Mark Levin – Republicans Have Nothing To Be Giddy About; Don’t Allow Democrats To Shape The Message

I do see your point of contention, Larry. So let me compose a mea culpa comment here based on some specifics. And I’ll even include Billy Bob as well. (ouch.. LOL) CORRECTION: Nope… sunsetted this since I didn’t read the graph trends incorrectly.

Now, for the purposes of this mea culpa debate, I’m going to have to assume your particular brand of “revenue loss”… meaning that the earnings of US taxpayers belong to the government to take, or give back, at will. It’s not a concept I endorse in any fashion. But it’s necessary for me to assume your point of view for this comment to make any sense whatsoever. However, personally, I still assert that money not stolen from the breadwinners by government is not a loss. It is money that Congress shouldn’t be spending because it’s not theirs.

Using the fourth year after enactment figures” the total mean revenue loss for Reagan’s combination tax policies (cuts and increases) from recovering Carter recession days is $76.8 bil. On the flip side, Clintons’ tax policies… also a combo of increases and cuts… left us with a revenue loss of $45.2. Both administrations left us with a “loss”, using your school of thought. So yes, I read the graphs wrong, as Billy Bob accused me… correctly… of doing. (again, ouch… LOL) because what I should have done was combine all the tax policies to get an overall mean average of loss or gain. Then again, Billy Bob read them wrong as well. CORRECTION: Actually, I did not read the graphs incorrectly at all. Retracted.

So I’ll mea culpa that the Reagan years were a mean revenue loss (using the tax bill effects estimates alone) with the combination of tax policies.

I will also cap that with the Clinton tax policy years were also a mean revenue loss. And Clinton enjoyed better business environment with both the dot com bubble and the onset of the housing bubble.

Yet… per the study’s quoted verbage:

Second, in 1981, ERTA was enacted, which provided for the indexation of the individual income tax parameters. [Mata musing: which eliminated the reasons for the continued tax cuts for the “bracket creep” indexing]l The combination of indexation and relatively large federal budget deficits helped cause 9 of the 11 major tax bills enacted between 1982 and 1993 to increase federal revenue.

Third, all 8 of the major tax bills enacted after 1993 have reduced federal revenue, some as a result of soaring federal revenue in the late 1990’s and early 2000’s that pushed the federal budget into surplus for the first time in many years.

Ya know, it’s hard to reconcile that comment about the Reagan years, which also includes only one of Clinton’s tax bills – the first Omnibus tax increase. You see, of the bills the comment mentions as revenue increases, one was Clinton’s, one of Bush 41’s, and the rest were Reagan policies. This doesn’t indicate that the Reagan tax policies were losers across the board.

What Reagan did was deal with the economy in a combination of tax cuts and increases…. so he lowered tax rates for Joe Citizen, but it also increased the amount of revenue from those dreaded “wealthiest of Americans”. In other words, the shift of the burden of taxes to the more wealthy started with Reagan.

Chris Frenze did an analysis of the tax burden shift, based on actual published IRS data on federal tax payments (not the “estimates” used for this particular study). Naturally, you probably won’t like it because he was the Chief Economist to the vice chair of the 1996 JEC. He said this about the way the tax revenue trickled into the IRS.

The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.

A middle class of taxpayers can be defined as those between the 50th percentile and the 95th percentile (those earning between $18,367 and $72,735 in 1988). Between 1981 and 1988, the income tax burden of the middle class declined from 57.5 percent in 1981 to 48.7 percent in 1988. This 8.8 percentage point decline in middle class tax burden is entirely accounted for by the increase borne by the top one percent.

Several conclusions follow from these data. First of all, reduction in high marginal tax rates can induce taxpayers to lessen their reliance on tax shelters and tax avoidance, and expose more of their income to taxation. The result in this case was a 51 percent increase in real tax payments by the top one percent. Meanwhile, the tax rate reduction reduced the tax payments of middle class and poor taxpayers. The net effect was a marked shift in the tax burden toward the top 1 percent amounting to about 10 percentage points. Lower top marginal tax rates had encouraged these taxpayers to generate more taxable income.

The 1993 Clinton tax increase appears to having the opposite effect on the willingness of wealthy taxpayers to expose income to taxation. According to IRS data, the income generated by the top one percent of income earners actually declined in 1993. This decline is especially significant since the retroactivity of the Clinton tax increase in that year limited the ability of taxpayers to deploy tax avoidance strategies, temporarily resulting in an increase in their tax burden. Moreover, according to the FY 1997 Clinton budget submission, individual income tax revenues as a share of GDP will be lower during the first four years of the Clinton tax increase, which include the effects of the 1990 tax increase, than under the last four years of the Reagan tax changes (FY 1986-89). Furthermore, according to a study published by the National Bureau for Economic Research,[2] the Clinton tax hike is failing to collect over 40 percent of the projected revenue increases.

What Clinton did was raise taxes on everyone except the lowest 50%, where they taxes were actually cut. Additionally, he added burdens to small business and, with the exception of his Tax Relief Act in 1997, pretty much focused his increases not on the wealthy, but on Joe Citizen. During the Clinton dot com boom, the majority of citizens were more flush with cash, and could more easily absorb the Clintonian tax policies without getting into distress… so they thought. However the mid 90s also began the rapid rise of consumer debt going to record levels by the early turn of the century. Were they really able to absorb the Clinton tax structures? Or were they merely using the EZ money era to rob Peter to pay Paul?

Now is not the time to play “Clinton”.

Additionally, Reagan’s tax increases centered more around investors, SS payroll taxes, and a temporary gas tax increase of 5 cents for six years. and a 16 cent increase on cigarette taxes. The later two are consumer/product based and not a mandate across all citizens, while the bulk of the rest of his increases are business taxes. Yet both Joe Citizen and businesses began to recover from Carter policies and thrive.

From the brief bits I have read of the deficit reduction commission proposals, they suggest doing much the same by reducing the tax rates across the board, but eliminating the tax credits, business write offs, etc. Whether this pencils out as an overall increase in taxes for everyone, we’d have to have a test case. But it’s the first return to Reaganesque tax policies I’ve see of late.

Back to GDP, your favorite measurement. The total of four year averages for all Reagan policies had a minus .88 effect on the GDP. Clinton’s tax policies had a plus .49 effect on the GDP. Thus the reason the study’s author says that the effect on the GDP of most tax policies… cuts or increases… are likely to be small and uncertain.

But when it comes to a recession, leaving that cash in the pocket of Joe Citizen makes a huge difference.

So, Larry… you have my mea culpa. Reagan tax policies did indeed result in the government not being able to steal approx $76 billion more from taxpayers and businesses, and I read the graph wrong. Now you have a mea culpa INRE the Clinton era… since his tax policies prevented the government from stealing an additional $45 billion from the same. Credit wasn’t easy and fast under Reagan, and people lived within their means. Not so during both Clinton and Bush era.

And the effect of both on the GDP was minimal.

And now we’ve reached today. Have I changed my mind? Hang no…. Reagan’s policies reversed a recession. Clinton’s policies resulted in a loss during a financial boom. Why would I? Tax cuts for income, and revamp the tax code for credits and write offs for business. And then have Congress live with what comes in… not what they want to come in.