chase is on and Dan is caught faster than you can say “Granny get your gun”!

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I enjoyed seeing that “Dirty Dan” got what was coming to him at the end of the episode below. If you listen to President Obama, and other liberals like John Brummett and Max Brantley then would get the impression that the mean rich folks don’t need to be so selfish and hand over the money to run the government for the rest of us.

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War on poverty is a failure in USA

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The state of our economy under President Obama according to Cato Institute

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Is soaking the rich fair?

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Do you think protectionism would help, in the long run, if we don’t implement pro-growth reforms?

Do you think protectionism would help, in the long run, if we don’t implement pro-growth reforms? Sometimes I wonder what are the motives of those who oppose free trade. Eight Questions for Protectionists Posted by Daniel J. Mitchell When asked to pick my most frustrating issue, I could list things from my policy field such as [...]

Three points where Brummett misses the boat in discussion versus Charlie Collins

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Obama wants to raise taxes on job creators

Uploaded by TheYoungTurks on Aug 6, 2010 Cenk Uygur (host of The Young Turks) filling in for Chris Jansing on MSNBC talks to Dan Mitchell of the Cato institute to compare Reaganomics to Obamanomics. __________________________ What should we do when we are caught in a slow economy? What did Reagan do in 1981? He lowered [...]

Cato’s Jeffrey Miron: “The liberal hatred of the rich is a minority view…”

Maybe the tide is turning. Americans do not hate the rich like liberals would have us believe. Take a look at this article: Soaking the Rich Is Not Fair by Jeffrey A. Miron This article appeared on The Huffington Post on September 2, 2011. What is the “fair” amount of taxation on high-income taxpayers? To liberals, the [...]

The Little Rascals – “Fly My Kite” (1931) Part 2-2

Mark Pryor voted for latest Obama stimulus

It seems like Pryor would have figured out that government stimulus bills do not work.

The Arkansas Times Blog reported last night:

Mark Pryor statement on Obama jobs bill

Posted by Max Brantley on Tue, Oct 11, 2011 at 6:29 PM

U.S. Sen. Mark Pryor’s office issued the following statement tonight:

In order to reach better days, job creation should be the number one priority in Congress. This jobs package, far from perfect, deserves debate and a vigorous amendment process. I see it as an opportunity to insert proposals to fix the fundamental challenges holding our economy back and chart a long-term course to move us forward. Only then can we inspire the confidence and certainty to get banks financing and businesses growing and hiring again.

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Uploaded by on Sep 7, 2011

Share this on Facebook: http://on.fb.me/qnjkn9 Tweet it: http://tiny.cc/o9v9t

In the debate of job creation and how best to pursue it as a policy goal, one point is forgotten: Government doesn’t create jobs. Government only diverts resources from one use to another, which doesn’t create new employment.

Video produced by Caleb Brown and Austin Bragg.

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When I think of all our hard earned money that has been wasted on stimulus programs it makes me sad. It has never worked and will not in the future too. Take a look at a few thoughts from Cato Institute:

Feeling Spent

by Michael D. Tanner

This article appeared in The New York Poston September 13, 2011. 

On Thursday night, the president laid out his plan for job creation, a $447 billion stimulus proposal, most of which we have seen before. After all, if Congress passes this new round of government spending, it would be the seventh such stimulus program since the recession began. George W. Bush pushed through two of them, totaling some $200 billion, and Obama already has enacted four more, with a total price tag of roughly $1.3 trillion.

The result: Three years and $1.5 trillion of spending later, we are back to the same gallimaufry of failed ideas. Among the worst:

1. Temporary Tax Cuts. The president wants to extend and expand the temporary reduction in the Social Security payroll tax that Congress enacted last December. The president also called for a grab-bag of tax credits for businesses that buy new equipment, hire veterans or even give workers a raise. There is obviously nothing wrong with letting workers keep a bit more of their money. And some of the tax breaks might encourage businesses to speed up otherwise planned hiring or purchases, providing a short-term economic boost. But neither people nor businesses tend to make the sort of long-term plans needed to boost production, generate growth and create jobs on the basis of temporary tax changes. This is especially true when businesses can look down the road and see tax hikes in their future.

If government spending brought about prosperity, we should be experiencing a golden age.

2. Further Extending Unemployment Benefits. The president wants to spend $49 billion to provide another extension of unemployment benefits to 99 weeks. Of course everyone can sympathize with the plight of the long-term unemployed. But, the overwhelming body of economic evidence suggests that extending unemployment benefits may actually increase unemployment and keep people out of work for longer. In fact, many economists believe that current extensions of unemployment benefits have already extended the average length of unemployment by three weeks or more.

Related post:

Obama has not learned that government stimulus will not work

President Obama just does not learn from the past. The Stimulus: The Government Job Creation Myth by Tad DeHaven   Tad DeHaven is a budget analyst at the Cato Institute and co-editor of Downsizing the Federal Government. Added to cato.org on August 2, 2010 This article appeared in the Richmond Times-Dispatch on August 1, 2010 [...]

Bill Clinton praises Obama
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