Tuesday, October 23, 2012

Saturday, December 11, 2010

EPISODE 3 (WE NEED A THIRD PARTY)

The Historical Lessons of Lower Tax Rates | The Heritage Foundation

The Historical Lessons of Lower Tax Rates | The Heritage Foundation

Published on August 13, 2003 by Daniel Mitchell, Ph.D.

There is a distinct pattern throughout American history: When tax rates are reduced, the economy's growth rate improves and living standards increase. Good tax policy has a number of interesting side effects. For instance, history tells us that tax revenues grow and "rich" taxpayers pay more tax when marginal tax rates are slashed. This means lower income citizens bear a lower share of the tax burden - a consequence that should lead class-warfare politicians to support lower tax rates.

Conversely, periods of higher tax rates are associated with sub par economic performance and stagnant tax revenues. In other words, when politicians attempt to "soak the rich," the rest of us take a bath. Examining the three major United States episodes of tax rate reductions can prove useful lessons.

1) Lower tax rates do not mean less tax revenue.

The tax cuts of the 1920s
Tax rates were slashed dramatically during the 1920s, dropping from over 70 percent to less than 25 percent. What happened? Personal income tax revenues increased substantially during the 1920s, despite the reduction in rates. Revenues rose from $719 million in 1921 to $1164 million in 1928, an increase of more than 61 percent.

According to then-Treasury Secretary Andrew Mellon:

The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business and invest it in tax-exempt securities or to find other lawful methods of avoiding the realization of taxable income. The result is that the sources of taxation are drying up; wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people.

The Kennedy tax cuts
President Hoover dramatically increased tax rates in the 1930s and President Roosevelt compounded the damage by pushing marginal tax rates to more than 90 percent. Recognizing that high tax rates were hindering the economy, President Kennedy proposed across-the-board tax rate reductions that reduced the top tax rate from more than 90 percent down to 70 percent. What happened? Tax revenues climbed from $94 billion in 1961 to $153 billion in 1968, an increase of 62 percent (33 percent after adjusting for inflation).

According to President John F. Kennedy:

Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

The Reagan tax cuts
Thanks to "bracket creep," the inflation of the 1970s pushed millions of taxpayers into higher tax brackets even though their inflation-adjusted incomes were not rising. To help offset this tax increase and also to improve incentives to work, save, and invest, President Reagan proposed sweeping tax rate reductions during the 1980s. What happened? Total tax revenues climbed by 99.4 percent during the 1980s, and the results are even more impressive when looking at what happened to personal income tax revenues. Once the economy received an unambiguous tax cut in January 1983, income tax revenues climbed dramatically, increasing by more than 54 percent by 1989 (28 percent after adjusting for inflation).

According to then-U.S. Representative Jack Kemp (R-NY), one of the chief architects of the Reagan tax cuts:

At some point, additional taxes so discourage the activity being taxed, such as working or investing, that they yield less revenue rather than more. There are, after all, two rates that yield the same amount of revenue: high tax rates on low production, or low rates on high production.

2) The rich pay more when incentives to hide income are reduced.

The tax cuts of the 1920s
The share of the tax burden paid by the rich rose dramatically as tax rates were reduced. The share of the tax burden borne by the rich (those making $50,000 and up in those days) climbed from 44.2 percent in 1921 to 78.4 percent in 1928.

The Kennedy tax cuts
Just as happened in the 1920s, the share of the income tax burden borne by the rich increased following the tax cuts. Tax collections from those making over $50,000 per year climbed by 57 percent between 1963 and 1966, while tax collections from those earning below $50,000 rose 11 percent. As a result, the rich saw their portion of the income tax burden climb from 11.6 percent to 15.1 percent.

The Reagan tax cuts
The share of income taxes paid by the top 10 percent of earners jumped significantly, climbing from 48.0 percent in 1981 to 57.2 percent in 1988. The top 1 percent saw their share of the income tax bill climb even more dramatically, from 17.6 percent in 1981 to 27.5 percent in 1988.

Harmful Spending & Complexity
Lower tax rates are important, but they are not the only critical issue. Both the level of government spending and where that money goes are very important. And even when looking only at tax policy, tax rates are just one piece of the puzzle. If certain types of income are subject to multiple layers of tax, as occurs in the current system, that problem cannot be solved by low rates. Similarly, a tax system with needless levels of complexity will impose heavy costs on the productive sector of the economy.

This WebMemo is excerpted from the author's, Daniel J. Mitchell's, Backgrounder, The Historical Lessons of Lower Tax Rates, published July 19, 1996. The original publication, found here, contains footnotes and numerous charts.

Friday, June 19, 2009

Wednesday, June 17, 2009

I coundn't have said it better.

Glenn Beck: The Letter

Audio Available:

June 17, 2009 - 10:36 ET

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Sign the petition: An open letter to our nation's leadership
GLENN: I got a letter from a woman in Arizona. She writes an open letter to our nation's leadership: I'm a home grown American citizen, 53, registered Democrat all my life. Before the last presidential election I registered as a Republican because I no longer felt the Democratic Party represents my views or works to pursue issues important to me. Now I no longer feel the Republican Party represents my views or works to pursue issues important to me. The fact is I no longer feel any political party or representative in Washington represents my views or works to pursue the issues important to me. There must be someone. Please tell me who you are. Please stand up and tell me that you are there and that you're willing to fight for our Constitution as it was written. Please stand up now. You might ask yourself what my views and issues are that I would horribly feel so disenfranchised by both major political parties. What kind of nut job am I? Will you please tell me?

Well, these are briefly my views and issues for which I seek representation:

One, illegal immigration. I want you to stop coddling illegal immigrants and secure our borders. Close the underground tunnels. Stop the violence and the trafficking in drugs and people. No amnesty, not again. Been there, done that, no resolution. P.S., I'm not a racist. This isn't to be confused with legal immigration.

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Two, the TARP bill, I want it repealed and I want no further funding supplied to it. We told you no, but you did it anyway. I want the remaining unfunded 95% repealed. Freeze, repeal.

Three: Czars, I want the circumvention of our checks and balances stopped immediately. Fire the czars. No more czars. Government officials answer to the process, not to the president. Stop trampling on our Constitution and honor it.

Four, cap and trade. The debate on global warming is not over. There is more to say.

Five, universal healthcare. I will not be rushed into another expensive decision. Don't you dare try to pass this in the middle of the night and then go on break. Slow down!

Six, growing government control. I want states rights and sovereignty fully restored. I want less government in my life, not more. Shrink it down. Mind your own business. You have enough to take care of with your real obligations. Why don't you start there.

Seven, ACORN. I do not want ACORN and its affiliates in charge of our 2010 census. I want them investigated. I also do not want mandatory escrow fees contributed to them every time on every real estate deal that closes. Stop the funding to ACORN and its affiliates pending impartial audits and investigations. I do not trust them with taking the census over with our taxpayer money. I don't trust them with our taxpayer money. Face up to the allegations against them and get it resolved before taxpayers get any more involved with them. If it walks like a duck and talks like a duck, hello. Stop protecting your political buddies. You work for us, the people. Investigate.

Eight, redistribution of wealth. No, no, no. I work for my money. It is mine. I have always worked for people with more money than I have because they gave me jobs. That is the only redistribution of wealth that I will support. I never got a job from a poor person. Why do you want me to hate my employers? Why ‑‑ what do you have against shareholders making a profit?

Nine, charitable contributions. Although I never got a job from a poor person, I have helped many in need. Charity belongs in our local communities, where we know our needs best and can use our local talent and our local resources. Butt out, please. We want to do it ourselves.

Ten, corporate bailouts. Knock it off. Sink or swim like the rest of us. If there are hard times ahead, we'll be better off just getting into it and letting the strong survive. Quick and painful. Have you ever ripped off a Band‑Aid? We will pull together. Great things happen in America under great hardship. Give us the chance to innovate. We cannot disappoint you more than you have disappointed us.

Eleven, transparency and accountability. How about it? No, really, how about it? Let's have it. Let's say we give the buzzwords a rest and have some straight honest talk. Please try ‑‑ please stop manipulating and trying to appease me with clever wording. I am not the idiot you obviously take me for. Stop sneaking around and meeting in back rooms making deals with your friends. It will only be a prelude to your criminal investigation. Stop hiding things from me.

Twelve, unprecedented quick spending. Stop it now.

Take a breath. Listen to the people. Let's just slow down and get some input from some nonpoliticians on the subject. Stop making everything an emergency. Stop speed reading our bills into law. I am not an activist. I am not a community organizer. Nor am I a terrorist, a militant or a violent person. I am a parent and a grandparent. I work. I'm busy. I'm busy. I am busy, and I am tired. I thought we elected competent people to take care of the business of government so that we could work, raise our families, pay our bills, have a little recreation, complain about taxes, endure our hardships, pursue our personal goals, cut our lawn, wash our cars on the weekends and be responsible contributing members of society and teach our children to be the same all while living in the home of the free and land of the brave.

I entrusted you with upholding the Constitution. I believed in the checks and balances to keep from getting far off course. What happened? You are very far off course. Do you really think I find humor in the hiring of a speed reader to unintelligently ramble all through a bill that you signed into law without knowing what it contained? I do not. It is a mockery of the responsibility I have entrusted to you. It is a slap in the face. I am not laughing at your arrogance. Why is it that I feel as if you would not trust me to make a single decision about my own life and how I would live it but you should expect that I should trust you with the debt that you have laid on all of us and our children. We did not want the TARP bill. We said no. We would repeal it if we could. I am sure that we still cannot. There is such urgency and recklessness in all of the recent spending.

From my perspective, it seems that all of you have gone insane. I also know that I am far from alone in these feelings. Do you honestly feel that your current pursuits have merit to patriotic Americans? We want it to stop. We want to put the brakes on everything that is being rushed by us and forced upon us. We want our voice back. You have forced us to put our lives on hold to straighten out the mess that you are making. We will have to give up our vacations, our time spent with our children, any relaxation time we may have had and money we cannot afford to spend on you to bring our concerns to Washington. Our president often knows all the right buzzword is unsustainable. Well, no kidding. How many tens of thousands of dollars did the focus group cost to come up with that word? We don't want your overpriced words. Stop treating us like we're morons.

We want all of you to stop focusing on your reelection and do the job we want done, not the job you want done or the job your party wants done. You work for us and at this rate I guarantee you not for long because we are coming. We will be heard and we will be represented. You think we're so busy with our lives that we will never come for you? We are the formerly silent majority, all of us who quietly work , pay taxes, obey the law, vote, save money, keep our noses to the grindstone and we are now looking up at you. You have awakened us, the patriotic spirit so strong and so powerful that it had been sleeping too long. You have pushed us too far. Our numbers are great. They may surprise you. For every one of us who will be there, there will be hundreds more that could not come. Unlike you, we have their trust. We will represent them honestly, rest assured. They will be at the polls on voting day to usher you out of office. We have cancelled vacations. We will use our last few dollars saved. We will find the representation among us and a grassroots campaign will flourish. We didn't ask for this fight. But the gloves are coming off. We do not come in violence, but we are angry. You will represent us or you will be replaced with someone who will. There are candidates among us when hewill rise like a Phoenix from the ashes that you have made of our constitution.

Democrat, Republican, independent, libertarian. Understand this. We don't care. Political parties are meaningless to us. Patriotic Americans are willing to do right by us and our Constitution and that is all that matters to us now. We are going to fire all of you who abuse power and seek more. It is not your power. It is ours and we want it back. We entrusted you with it and you abused it. You are dishonorable. You are dishonest. As Americans we are ashamed of you. You have brought shame to us. If you are not representing the wants and needs of your constituency loudly and consistently, in spite of the objections of your party, you will be fired. Did you hear? We no longer care about your political parties. You need to be loyal to us, not to them. Because we will get you fired and they will not save you. If you do or can represent me, my issues, my views, please stand up. Make your identity known. You need to make some noise about it. Speak up. I need to know who you are. If you do not speak up, you will be herded out with the rest of the sheep and we will replace the whole damn congress if need be one by one. We are coming. Are we coming for you? Who do you represent? What do you represent? Listen. Because we are coming. We the people are coming.

The above was taken from the following Website.

http://www.glennbeck.com/content/articles/article/198/26742/