Budget Deficit Shrinking Unexpectedly Quickly

[MMMMMM]

(excerpt)"Bush's Budget Update May Show Deficit Goal Being Reached Early

July 11 (Bloomberg) -- President George W. Bush's administration will report this week that surging tax revenue is shrinking this year's budget deficit from the record 2004 level, possibly by as much as $90 billion, giving him a shot at fulfilling his deficit reduction promise three years early.

With tax revenue running $1 billion a day ahead of the 2004 pace in late April and May, the deficit will likely decline to about $325 billion from $412 billion last year, according to the Congressional Budget Office and private forecasters such as Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut.

``An expanding economy, creating more receipts, is putting us on a very good path to deal with our deficit,'' Treasury Secretary John Snow said at a press conference in Calgary on July 8. ``It's pretty clear now the path we are on will take us below the president's initial target.''

Bush promised during his election campaign last year that he would pare the annual deficit to about 2.25 percent of the nation's gross domestic product by 2009.

As recently as February, the government was projecting the deficit would rise this year to $427 billion, or about 3.5 percent of the nation's gross domestic product. Some economists, including Mike Englund of Boulder, Colorado, research firm Action Economics LLC, now predict the shortfall will drop to 2.5 percent of GDP this year and as low as 2.0 percent next year. That would mean a deficit next year as low as about $250 billion. (end excerpt)"

http://www.bloomberg.com/apps/news?p...d=aZgwyLsWjDDc

Just some timely facts for those who tend to view economics as a purely zero-sum game.

Higher tax rates do not imply greater tax revenues, nor do lower tax rates imply lesser tax revenues.

[BZ_Zorro]

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Higher tax rates do not imply greater tax revenues, nor do lower tax rates imply lesser tax revenues.

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Or vice versa. I fail to see a causal link between Bush's tax cuts and these numbers.

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Just some timely facts for those who tend to view economics as a purely zero-sum game.

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There are actually people who think this?

[MMMMMM]

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Higher tax rates do not imply greater tax revenues, nor do lower tax rates imply lesser tax revenues.

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Or vice versa. I fail to see a causal link between Bush's tax cuts and these numbers.

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I'm not arguing for the vice versa here (although it is probably true as well. Didn't tax revenues rise after the Kennedy and Reagan tax cuts?)

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Just some timely facts for those who tend to view economics as a purely zero-sum game.

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There are actually people who think this?

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Yes, there are people who "tend to view economics as a purely zero-sum game." Some of them frequent this board. Where have you been?

[adios]

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I fail to see a causal link between Bush's tax cuts and these numbers.

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Actually there is but my impression of you is that nothing would convince you so why bother.

[BZ_Zorro]

Actually, there is plenty that would convince me. A link to an unbiased, respected source that analyses the recent changes in the economy would go a long way.

I agree that tax cuts can and do stimulate the economy, that's ABC economics. It doesn't always happen that way though. I've yet to read a non-conservative article that establishes that link with the Bush tax cuts, but I'm open to being proven dead wrong.

[lastchance]

Tax Revenues are made up of

Tax Rate * amount of money that flows into tax rate, correct?

So, for tax revenues to be greater with a lower tax rate, the amount of money that flows into the new tax rate must be multipled by 1/(1-tax rate reduction (as a decimal reduction from the original)) greater than the original tax rate.

This is all assuming tax rate is an independent variable.

Clearly, I have shown tax rate to have a direct effect with tax revenue, unless the amount of money that is generated by a lower tax rate to increase money flow by a multiplier of exactly 1/(1-tax rate reduction), which would be highly unlikely and illogical.

Also, F(tax rate) is a continuous graph, correct?

Clearly, at some point, depending on the what the graph of F(tax rate) looks like, there will be a point where increasing taxes will have a positive effect on tax revenue, probably the closer you get to 0%.

BTW, what does/should F(tax rate) look like?

[BZ_Zorro]

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Higher tax rates do not imply greater tax revenues

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Dumb Question of The Day: If higher tax rates do not imply greater tax revenues, why do governments raise taxes when they need money?

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Higher tax rates do not imply greater tax revenues

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Dumb Question of The Day: If higher tax rates do not imply greater tax revenues, why do governments raise taxes when they need money?

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to raise more revenue.

the statement should read "higher taxes does garuntee more gross tax collected than would have occured under a lower tax rate"

[Arnfinn Madsen]

The claim that lower taxes might lead to higher tax revenue has been proven wrong by so many economists (right to left) that it is considered dead. There is no way you can increase GDP by 10% by reducing taxes by 10% (i.e. from 20% to 18%).

[adios]

The notion of economists "proving" something is wrong is actualling quite funny.