Obama calls for increase in Federal Gas Tax

[Dr.Who]

L

On a national level, if more of the national income, or GDP goes to the federal government, then the federal government will have a higher percentage of the GDP.

Just as we can say that at a zero percent tax rate the revenue as a percent of GDP would be zero we can also say that at a 100% tax rate the revenue as a percent of GDP would also be zero.


The real question is what happens in the middle - at any of the levels that have ever been tried. And the facts prove that in the middle changing the tax rate (or any other aspect of taxation) does not result in any more than a small change in revenue as a percent of GDP. So small in fact that it is more likely to be the result of chance.

No one can soundly make an argument that raising taxes increases revenue. Nor can they claim that lowering taxes increases revenue (though I don't think I saw anyone here make that claim).

 

[Dr.Who]

But yes, higher taxes results in a higher percentage of the GDP going to the government.

I posted a graph a back a few posts (post 69) that clearly showed that for every combination of rates and other factors whatever tax plans we have ever tried have never resulted in increased revenue as a percent of GDP.

If you want to argue that between WWII and the present there is a tax plan that has not been tried then show it to us. Otherwise high rates and low rates and whatever else have never resulted in increased (or decreased ) GDP.

 

[GenSeneca]

But yes, higher taxes results in a higher percentage of the GDP going to the government.

Your evidence of this is....

 

[GenSeneca]

and you are saying that no matter what rate, from zero to 100 percent, the amount we take in will never change right?

Go fish.

 

[PLC1]

Your evidence of this is....

Simple mathematics.

 

[GenSeneca]

No one can soundly make an argument that raising taxes increases revenue.

As this thread has proven time and time again.

 

[GenSeneca]

Simple mathematics.

Then you have no evidence... The historical data, i.e. facts, points to your conclusions as being fallacious. It's no surprise that you reject reality and substitute your own.

 

[PLC1]

Then you have no evidence... The historical data, i.e. facts, points to your conclusions as being fallacious. It's no surprise that you reject reality and substitute your own.

I suppose. the idea that 2 +2 might equal four from time to time must somehow violate the rules of "logic" you've been taught.



If you collect more in taxes, then the government has a higher percentage of the wealth that is taxed. There are many factors, including the deductions and exclusions as well as the "tax rate", but if more taxes are collected, more are in the government's coffers and less is in the private sector.

If you put more money into your savings account, and less in checking, then your savings account is going to get a larger percentage of your income.

It's the same thing.

 

[Dr.Who]

Simple mathematics.

So show usw the math for a 100% tax rate. What would revenue be as a percent of GDP? When you take all the money and GDP falls to zero what answer will you get when you take a percentage of a GDP of 0?

I had posted that and now you have me thinking about a formula. Might it look like this?

GDP - (X% of GDP) = The amount of GDP left grow the economy and to be taxed next year. Therefore the larger X is the smaller the economy will be next year.

An X of 99% will leave 1% of GDP for next years growth. So next years revenue will be tiny.
An X of 50% will leave 50% of GDP for next years growth.
An X of 1 will leave 99% of GDP for next years growth. So next years revenue will also be a tiny percent of a large number.

How much can one remove from the GDP and still have the economy actually grow next year?

Which is better a tiny percent of a large number or a large percent of a tiny number? Since the ultimate goal is for that number to be as large as possible the tiny percent of a large number is better than the large percent of a tiny number. But the amount taken has to be enough to run government - only large enough to run government. Any larger and one is reducing the size of the GDP for no good reason.

I can't tell you how large X should be but I can say that GDP should be as large as possible and the size of gov should be as small as possible while still working.

 

[PLC1]

So show usw the math for a 100% tax rate. What would revenue be as a percent of GDP? When you take all the money and GDP falls to zero what answer will you get when you divide by the GDP of 0?

Answer: any number divided by zero results in at best an error and at worst a crash of the system.

A 100% tax rate would, of course, result in 100% of the income going to the government.

What would happen to the GDP and the actual dollar amount going anywhere is another matter.

Now, show us how a 0% tax rate would result in the same percent, or close to the same percent, of the GDP going to the government.

 

[Dr.Who]

A 100% tax rate would, of course, result in 100% of the income going to the government.

What would happen to the GDP and the actual dollar amount going anywhere is another matter.

Now, show us how a 0% tax rate would result in the same percent, or close to the same percent, of the GDP going to the government.

Clearly if the gov took 100% of the GDP no one would have any money left to do anything. The cash based economy would cease to exist as we know it.

If the gov took zero percent of the GDP the economy would run very nicely and all individuals and businesses would operate with more profit than they otherwise would. But since gov would cease to function it would not longer stop people from harming each other and that would likewise result in the end of an economy as we know it.

It stands to reason that a 1% tax rate would be about as bad as a 0% tax rate and a 2% tax rate would be almost as bad, etc.

Likewise, a 99% tax rate would be about as bad as a 100% tax rate and a 98% tax rate would be almost as bad, etc.

The best must be somewhere in between and not necessarily at 50%. What we know from the statistics is that no matter what rate has been tried the gov takes in about 18%. Therefore lets just get used to an 18% revenue and leave the tax rate as small as it can be while still generating that 18%.

We could start at the lowest rate that has been tried and then lower it just a little each year until the revenue actually drops. Then we would know that the rate from the year before was the optimal rate.

 

[GenSeneca]

I suppose. the idea that 2 +2 might equal four from time to time must somehow violate the rules of "logic" you've been taught.

Your argument is still based on a fallacy... You're treating taxable income as a static number when, in reality, it's a variable figure while also excluding ALL other factors from the equation.

There are many factors...

None of which are represented in your "simple mathematics" equation of 2+2.

If you put more money into your savings account, and less in checking, then your savings account is going to get a larger percentage of your income.

History shows that's simply not the case with taxes... For example, revenue was 17.5% before the Clinton tax increase and remained 17.5% after the tax increase. According to your "simple mathematics", revenue should have gone up as a % of GDP, but didn't... How do you explain that?

It's the same thing.

Since spending has been roughly 24% of GDP, what tax rate would we need to see revenue at 24% of GDP?

 

[Dr.Who]

Since spending has been roughly 24% of GDP, what tax rate would we need to see revenue at 24% of GDP?

We have never had a revenue that large, even with tax rates as high as 94% (1944 war taxes) for the highest bracket, so we should never expect it to happen.

The highest it has ever been was around 19% so we should not expect it to get above that. 24% spending us unsustainable.

But which is better, a 94% tax rate with 18% revenue or a 25% top marginal tax rate with 18% revenue?

Some other intersting questions:


Which is more efficient? Taxing at 94% to get 18% or taxing at 25% to get 18%? Notice that the government has never been efficient enough to tax at 18% to get 18%.

is it possible to tax at lower than 18% top marginal tax bracket and still get 18% revenue? Yes because the top bracket is only one source for the revenue. The lower brackets also effect the amount of revenue. [edit: if all the tax brackets paid 18%, a flat rate, then the total revenue should be about 18% at best - it could still be lower but never higher]

And I think it is worth mention that sometimes we have talked about taxing GDP and sometimes we have talked about taxing marginal tax brackets. There has never been a tax that was intended to tax GDP so that is kind of an imaginary scenario. But we do have data about all the taxes that have been tried.

 

[GenSeneca]

We have never had a revenue that large, even with tax rates as high as 94% (1944 war taxes) for the highest bracket, so we should never expect it to happen.

I know that and you know that... But PLC hasn't come to terms with that reality yet. He is arguing that raising tax rates will increase revenue as a % of GDP, when asked for evidence of this he offers "simple mathematics", so I want to see how he applies his 2+2 formula to figure out a tax rate that will yield record breaking revenues of 24% of GDP.

As a side note Dr.Who... Watch out for the Red Herring offensive.

 

[Dr.Who]

I know that and you know that... But PLC hasn't come to terms with that reality yet. He is arguing that raising tax rates will increase revenue as a % of GDP, when asked for evidence of this he offers "simple mathematics", so I want to see how he applies his 2+2 formula to figure out a tax rate that will yield record breaking revenues of 24% of GDP.

I think there is a theoretical time when it would be true.

If the gov taxed everyone with a flat tax and no deductions or exemptions instead of just some people with a progressive tax then the revenue would always be the total income of all people and businesses times the tax rate. Additionally there would need to be no tax evasion and no black or grey market economy. But that would have to be seen as an argument against progressive taxation. If we wanted revenu to go above historical highs the only way to do that would be do eliminate progressive taxation. I wonder if the powers that be understand this and secretly plan to eliminate progressive taxation once the burden from the debt is so high that there is no other way to pay for it.