Note, that is not an "economic paper" it is not a peer-reviewed published article. It is a book published by a conservative think tank.
Doing an evaluation like the one he did is extremely risky since so many things change that are dependent on one another.
For instance if we change the top marginal rate but increase other rates and end up with the same tax revenue can we discern a revenue change from the effects of the tax?
A: No, a statistical analysis will show that there was "no correlation" between the various effects since they happened at the same time and had offsetting effects. There is no way to tease the relevant data out of that
The primary problem then is that those tax changes (and many tax changes) were intended to be revenue neutral. I.E. if the tax changes were successful then we could not possibly see the effect that he wants to claim doesn't exist because we intentionally raised revenue by increasing tax rates in other areas while lowering the tax rate in the one he wants to study!
It should also be noted that Clinton did see a large spike in revenues from his tax increases that could not be explained solely by the increase in production that occurred at the end of the 92-93 recession. Such Hauser's prediction that this would not happen was wrong, falsifying his theory right there.
We also have the significant reduction in revenues from the Bush tax cuts to show how this was wrong. And we can't explain that because of a slump in GDP, 2001 was the end of a recession and we were on the uptick! Revenues should have increased but instead decreased! We lost a total of 3.2% of revenues as a result (I.E. revenues should have grown by 1.5%, instead they fell by 1.7%)
And they fell again the next two years! Making the total single year shortfall at the end of three years nearly 2% of GDP per year.
I.E. if we had not had the Bush tax cuts revenues would have been ~2% of GDP higher in 2004 than they were. That is massive!
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timeasmymeasure
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Date: 2011-11-21 06:29 am (UTC)Doing an evaluation like the one he did is extremely risky since so many things change that are dependent on one another.
For instance if we change the top marginal rate but increase other rates and end up with the same tax revenue can we discern a revenue change from the effects of the tax?
A: No, a statistical analysis will show that there was "no correlation" between the various effects since they happened at the same time and had offsetting effects. There is no way to tease the relevant data out of that
The primary problem then is that those tax changes (and many tax changes) were intended to be revenue neutral. I.E. if the tax changes were successful then we could not possibly see the effect that he wants to claim doesn't exist because we intentionally raised revenue by increasing tax rates in other areas while lowering the tax rate in the one he wants to study!
It should also be noted that Clinton did see a large spike in revenues from his tax increases that could not be explained solely by the increase in production that occurred at the end of the 92-93 recession. Such Hauser's prediction that this would not happen was wrong, falsifying his theory right there.
We also have the significant reduction in revenues from the Bush tax cuts to show how this was wrong. And we can't explain that because of a slump in GDP, 2001 was the end of a recession and we were on the uptick! Revenues should have increased but instead decreased! We lost a total of 3.2% of revenues as a result (I.E. revenues should have grown by 1.5%, instead they fell by 1.7%)
And they fell again the next two years! Making the total single year shortfall at the end of three years nearly 2% of GDP per year.
I.E. if we had not had the Bush tax cuts revenues would have been ~2% of GDP higher in 2004 than they were. That is massive!