Comparing to other countries is irrelevant. Their economies are smaller and maybe their ratio is stable?
Also, the US budget was balanced in 2000. It is possible.
I have no idea why so many people refuse to accept that there is a growing problem.
Also, the US budget was balanced in 2000. It is possible.
I have no idea why so many people refuse to accept that there is a growing problem.
It was balanced due to the Internet bubble providing unsustainable revenues coupled with age demographics. The large cohort of the population had hit peak earnings years. The govt revenue as a % of GDP hit all time highs, not because of careful planning and choices, but because of luck and unsustainable timing.
When that bubble popped, and as the cohort in peak earning years shrunk as people aged out of it, so did the revenue, and then the budget became un-balanced again. Certainly the unpaid for Bush Tax cuts have made it worse, but the fall began before Bush even took office, and certainly was well gone by the time Bush passed the tax cuts.
It was not balanced by some stroke of government genius.
The scam part comes from how the tax cut was marketed to Americans
“Contrary to common perceptions, the CBO data indicate that: (1) income earned after taxes and transfers has increased over the past several decades for all income groups, (2) the federal tax system is progressive and has become more progressive over the past three decades, and (3) the federal system relies heavily on higher earners to raise revenue for government services and means-tested transfers.”
https://www.forbes.com/sites/timworstall/2015/01/08/the-us-t...
I can’t find data before 1980.
Reagan’s tax reform wasn’t a gimmick: it broadened the tax base (to encompass more kinds of income) and lowered rate to keep the effective tax rate basically the same.
The biggest problem is we simply doesn’t tax enough. We want to grow the scope of our government to be more like Europe, but we aren’t willing to tax the middle and upper middle class the way they do in Europe. We had an au pair from Germany. Our effective tax rate in a blue state as a dual income professional couple was the same as she paid at her entry level office job.
You're right that the 86 reform was pretty progressive but with all 3, the rich did great, poor did alright and middle class did poorly, IMO.
What was their effective rate in those years? What percentage of their income are they paying compared to the nonrich, and how did it trend?
Whether you think that's a good thing or a bad thing, it's hard to call it progressive.
Not saying I entirely disagree with it. I just don't think that data is that compelling since it's a pretty shallow analysis of taxation and income of high earners (which is fine, not every article needs to be that deep)
As they paid less everyone else could just be paying more as a total
This time span covers top marginal tax rates from as high as 90% to as low as 35%. The truth here is that we cannot significantly increase tax revenues by raising tax rates, as when taxes get too high, people are simply incentivized to earn less, or to spend more on finding, developing, or exploiting loopholes in the tax code to reduce their taxes. Accordingly, actual economists have understood for the last 50 years that simply raising taxes blindly can counterintuitively decrease overall tax revenue. This effect is part of what's referred to as the Laffer Curve. [2]
But to your first point, that there is no problem, I'd like to point out that interest spending has exceeded defense spending. [3]
But hey, don't take my word for that constituting a problem, take it from Jerome Powell, chair of the U.S. Federal Reserve:
"The U.S. federal government’s on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don’t think that’s at all controversial." [4]
In summary:
• No, everything is not perfectly fine. The United States is on a fiscally unsustainable path.
• No, the TCJA is not the big proximal contributor to the problem, routine deficit spending resulting in unsustainable debt is.
• No, we can't easily fix the problem by raising taxes on everyone, let alone by only raising them on the rich.
Citations:
[1] https://fred.stlouisfed.org/series/FYFRGDA188S
[2] https://www.investopedia.com/terms/l/laffercurve.asp
[3a] https://fred.stlouisfed.org/series/A091RC1Q027SBEA
[3b] https://fred.stlouisfed.org/series/FDEFX
[4] https://thehill.com/homenews/4447860-powell-the-us-is-on-an-...
None of this stuff is a priori true.
If this is incorrect, please feel free to correct me.
Also, what is your takeaway from this, after discounting the validity of the Laffer Curve, that the US as a whole ought to simply enact dramatic tax hikes, which will solve fiscal stability issues?
That's before we get into the (lack of?) empirical data. I'm finding it hard to come up with any citations that offer an existence proof of a Laffer curve for real, actual public finance systems. The Cato Institute and Brookings have things to say, but they're encumbered by policy goals. Ebrill, also encumbered by policy goals near as I can tell, urges caution. Espanhol's master's thesis concludes that a Laffer curve doesn't exist in its investigation of corporate tax rates across the Eurozone.
So, frankly, I'm keener just to throw out the academics here.
That's also before we get into what debt is and how it works. It isn't a call option: the persons, fictitious and natural, to whom the US government is indebted cannot exercise those debts on a whim in an effort to get paid. They have a maturity schedule. What matters to these creditors (and all creditors more broadly) is that there's faith that their debt instruments will eventually fully mature. For natural persons, that's likely decades from now. For fictitious persons like governments, that could very well be on the order of centuries.
It's for this reason why I also reject the appeal to Jerome Powell's authority: he doesn't express a concrete reason why he expects the faith that those persons, fictious and natural, have in the federal government to erode to the point where default is some notion of imminent. Does he expect the executive branch to stop payments suddenly? Does he expect that the tax base will collapse in the very near future? (Malthusians in particular are fond of crying the latter, predicting widespread famine.)
Furthermore, that's all before we get into taxation and how it works. It's a sticky subject academically, even after you peel away the conflicting policy goals. Is taxation revenue? Is it a constraint on the money supply? Is it economic dead weight? The answer to all of these is, "It really depends." One model says one thing, and another says something else, and there isn't a whole lot of real consensus on which one fits best where. (Economics, it turns out, is one of those social sciences, which means that most experimentation is thorny unless you abandon ethics. When all you have is models...)
The thing that matters at the end of the day is that someone (maybe you!) will cheerfully accept my greenbacks for what I reasonably feel like they're worth, and as long as that remains the case, I'll happily render unto Caesar until we finally find a way to kill him for good.
Gross federal tax revenue never declined, even in the year after the 2017 tax cuts took effect.
https://www.statista.com/statistics/200405/receipts-of-the-u...
I think because this implies change. And over the past couple decades it's become more and more acceptable to simply be against all change. It's political viable to be the guy who doesn't change things, and you can slam other people just by saying "look, he changes things!"
I mean, lately it feels like there's a lot of political will to take a "do nothing and hope it works" approach to everything. It's frustrating.