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Tuesday, September 28, 2010

Johnston: The Failure of the Bush Tax Cuts

Tax AnalystsDavid Cay Johnston has published So How Did the Bush Tax Cuts Work Out for the Economy?, 128 Tax Notes 1409(Sept. 27, 2010):

Analyzing the latest tax data, Johnston finds that average incomes are down since 2000, the number of high-income nontaxpayers is rapidly rising, and the numbers show that the 2001 and 2003 Bush tax cuts failed to produce economic growth as promised.


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The idea that tax rates are the exclusive, or even the primary, determinant of economic growth is silly. It's a straw man argument. Besides that, the Bush tax cuts were a smaller change than the 1986 tax reform, and they only partially reversed the prior increases under GHW Bush and Clinton.

Ultra-high tax rates can break an economy, but you need more than low tax rates to make an economy. Much more.

Posted by: AMTbuff | Sep 28, 2010 7:08:28 AM

Yes, you need to bring spending in line with revenue and one way to do that is to go back to the Clinton rates. As Clinton discovered, coming close to a balanced budget brings interest rates low. So I favor letting the tax cuts expire uninterrupted or unmodified. Bush's tax cuts distorted the economy and unbalanced the government's expenditures. As a result, we will have a Bush hangover for a very long time, crippling our economy while the Chinese have the latest transportation infrastructure, investment in new technology, a blue water Navy that can challenge ours, and a goal for a Moon shot. Tax cuts for the rich don't do any of those. Thanks Bush, and thanks GOP!

Posted by: Anonymous | Sep 28, 2010 7:30:47 AM

DCJ: "the worst recession ear since the 1930s"

Johnston seems to be parroting Obama's talking addition to blaming Bush. I seem to remember a worst recession with double digit unemployment, double digit prime interest rates, and double digit inflation under Jimmy Carter's first administration. We are now in Carter's second administation. Hold on to your seats.

DCJ: "Where is the prosperity"

Johnston would do well to remember that we were already in a recession when Clinton left office and that the 9-11 attacks sent the economy into a tailspin. But, the economy did recover and people prospered until the real estate bubble burst, which was inevitable after slobbering Barney Frank and the Democrats pushed for mortgages for every deadbeat who couldn't afford one.

So what alternative does DCJ want us to accept? Give government more money by taking it away from the people who earn it and the businessmen who provide jobs. What for...another stimulus?

DCJ: "Our government, the basis of our freedoms"

Ahhh, here we see the real philosopy of DCJ and the Left. They firmly believe that government gives us our rights. Government should be in total control.

Actually, as set forth in the Declaration of Independence, our freedoms exist because we are naturally endowed with them by our Creator (Whom Obama intentionally fails to credit.) Freedoms do not come from government. In addition, our freedoms are enumerated in the Constitution, which limits government from taking them away.

Government doesn't give. It only takes away and re-distributes.

The solution to our problems is not bigger government, more regulations, and less money for all taxpayers.

Posted by: Woody | Sep 28, 2010 7:32:43 AM

Someone needs to explain to me why cutting taxes for the rich doesn't lead to a new national infrastructure, a revamped public education system, faster broadband, sophisticated military, a new space program, and possible energy independence. Could it be that the rich don't spend it on public purposes? Instead, they save and invest in private companies and grow richer? How shocking.

Posted by: Anonymous | Sep 28, 2010 11:46:36 AM

I don't understand the point of that graph, other than to stir the emotions of true believers.

22,000 people returned $200,000 of gross income and sufficient losses to reduce it to zero? I'd have expected at least 22,000 restaurants owners in New York City alone went belly up in late 2008 and freed-up sufficient passive losses to wipe out their income.

Posted by: guy in the veal calf office | Sep 28, 2010 4:19:22 PM

Anonymous: Could it be that the rich don't spend it on public purposes? Instead, they save and invest in private companies and grow richer? How shocking.

Just see how many jobs there would be if "the rich" quit investing in private companies. I would say that Bill Gates has done more for "public purposes" than all the community organizers lumped together have.

And, I would like to see how well broadband, the military, and what used to be our space program, before Obama killed it, would have been furthered without private companies and their innovations. As far as public education, well, you can hold onto what the government and the teacher unions have ruined.

Since you hate the greedy rich, go ask a worker for a small business which he would prefer and what makes the most sense: (1) Have the government take money from his "rich" employer who gives him a job or (2) have his employer keep his money to re-invest in company growth and to be able to afford his workers.

(Ten to one odds that the IP address of Anonymous is that of the Syracuse law school.)

Posted by: Woody | Sep 28, 2010 6:08:02 PM

First of all, small business is not rich. Small businesses get many tax breaks, but at what point do you stop calling a business a small business? Would you call Exxon small business? That's vastly different from your local mom and pop store.

Second, I'm sure that your average worker would vote for tax cuts for the owner so he can buy a Mercedes SLS while the infrastructure decays and there are no roads or reliable transportation to get to work. The owner lives in a gated community with kids going to private schools while the worker's kids go to a crappy public school that the owner begrudgingly pays his taxes on.

Ironic that the right and libertarians scream about Hayek's Road to Serfdom and nanny statism and don't realize that we're all in a trajectory for 99 percent of us to become serfs to the rich.

Third, no, I don't go to Syracuse Law School.

Posted by: Anonymous | Sep 29, 2010 7:19:46 AM

Anonymous, you clearly don't have a clue about the nature and size of small businesses, which provide most of the jobs in this country. They're not typically mom-and-pop corner stores.

Small businesses provide comfortable livings for many owners, but that doesn't make those owners the "evil rich." In fact, most small business owners that I know sacrificed and suffered for years to make their companies successful and they took great risks, but what would you know or appreciate about that?

And, all the tax breaks?! Obama kept harping on the capital gains tax breaks for small businesses, but Obama has no clue, either, about taxes and that small businesses don't benefit from that. And, like the health-care mandate is really going to help them.

Small businesses don't need help from government...they need more relief from taxes and job-killing regulations. The solution to job creation isn't government "help"'s getting government out of the way.

You fall into the same blindness of liberal politicians who voted "luxury taxes" on yachts and expensive cars, which killed their sales and shut down businesses who made those items purchased by "the rich" and that provided jobs for "working families."

I didn't say that you atended Syracuse law school. It's just that your comments and defense of the article reminded me of "someone" who teaches there. Maybe you would be so kind as to quit being anonymous and fill us in on your background and why you are filled with such wealth-envy.

Posted by: Woody | Sep 29, 2010 8:41:50 AM