Long-Run Effects of Raising and Lowering Overall Tax Rate
Do we want both All individuals and government to be much richer?
Then we must substantially lower tax rates.
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Democrats want to maximize current tax revenues.
Attached Table 1 is a Democrats-preferred case model showing how the economy and tax revenues are affected by raising overall tax rate (taxes percent of GDP) from 40% to 50%.
Considering deadweight loss effect of taxation, the actual percent currently is well above 40%.
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Republicans want to maximize current and long-run economy growth, thereby maximizing future tax revenues.
Table 2 is a Republicans-preferred case model showing how the economy and tax revenues are affected by lowering overall tax rate from 40% to 30%.
In both cases annual government spending is per column C.
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Raising overall tax rate is a lose-lose-lose:
Per Table 1 in year 100, with 50% overall tax rate compared to what it would have been in year 100 with original 40% tax rate:
· economy size is lower by 63% ($541 v $1,499)
· per year tax revenue is lower by 53% ($270 v $580)
· all years total tax revenue is 32% lower ($17,299 v $25,558)
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Lowering overall tax rate is a win-win-win:
Per Table 2 in year 100, with 30% overall tax rate compared to what it would have been in year 100 with original 40% tax rate:
· economy size is 7 times bigger ($10,101 v $1,449)
· per year tax revenue is 5 times bigger ($3,030 v $580)
· all years total tax revenue is 3 times bigger ($77,308 v $25,558)
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Per Table 3 newly accumulated debt reaches maximum of -162 in year 15 and then is paid down by the resulting higher tax revenue and is entirely paid off in year 26.
The resulting F - C annual tax revenue surplus then is paid out to everyone as a Citizens’ Shareholder Dividend.
Tax increase or decrease on businesses, the rich, or the general public does not matter, in any case ultimately all taxes are paid for by everyone.
The overall tax rate, taxes percent of GDP, is what matters.
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All this is logical, intuitive, common sense and widely known.
But We must always keep in mind:
-politicians know future voters can’t vote for current politicians
-most people are mainly concerned about the current short-run not the future long-run
-many people prefer economic degrowth not growth:
Economic degrowth philosophy
ChatGPT:
Economic degrowth is a philosophical and socio-economic concept that argues for the intentional downsizing of economies to achieve sustainable development and address environmental challenges.
This philosophy critiques the conventional growth paradigm, which equates economic growth with progress and well-being, and posits infinite growth is unsustainable on a finite planet.
Key Principles of Economic Degrowth
Sustainability:
Emphasizes the need to reduce ecological footprints and live within the Earth's carrying capacity.
This involves minimizing resource consumption, reducing waste, and promoting renewable energy sources.
Equity and Social Justice:
Advocates for a more equitable distribution of wealth and resources.
This includes addressing inequalities and ensuring all individuals have access to basic needs and a good quality of life.
Well-being Over Consumption:
Shifts focus from material wealth and consumerism to well-being and quality of life.
This includes promoting community, health, education, and meaningful work over the accumulation of goods.
Arguments for Economic Degrowth
Environmental Protection:
Economic growth often leads to environmental degradation.
Degrowth advocates argue reducing economic activity can decrease pollution, conserve resources, and mitigate climate change.
Finite Resources:
The planet has limited resources, and continuous economic growth is not feasible in the long run.
Degrowth promotes a steady-state economy that operates within these limits.
Quality of Life:
High levels of consumption do not necessarily lead to greater happiness or well-being.
Degrowth suggests a simpler lifestyle focused on relationships, community, and health can be more fulfilling.
Reducing Inequality:
Economic growth can exacerbate social inequalities.
Degrowth emphasizes redistributing wealth and ensuring everyone's basic needs are met.
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The argument against economic degrowth but rather for rapid economic growth includes faster:
-movement of people out of poverty into prosperity, everyone becomes unequally wealthy and free of government-dependency
-development of medical sciences with resulting improved quality of life and longer life
-development of efficient use of and recycling of resources technologies
-development of electric energy production technologies
-development of environment improving technologies
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