Monthly Archives: March 2012

News

Canada’s tax revenues steady as they lowered corporate tax rates

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Canada: Corporate tax cuts, not stimulus spending
Canada: Corporate tax cuts, not stimulus spending

From the Daily Caller.

Excerpt:

The chart shows Canada’s federal corporate tax revenues as a share of gross domestic product (GDP) and the federal corporate tax rate. The tax rate plunged from 38 percent in 1980 to just 15 percent by 2012. Amazingly, there has been no obvious drop in tax revenues over the period.

Canadian corporate tax revenues have fluctuated, but the changes are correlated with economic growth, not the tax rate. In the late 1980s, a tax rate cut was followed by three years of stable revenues. In the early 1990s, a plunge in revenues was caused by a recession, and then in the late 1990s revenues soared as the economy grew.

In 2000, Canadian policymakers enacted another round of corporate tax rate cuts, which were phased in gradually. Corporate tax revenues initially dipped, but then they rebounded strongly in the late 2000s.

The rate cuts enacted in 2000 were projected to cause substantial revenue losses to the Canadian government. That projection indicates that the reform didn’t have much in the way of legislated loophole closing. But the chart shows that the positive taxpayer response to the rate cut was apparently so large that the government did not lose much, if any, revenue at all.

In 2009, Canada was dragged into a recession by the elephant economy next door, and that knocked the wind out of corporate tax revenues. However, it is remarkable that even with a recession and a tax rate under 20 percent, tax revenues as a share of GDP have been roughly as high in recent years as they were during the 1980s, when there was a much higher rate. Jason Clemens of the Macdonald-Laurier Institute notes that Canadian corporate tax revenues have been correlated with corporate profits, not the tax rate.

If a corporate tax rate is high, there is a “Laffer effect” when the rate is cut, meaning that the tax base expands so much that the government doesn’t lose any money. Estimates from Jack Mintz and other tax experts show that cutting corporate tax rates when they are above about 25 percent won’t lose governments any revenues over the long run.

This data is no surprise to supply siders – we expect this because of past experience with tax cuts.

Tax cuts: do they work?

Consider this article by the Cato Institute discusses how the Reagan tax cuts affected the unemployment rate.

Excerpt:

In 1980, President Carter and his supporters in the Congress and news media asked, “how can we afford” presidential candidate Ronald Reagan’s proposed tax cuts?

Mr. Reagan’s critics claimed the tax cuts would lead to more inflation and higher interest rates, while Mr. Reagan said tax cuts would lead to more economic growth and higher living standards. What happened? Inflation fell from 12.5 percent in 1980 to 3.9 percent in 1984, interest rates fell, and economic growth went from minus 0.2 percent in 1980 to plus 7.3 percent in 1984, and Mr. Reagan was re-elected in a landslide.

[…]Despite the fact that federal revenues have varied little (as a percentage of GDP) over the last 40 years, there has been an enormous variation in top tax rates. When Ronald Reagan took office, the top individual tax rate was 70 percent and by 1986 it was down to only 28 percent. All Americans received at least a 30 percent tax rate cut; yet federal tax revenues as a percent of GDP were almost unchanged during the Reagan presidency (from 18.9 percent in 1980 to 18.1 percent in 1988).

What did change, however, was the rate of economic growth, which was more than 50 percent higher for the seven years after the Reagan tax cuts compared with the previous seven years. This increase in economic growth, plus some reductions in tax credits and deductions, almost entirely offset the effect of the rate reductions. Rapid economic growth, unlike government spending programs, proved to be the most effective way to reduce unemployment and poverty, and create opportunity for the disadvantaged.

The federal revenues as a % of GDP were steady.

The conservative Heritage Foundation describes the effects of the Bush tax cuts.

Excerpt:

President Bush signed the first wave of tax cuts in 2001, cutting rates and providing tax relief for families by, for example, doubling of the child tax credit to $1,000.

At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.

It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.

In 2003, capital gains tax rates were reduced. Rather than expand by 36% as the Congressional Budget Office projected before the tax cut, capital gains revenues more than doubled to $103 billion.

The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.

Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:

  • GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
  • The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
  • The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.

The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy. Nor was this experience unique. The famous Clinton economic boom began when Congress passed legislation cutting spending and cutting the capital gains tax rate.

Tax revenues increased after the Bush tax cuts – due economic growth.

Those are the facts. That’s not what you hear in the media, but they are the facts.

News

CBO report: four million will lose employer health care due to Obamacare

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White House Dossier explains what’s wrong with Obama’s promise above.

Excerpt:

A new report by the nonpartisan Congressional Budget Office states that by 2016, Obamacare will result in 4 million people fewer people getting health insurance coverage from their employers.

The estimate is a vast increase from the CBO prediction just a year ago that 1 million would no longer obtain coverage from their employers. And it raises substantial questions about the veracity of one of Obama’s key pledges in selling the health care law – that everyone who wants to keep their current health insurance plan and doctor could do it.

It’s not clear how many of the 4 million would be forced out as a result of employers dropping coverage. But it can be assumed that many will indeed lose their insurance and have to seek it elsewhere, since few people would seem likely to intentionally abandon coverage provided by an employer.

And many employers have already indicated that they would rather drop coverage and incur fees from the government than continue to provide it.

According to a survey published last summer by the Towers Watson consulting firm, almost one in ten medium to large size employers said they are likely or very likely to end health benefits for their workers.

[…]The CBO also projects that 2 million fewer uninsured will gain insurance under the law than previously thought, with the total uninsured population declining by 30 million instead of 32 million.

Here’s an updated Obama promise about keeping your current health care coverage:

But don’t worry – if you work for an Obama-supporting union, or a big Obama-supporting corporation, then you’ve probably got a waiver from Obamacare.

Polemics

Philosopher Doug Groothuis explains the logic of the pro-life position

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At Christian Post, an article by Douglas Groothuis. (H/T Mary)

Here’s the most useful bit:

When we separate personhood from humanity, we make personhood an achievement based on the possession of certain qualities. But what are these person-constituting qualities? Some say a basic level of consciousness; others assert viability outside the womb; still others say a sense of self-interest (which probably does not obtain until after birth). All of these criteria would take away humanity from those in comas or other physically compromised situations.4 Humans can lose levels of consciousness through injuries, and even infants are not viable without intense and sustained human support. Moreover, who are we to say just what qualities make for membership in the moral community of persons?5 The stakes are very high in this question. If we are wrong in our identification of what qualities are sufficient for personhood and we allow a person to be killed, we have allowed the wrongful killing of nothing less than a person. Therefore, I argue that personhood should be viewed as a substance or essence that is given at conception. The fetus is not a lifeless mechanism that only becomes what it is after several parts are put together—as is the case with a watch or an automobile. Rather, the fetus is a living human organism, whose future unfolds from within itself according to internal principles. For example, the fertilized ovum contains a complete genetic code that is distinct from that of the mother or father. But this is not a mere inert blueprint (which is separable from the building it describes); this is a living blueprint that becomes what its human nature demands.

Yet even if one is not sure when personhood becomes a reality, one should err on the side of being conservative simply because so much is at stake. That is, if one aborts a fetus who is already a person, one commits a deep moral wrong by wrongfully killing an innocent human life. Just as we do not shoot target practice when we are told there may be children playing behind the targets, we should not abortion fetuses if they may be persons with the right not to be killed. As I have argued, it cannot be disputed that abortion kills a living, human being.

Many argue that outside considerations experienced by the mother should overrule the moral value of the human embryo. If a woman does not want a pregnancy, she may abort. But these quality of life considerations always involve issues of lesser moral weight than that of the conservation and protection of a unique human life (which considers the sanctity or innate and intrinsic value of a human life).6 An unwanted pregnancy is difficult, but the answer is not to kill a human being in order to end that pregnancy.

I think that the real question in the abortion debate right now is whether a living organism with a human nature and a human genetic code that is distinct from its mother and father deserves the right to life, or whether it needs to develop some other capability in order to be worthy of protection from violence.

Consider something from philosopher Francis J. Beckwith.

Excerpt:

Some argue that personhood does not arrive until brain waves are detected (40 to 43 days).11Others, such as Mary Anne Warren,12 define a person as a being who can engage in cognitive acts such as sophisticated communication, consciousness, solving complex problems, self-motivated activity and having a self-concept. This would put the arrival of personhood at some time after birth. Still others, such as L. W. Sumner, 13 hold a more moderate position and argue that human personhood does not arrive until the fetus is sentient, the ability to feel and sense as a conscious being. This, according to Sumner, occurs possibly as early as the middle weeks of the second trimester of pregnancy and definitely by the end of that trimester.

Although these criteria differ from each other in important ways, they all have one thing in common: each maintains that if and only if an entity functions in a certain way are we warranted in calling that entity a person. Defenders of these criteria argue that once a human being, whether born or unborn, acquires a certain function or functions–whether it is brain waves, rationality, sentience, etc.– it is then and only then that a person actually exists. Those who defend these personhood criteria typically make a distinction between “being a human” and “being a person.” They argue that although fetuses are members of the species homo sapiens, and in that sense are human, they are not truly persons until they fulfill a particular set of personhood criteria.

Although functional definitions of personhood may tell us some conditions that are sufficient to say that a being is a person, they are not adequate in revealing to us all the conditions that are sufficient for a particular being to be called a person. For example, when a human being is asleep, unconscious, and temporarily comatose, she is not functioning as a person as defined by some personhood criteria. Nevertheless, most people would reject the notion that a human being is not a person while in any of these states. In other words, while personhood criteria, such as the ones presented by Warren can tell us that a being is a person, these criteria are not adequate to declare a being a non-person: The exercise of rational thought tells us that a being is a person; when that person is sleeping, and thus is not exercising rational thought, that lack of exercise of the thought function does not make her a non-person at that time. Consequently, it seems more consistent with our moral intuitions to say that personhood is not something that arises when certain functions are in place, but rather is something that grounds these functions, whether or not they are ever actualized in the life of a human being. Thus, defining personhood strictly in terms of function is inadequate.

If you are pro-life because of your feelings, or because someone told you to be, you ought to know that being pro-life is quite rational and supported by medical evidence. People who are pro-abortion are pro-abortion because they want recreational sex without the complications of having to care for the consequences (babies!) of their own actions. Well, guess what. We ought to care about not hurting other people. If grown-up’ selfish pursuit of happy feelings conflicts with another person’s right to life, then maybe we need to take a step back from being happy and start trying to be good instead.