[tn13]

> . The US has known for at least a decade that spending more on IRS agents would earn more money than it would cost.

Isn't that proven to be a mostly false notion? Lower taxes tend to bring in more revenue and create more employment.

[ergothus]

> Lower taxes tend to bring in more revenue and create more employment.

Two responses:

1) A bit of an irrelevant point, since we're not talking about RAISING taxes, we're talking about collecting taxes that are due under current rules. (You can argue that's an effective tax increase, but I doubt people/companies that aren't following the rules are a good basis for policy - with lower taxes they'll still cheat)

2) But if we do consider your point...I don't know that your point has been shown at all. Sure, if you're on the far side of the Laffer curve, which is 50-70% tax rate (depending on whose numbers you trust), but we're at 20-38% tax rate in the US (and that's marginal rate, not overall rate). I'd also look to the efforts of politicians like Brownback in Kansas, where a massive tax cut led to...a tanking of the local economy. I don't recall of hearing of a single supply-side success in post-WWII America, but I'll admit to non-perfect knowledge.

Also, as a liberal, I support taxes because I support many govt programs. Taxes themselves are NOT exciting - if we could really raise more govt revenue by cutting taxes, I'd be all for it, but I've not seen any reliable evidence for that (again, unless you're on the other side of the Laffer curve) and I've seen at least limited evidence against it.

[ryanwaggoner]

Our top marginal rate is 39.4%, not 38. And that's only Federal income tax. Add in 3.8% Medicare and top marginal rates at the state / city level approaching 15% for some locations and top marginal income tax rate on earned income approaches 60% for some (wealthy) individuals. Not to mention sales tax, property tax, capital gains, etc.

Whether that's too high or too low is a separate discussion. But saying we're at 38% just isn't true.

[ergothus]

My bad, you are correct, 39.4% is the top marginal tax rate in the US, not 38%.

> Whether that's too high or too low is a separate discussion

Sounds fine: while exploring the numbers here (because frankly, I'm curious - tax rates are NOT a strength of mine) I'll not engage in that debate

> Add in 3.8% Medicare

Just to clarify that's the TOP rate, and that includes the employer share (which is arguably fair to include)

> top marginal rates at the state / city level approaching 15% for some locations

I'm less inclined to talk about the local taxes of extreme locations when discussing US taxes - Those would just induce people to move if too high (particularly since we're talking about people making over $400,000/year) and their new location could still be US.

So that would bring top marginal rates to 44.2%, and effective rates somewhere around 28-29% (assuming I didn't screw it up)

There is likely some minimum level of local taxes to apply there, (as well as a "reasonable minimum" to apply so we exclude rare extremely low results just like I rejected the extremely high ones) but I have no idea how to find that (1%? 3%?)

[linkregister]

Did Kansas's economy tank? I was under the impression that unemployment has dropped at similar rates to comparable states.

The primary impact has been massive reduction in the ability of the state government to provide services, including education. That is too long-term to be immediately measurable.

[ergothus]

First - I was wrong to mention the "local economy" because I don't actually know. I _meant_ the govt budget.

Second - Despite being willing to admit I don't know, I HAVE heard it, so I'm definitely open to having what I've heard proven/disproven (to the degree we can with so many variables).

As far as I can tell from my quick searches:

* Kansas private-sector job growth post-tax plan is low. (both regionally and nationally) * The Govt budget has definitely been hit * Kansas unemployment rate is actually BETTER than the national rate...but it seems like it always has been, for the last 25 years at least. (There's a recent spike since May, but even a skeptic of the Brownback plan such as myself is unwilling to attribute the spike to the tax rate without more data) * Kansas GDP growth rate is lower than the regional average and has been since the tax plan was enacted (this may be a red herring, couldn't see what it did before the tax plan, nor how the state GDP compares to it's theoretical potential which would impact tax rate)

So: Based on this I can't conclude the Kansas economy has "tanked" as I originally said...but I also don't see anything indicating an improvement due to the plan either. If cutting tax rates leads to more investment and growth, where should we be seeing that?

[Symmetry]

Your referring to an idea called the Laffer Curve. It's true that the government would bring in essentially $0 revenue with an income tax rate of 0% and it's, well, more or less true for a tax rate of 100% too. And so logically there is a point between those two where revenue is maximized. But in the US at least we're no where near that point. For people payed in proportion to their labor like people working hourly jobs it seems to peak over 50% and for salaried professionals the peak seems to be between 70% and 80%. So if you're talking about lowering the top tax bracket from 90% to 70% you can raise more money. But you can't for any of the sorts of tax rates we have today.

[kcorbitt]

But government revenue is almost certainly the wrong thing to optimize for. You probably want to optimize for something closer "wellbeing of the median citizen," although there's of course a lot of disagreement on what the actual right metric is.

This is a very practical difference. For the sake of easy math, let's assume that the maximum-revenue point on the curve is a 50% tax rate. It then follows that for every % you charge someone over 50%, tax revenue decreases. Which means that at this rate, every additional X% of tax is actually decreasing total economic output by 2X%! And assuming that we're on a smooth curve, that means that every X% you DECREASE your tax from the Laffer point is creating 2X% of economic value. Now, based on how fairly the created value is distributed and how efficiently you believe the government can spend its tax revenue you may have a different opinion on how much value you're comfortable destroying to increase tax revenue, but I'd submit that 2X is quite a high number.

I believe we need much-higher-than-0 taxes, but "we're still below the Laffer point" is a poor argument for raising them.

[kvb]

No, see Brownback's Kansas tax cuts for just one recent example showing that (at least in our current tax regime) lowering rates brings in less revenue.

[ashark]

> Lower taxes tend to bring in more revenue and create more employment.

Got some examples where this actually worked?

[vacri]

Tax haven countries that have no other economic drivers, but these are essentially parasitic economies and it wouldn't work in large countries.