Can We Balance the Budget By Raising Taxes?

Summary: Professor Antony Davies asks whether the United States can balance the federal government's budget by raising taxes. Looking at historical data of tax rates compared with government revenue, he shows that government revenue has remained essentially constant since 1969, despite wide changes in marginal tax rates. Prof. Davies concludes by suggesting that the optimal tax policy is be a simplified system with low rates.

[blazerider]

What I don't understand is why the people supposedly focused on "cutting taxes" in our government start with the super rich and get to the rest of us whenever they happen to find room in the budget (almost never).

[Archronis]

This presentation is misleading. He's showing the MARGINAL INCOME tax rate but ignores the fact that the tax burden was shifted in other ways at the same time via other taxes and brackets (that their own linked charts show). Also, a little research shows that his chart isn't exactly what he says it is. It is sourced to the IRS, but similar charts from other sources shows attenuated mirroring of revenue to tax rates ranging 22-30% of GDP. The data here was baked in some way not clearly disclosed.

[DMAN]

@SUMD123 You should probably read the link in the description, it describes:
"What is interesting about this data is that there are only two tax rates
that, when raised, increase tax revenue: Social Security and Medicare
tax rates. One possible reason for this is that, because more than 50% of
Americans pay no income tax, the only taxes that hit all working
Americans are the Social Security and Medicare taxes."
However, it also notes that these taxes increase the unemployment rate.

[StateExempt]

@egcroan - I can agree with you on tax loopholes, but my basic point remains:

It is misleading to say that corporations do not pay taxes because it implies that the executives for those firms do not pay taxes either, which is simply not the case.

[Blizeful]

I agree with this video that lowering taxes is best tax code policy for an economic stimulus, but only giving the wealthy tax cuts and not the middle/lower class wont help improve an economy. the middle class and lower class are the main consumers of this economy and giving them more purchasing power could greatly help the economy.

[DMAN]

@SUMD123 I did read your comment, if you read mine and the pdf, the graphs show that taxes on everyone do increase the revenue at the cost of unemployment like I said. What the video above explains and what you reiterated is that increasing the tax on the top income bracket has little effect on revenue. Now, it could be assumed that he generalises all taxes are like this and is therefore misleading, except he says something COMPLETELY to the contrary (middle class tax revenue), in the full PDF.

[StateExempt]

@Archronis - Those that work for the company, including the CEO and board of directors still pay taxes, correct?

[wood]

@gotrootdude, I never understood this argument. Its not that I don't pay my taxes nor is it that I do not need certain goods & services which the government currently provides. It's that I oppose the coercive monopoly under which they are currently provided.

If Safeway monopolized the grocery industry & violently forced everyone to buy their products, it would not be a valid argument against someone criticizing this state of affairs to simply tell them "either shut up or starve!!!"

[MrHamncheez]

@deathclaw555 I dont understand what you mean by that. Could you rephrase it? Are you referring to taxation?

[troooooper]

A is true. B is true. so i believe C is true.
Thats what this guys said. This doesnt include the distinction between the amount of taxes that is taken from different classes. What this graph of his could possibly infer is that the tax money are coming from somewhere else than the group of which tax graph of being lowered or increased is shown. OR people simply do/buy less when taxes were increased but could be denied since taxes were varied substantially in all areas, breaking point wasnt missed

[chrtravels]

There’s no audio in this video. Strange other people are commenting, so maybe it’s just me, but I’m able to listen to your other videos, and they have audio.

[Loathomar]

It would also seem as good question of, what made up that 18% of GDP in taxes at different points. Income tax has generally remand the same at ~40-45%, but corporate tax as dropped from 25 percent in the 1950s to less then 10% today. That was replaced entirely by the payroll tax, which want from less the 10% in the 50s to 25% today. As the payroll tax is regressive, we can see where the taxes have been moved. Marginal tax rates mean little if the deductions change to make the same effective rate

[RavemastaJ]

There are a number of issues with that (although I know where you're coming from now).

Firstly, running at max capacity is not always feasible, due to market volatility (supply and demand fluctuates due to innumerable factors).

Secondly, the very fact that you are running at max capacity could completely change how the market works, creating unwanted volatility and uncertainty for the business owner.

Although, this does raise the question: Where does profit actually go, once they have it?

[theoriginalKland]

@Illyrien Not exactly, what he is saying is that even though they are lowering the taxes on the top 1% the government still takes in the same percentage of revenue every year. What he neglected to mention is that this is because the taxes on the middle and lower class were RAISED in order to compensate for the rich tax cuts. They haven't really cut taxes, they just shifted the tax burden to the middle and lower class.

[simonburbank]

@residentzombie So how do we create roads, fund public schools etc. if we have no income tax.

[halloranedward]

I don't know why anyone would think that government spending does not create jobs and improve the economy, look how well it worked the last time they did that.

[soulforged]

@CorrerPorVida It's because when we raise rates, the rich just get around it with accounting, investing overseas, etc. Lower taxes invites capital into the country, higher taxes drive capital out. Simple enough, it really makes sense if you look at it reasonably.

[Neosaigo]

You can't balance the budget by raising taxes, but you can reduce the deficit by raising revenue (a.k.a taxes).

It is two separate issues. Budget is determined by the policies adopted by the Congress and taxes is not directly related since how the revenue are utilized depends on the budget plan.

However in general, higher revenue and lower spending is the only way to close a budget deficit, especially one this big.

Catholic university... *chuckle*.

[bradjbourgeois]

If you made $16, 614.33 in 1980 (50, 000 in 2011 dollars) your effective tax rat was 30.9% (income and payroll taxes), by 1990 your rate was 34.4% compared to 23.2% in 1950. If you made $33, 228, 671.50 in 1980 (100 million in 2011 dollars) you were taxed at 69.9%, 28% in 1990 and 87.2% in 1960. There are more working people, taxes were raised on them to make up for decreasing taxes on the super rich.

[sleddineinar]

What he saying here, for those who are a bit slower at this... Is that the govt gets 18% of whatever the GDP is, and that the less govt taxes us the more the GDP is therefor the more revenue they actually get. Savvy?