About two minutes ago on Meet the Press David Gregory asked former Fed Chairman Alan Greenspan the following question:
Do tax cuts pay for themselves?
Greenspan’s answer:
They do not.
Supply-side conservatives have argued for years that when you keep taxes low you increase the money supply the supply of capital and thereby stimulate the economy. This is not the same as saying tax cuts pay for themselves.
In any case, I am quite sure that even Greenspan agrees that there is a top tax rate which if exceeded will result in constriction of the economy and the consequent reduction of federal tax revenue.
In short, the tax dispute is not about whether or not we should have taxes, but rather how much taxes we should have.
Where do you think we should draw the line?
8 responses so far ↓
1 CA1 // Aug 1, 2010 at 1:04 pm
” Supply-side conservatives have argued for years that when you keep taxes low you increase the money supply and thereby stimulate the economy.” Are you sure that you meant to say “increase the money supply”?
2 Vious // Aug 1, 2010 at 4:41 pm
It seems obvious that Republicans who want things paid for have yet to actually come up with an answer as to HOW they would pay for these tax cuts and with all sorts of blogs claiming different things of how they pay for themselves…it becomes painfully clear that we are not sure if they pay for themselves and in the end, they do not
So, all Republicans have egg on themselves YET AGAIN for wanting deficit responsibility yet CONTINUING not to actually implement it into action
3 Peter // Aug 1, 2010 at 4:52 pm
Vious,
Democrats = Good. Republicans = Bad.
Surely you can do better than that.
4 Peter // Aug 1, 2010 at 4:54 pm
CA1,
Increase the supply of capital.
5 Tyler // Aug 2, 2010 at 4:22 am
Vious,
Please remind me, what party controls both congress and the executive branch? Kinda hard for Republicans to do anything serious about deficit reduction when they don’t control the legislation, budget, etc.
6 LawStudent // Aug 2, 2010 at 1:02 pm
@ Vious
A tax cut is not an expenditure so why would the government have to “pay” for it?
I assume that you are working on the unsophisticated static analysis of the effect of tax rate reductions.
7 Norm Bernstein // Aug 3, 2010 at 2:43 pm
“Where do we draw the line?”
I’d argue that the answer lies in examining the history of tax rates in the country, and examining the economic vitality under differing rates. We currently have the lowest level of federal taxation, as a percentage of economic activity, in six decades… which, to me, argues that rates could easily withstand being a little higher without deleterious effect. In an era of expanding deficits, the solutions have t ocome both from controlling spending AND raising revenue. One or the other isn’t an answer. Obama’s plan to raise the top bracket rate from 35% to 39.6% is still, by historical standards, a very low rate… and it won’t hur the people in that tax bracket at all.
8 Ayn Rand Acolyte Alan Greenspan Favors Across the Board Tax Increases // Sep 15, 2010 at 2:14 pm
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