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No, not at all. There is no evidence that tax cuts lead to higher wages or economic growth. It's been studied and debunked to death but it never dies.

by dnomad 8y ago

eschevarria 8y ago
Deadweight losses from taxes have most certainly not been debunked.
- mfringel 8y ago
  Yes, and distribution of the benefits from deadweight loss reduction has also been a matter of study, and that's the topic on the table.
  - eschevarria 8y ago
    That the distribution of the benefits is done according to supply and demand has most certainly not been debunked either. Wages are decided by the labor market equilibrium, not individually by employers. And economic growth is not a matter of distribution and certainly related to deadweight losses.
    - dnomad 8y ago
      Do you have any evidence for these simplistic Econ101 theories? The funny thing is that if an any economist did prove a link between tax cuts and long term economic growth he wouldn't just win a Nobel, they'd knock down the Statue of Liberty and replace it with a statue of him. Alas, the evidence eludes all comers. > And economic growth is not a matter of distribution and certainly related to deadweight losses. Unfortunately this is exactly wrong. Economic growth is probably only a matter of distribution. No matter how hard the supply siders wish it, aggregate demand and a strong consumer base are all that really matters. As they say, show me a growing middle class and I'll show you economic growth.
      - eschevarria 8y ago
        > Do you have any evidence for these simplistic Econ101 theories? Yes, deductive logic. Way better than empirical studies, if that's what you were looking for. You only need the assumption that demand curves in the labor market slope downward to deduce that taxes in that market cause deadweight losses, and the evidence that demand curves nearly always slope downward, not just in the labor market, is every transaction you have ever made and every transaction you have ever heard anyone talk about. There are empirical studies that confirm this, but they are irrelevant because you have access to much better evidence, and you should just dismiss the empirical studies that say otherwise. If controlled experiments showed this wrong, you should assume that the researchers are lying about their results, because that would genuinely be a more likely explanation than demand curves not actually sloping downward. By the way, simple theories are more likely to be true, not less. > Economic growth is probably only a matter of distribution. There are exactly two reasons there can be an increase in economic growth and they are intensive and extensive growth. Either you make more efficient use of inputs or you have more inputs. Deadweight losses mean you make less efficient use of inputs. In principle, the inefficiency caused by the taxes could be offset by the way they are spent if they were used to correct a market failure, which could increase economic efficiency or even increase the inputs. But market failures do not exist so in practice this does not happen and taxes always harm economic growth.
ksk 8y ago
There is evidence, its just that the evidence is weak and mere co-relations. All of macro economic theory is like that - just models explaining aggregate human behavior. Anything people propose can probably be shown to work in some model or another. On the flip side, higher taxes also don't "lead to" any wage increases or economic growth. Given the massive waste and inefficiency in most government programs, very little of our taxes actually go to anything useful. Most of it goes towards war and to pay government contractors invoicing a $200 "military spec" screwdriver.
- dnomad 8y ago
  > Given the massive waste and inefficiency in most government programs, very little of our taxes actually go to anything useful. There is very convincing evidence that higher taxes and greater government spending do lead to long term economic growth. These days even the old fuddy duddies at the IMF have been forced to admit that higher taxes don't lower growth [1] and that many times the fiscal multipler is greater than 1 [2]. Certainly from 2008-2015, despite all the austerity hawks going on and on about inefficient government spending, actual evidence indicates the fiscal multipler was nearly 2! [1] https://www.independent.co.uk/news/world/politics/inequality-imf-international-monetary-fund-high-tax-rich-jeremy-corbyn-a7995826.html https://www.independent.co.uk/news/world/politics/inequality... [2] https://www.washingtonpost.com/news/wonk/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/?utm_term=.8b9c2def2ad0 https://www.washingtonpost.com/news/wonk/wp/2013/01/03/an-am...
  - ksk 8y ago
    If you wanted to, you could fill a cup of water by dumping a gallon bucket on top of it. The point here is that the government has never been efficient in allocating resources. Also FYI: I'm not a representative or a supporter of the IMF. The fact that some of their people have said things which didn't turn out to be true doesn't concern me. In fact I'd probably expect that most bold predictions don't come true, especially on economic matters.
- bobwaycott 8y ago
  This is ideology and attempted political point-scoring, not evidence. There aren’t even a preponderance of correlative data that shows a link between tax cuts and economic growth—except where economic growth is defined as a disproportionate increase in wealth concentration in ever smaller percentages of the population. The opposite has been shown—and quite conclusively—with decades of data (that tax cuts do not spur economic growth). Moreover, seeing as how you’re dragging out the old government waste trope—its notable that you conveniently neglect to directly indict those on the receiving end of this “waste”. It cannot be solely the government’s fault that private corporate contractors happily pocket this waste. If waste is something you find especially onerous, shouldn’t we start by pointing the finger at the private companies who submit “wasteful” bids/invoices? If the government is paying too much and wasting public funds on contractors, doesn’t the fault lie with those submitting the bids/invoices? If there is nothing at all wrong with their bids, and we want to say it’s acceptable to bid any amount so long as the bidding is, say, fairly open to all comers, then how exactly can the government be guilty of “waste”? Seems every time the government is criticized for waste, it’s always a one-sided critique. Meanwhile, attempting to reign in this alleged waste with regulations, bid caps, stronger negotiating power, or some form of (gasp!) price control mechanism for public projects is rather uniformly met with charges of abuse of power, not playing by the rules, crippling free markets, or some other such nonsense. If there is waste, it starts with exorbitant bids/invoices for that $200 screwdriver. Seems to me the government is simply playing by the rules and paying what is demanded. There’d be a shit storm if they didn’t.
bobwaycott 8y ago
It’s not just that there is no evidence supporting the trickle-down fantasy, or that the fantasy has been debunked on the basis of this lack of evidence. In fact, the exact opposite has been shown with evidence—that tax cuts do not lead to economic growth[0]. [0]: https://www.theatlantic.com/business/archive/2012/09/tax-cuts-dont-lead-to-economic-growth-a-new-65-year-study-finds/262438/ https://www.theatlantic.com/business/archive/2012/09/tax-cut...
bcoates 8y ago
The point isn't to have a tax cut but to reform the particular anti-employment/anti-investment distorted incentives the US corporate tax system had. At some point the US finances are going to have to be stabilized by increasing taxes or perhaps spending not so much on military white elephants, but a non-progressive tax on spending overseas profits in the US is not the right way to do it.

No, not at all. There is no evidence that tax cuts lead to higher wages or economic growth. It's been studied and debunked to death but it never dies.

by dnomad 8y ago

No, not at all. There is no evidence that tax cuts lead to higher wages or economic growth. It's been studied and debunked to death but it never dies.

eschevarria 8y ago

Deadweight losses from taxes have most certainly not been debunked.

mfringel 8y ago
Yes, and distribution of the benefits from deadweight loss reduction has also been a matter of study, and that's the topic on the table.
- eschevarria 8y ago
  That the distribution of the benefits is done according to supply and demand has most certainly not been debunked either. Wages are decided by the labor market equilibrium, not individually by employers. And economic growth is not a matter of distribution and certainly related to deadweight losses.
  - dnomad 8y ago
    Do you have any evidence for these simplistic Econ101 theories? The funny thing is that if an any economist did prove a link between tax cuts and long term economic growth he wouldn't just win a Nobel, they'd knock down the Statue of Liberty and replace it with a statue of him. Alas, the evidence eludes all comers. > And economic growth is not a matter of distribution and certainly related to deadweight losses. Unfortunately this is exactly wrong. Economic growth is probably only a matter of distribution. No matter how hard the supply siders wish it, aggregate demand and a strong consumer base are all that really matters. As they say, show me a growing middle class and I'll show you economic growth.
    - eschevarria 8y ago
      > Do you have any evidence for these simplistic Econ101 theories? Yes, deductive logic. Way better than empirical studies, if that's what you were looking for. You only need the assumption that demand curves in the labor market slope downward to deduce that taxes in that market cause deadweight losses, and the evidence that demand curves nearly always slope downward, not just in the labor market, is every transaction you have ever made and every transaction you have ever heard anyone talk about. There are empirical studies that confirm this, but they are irrelevant because you have access to much better evidence, and you should just dismiss the empirical studies that say otherwise. If controlled experiments showed this wrong, you should assume that the researchers are lying about their results, because that would genuinely be a more likely explanation than demand curves not actually sloping downward. By the way, simple theories are more likely to be true, not less. > Economic growth is probably only a matter of distribution. There are exactly two reasons there can be an increase in economic growth and they are intensive and extensive growth. Either you make more efficient use of inputs or you have more inputs. Deadweight losses mean you make less efficient use of inputs. In principle, the inefficiency caused by the taxes could be offset by the way they are spent if they were used to correct a market failure, which could increase economic efficiency or even increase the inputs. But market failures do not exist so in practice this does not happen and taxes always harm economic growth.

ksk 8y ago

There is evidence, its just that the evidence is weak and mere co-relations. All of macro economic theory is like that - just models explaining aggregate human behavior. Anything people propose can probably be shown to work in some model or another. On the flip side, higher taxes also don't "lead to" any wage increases or economic growth. Given the massive waste and inefficiency in most government programs, very little of our taxes actually go to anything useful. Most of it goes towards war and to pay government contractors invoicing a $200 "military spec" screwdriver.

dnomad 8y ago
> Given the massive waste and inefficiency in most government programs, very little of our taxes actually go to anything useful. There is very convincing evidence that higher taxes and greater government spending do lead to long term economic growth. These days even the old fuddy duddies at the IMF have been forced to admit that higher taxes don't lower growth [1] and that many times the fiscal multipler is greater than 1 [2]. Certainly from 2008-2015, despite all the austerity hawks going on and on about inefficient government spending, actual evidence indicates the fiscal multipler was nearly 2! [1] https://www.independent.co.uk/news/world/politics/inequality-imf-international-monetary-fund-high-tax-rich-jeremy-corbyn-a7995826.html https://www.independent.co.uk/news/world/politics/inequality... [2] https://www.washingtonpost.com/news/wonk/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/?utm_term=.8b9c2def2ad0 https://www.washingtonpost.com/news/wonk/wp/2013/01/03/an-am...
- ksk 8y ago
  If you wanted to, you could fill a cup of water by dumping a gallon bucket on top of it. The point here is that the government has never been efficient in allocating resources. Also FYI: I'm not a representative or a supporter of the IMF. The fact that some of their people have said things which didn't turn out to be true doesn't concern me. In fact I'd probably expect that most bold predictions don't come true, especially on economic matters.
bobwaycott 8y ago
This is ideology and attempted political point-scoring, not evidence. There aren’t even a preponderance of correlative data that shows a link between tax cuts and economic growth—except where economic growth is defined as a disproportionate increase in wealth concentration in ever smaller percentages of the population. The opposite has been shown—and quite conclusively—with decades of data (that tax cuts do not spur economic growth). Moreover, seeing as how you’re dragging out the old government waste trope—its notable that you conveniently neglect to directly indict those on the receiving end of this “waste”. It cannot be solely the government’s fault that private corporate contractors happily pocket this waste. If waste is something you find especially onerous, shouldn’t we start by pointing the finger at the private companies who submit “wasteful” bids/invoices? If the government is paying too much and wasting public funds on contractors, doesn’t the fault lie with those submitting the bids/invoices? If there is nothing at all wrong with their bids, and we want to say it’s acceptable to bid any amount so long as the bidding is, say, fairly open to all comers, then how exactly can the government be guilty of “waste”? Seems every time the government is criticized for waste, it’s always a one-sided critique. Meanwhile, attempting to reign in this alleged waste with regulations, bid caps, stronger negotiating power, or some form of (gasp!) price control mechanism for public projects is rather uniformly met with charges of abuse of power, not playing by the rules, crippling free markets, or some other such nonsense. If there is waste, it starts with exorbitant bids/invoices for that $200 screwdriver. Seems to me the government is simply playing by the rules and paying what is demanded. There’d be a shit storm if they didn’t.

bobwaycott 8y ago

It’s not just that there is no evidence supporting the trickle-down fantasy, or that the fantasy has been debunked on the basis of this lack of evidence. In fact, the exact opposite has been shown with evidence—that tax cuts do not lead to economic growth[0]. [0]: https://www.theatlantic.com/business/archive/2012/09/tax-cuts-dont-lead-to-economic-growth-a-new-65-year-study-finds/262438/ https://www.theatlantic.com/business/archive/2012/09/tax-cut...

bcoates 8y ago

The point isn't to have a tax cut but to reform the particular anti-employment/anti-investment distorted incentives the US corporate tax system had. At some point the US finances are going to have to be stabilized by increasing taxes or perhaps spending not so much on military white elephants, but a non-progressive tax on spending overseas profits in the US is not the right way to do it.