Surplus NOT from Capital Gains Receipts (Re: Krugman qualitycontrol

Nathan Newman nathan.newman at yale.edu
Wed Jul 26 06:28:44 PDT 2000


On Tue, 25 Jul 2000, Max Sawicky wrote:


> " . . . The question is to compare how much the wealthy would have paid
> absent the 1993 tax bill and compare that to present income tax revenue.
> Total annual income tax revenues have increased to $990 billion per year
> since 1993 when it was $509 billion- nearly doubling total income tax
> receipts. Given that the richest 5% pay half of all income taxes, that adds
> up to an increase of $240 billion per year paid by the richest 5% and an
> increase of $150 billion per year paid by the richest 1%."
>
> [mbs] No. As noted above, the revenue proceeds stem from both
> tax base changes (how large, and what rates they are subject to)
> and rate increases, so applying new rates
> to new bases would be wrong, in my book. It gives Clinton
> credit for a worsened distribution of income (hmmm).

If Clinton is responsible for all macro-economic results, he is responsible both for booming growth and the unequal distribution of income - which is all of the surplus.

If we assume that all he had control of was actual government regulations, meaning in this case the tax code, what the 1993 tax bill is responsible for is making sure that a large chunk of that wealth going to the wealthy from the boom was taxed back for public use.

If the top rate had not been raised from 31% to 41% in 1993, the surplus would be much smaller or nonexistent.

That seems like the bottom line on assessing the effects of any policy.

Using "but for" analysis of the effects of tax cuts or hikes is hardly radical. It is exactly what Citizens for Tax Justice and other liberal groups did in the 1980s in assessing the responsibility of the 1981 tax cuts for the deficit back then.


> Max again, on politics:
>
> You ask, why should Dems propose more, if the GOP
> won't pass even a little spending? To make the case
> that more spending is both feasible and worthwhile.
> The GOP has figured out that proposing big tax cuts
> is a way to popularize the idea, even if you don't
> get them the first time around. Clinton is ready to make
> compromises and trades on them, while the Repugs
> have the political initiative.

First, he is willing to make trades over spending programs, notably the prescription drugs benefit. So the basic idea of matching spending with tax cut proposals is already there, and I have no disagreement with having Dems out there proposing big spending programs. I just don't think in practice it makes too big a difference in results, which is why it is not an issue that will drive me over to Nader.

And the reality is that for all the talk about the "surplus", it is pretty ephemeral. Any kick in the economy and most of it will melt away pretty quickly. So a little fiscal restraint rhetoric while the GOP controls the purse springs is gives the hand to veto all the GOP tax giveaways to the wealthy.

-- Nathan Newman



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