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 rates and tax revenues, slowing down the economy.
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%.
Year one tax revenues $101.
(Current 2025 total taxation numerical level is about 25% of GDP, use 40% in these models to include deadweight loss effect of taxation).
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Republicans want to minimize current tax rates and current revenues, speeding up the economy.
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%.
Year one tax revenues $62.
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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 holding the original 40% tax rate, assuming resulting 1% yearly economy growth:
· 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 holding the original 40% tax rate, assuming resulting 4% yearly economy growth:
· 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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The annual tax revenue surplus resulting from lower 30% overall tax rate then to be mostly 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, and common sense, but we must always keep in mind:
-people are mainly concerned about the current short-run not the future long-run
-politicians know future voters can’t vote for current politicians
-many people are worried with more rapid economic growth inequality of incomes will increase, e.g. most peoples’ income and wealth grow 10% per year but rich peoples’ grow 15%, they’d prefer e.g. 5% and 6%
-many people prefer economic degrowth not economic growth
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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 philosophy
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.
Environmental protection:
Economic growth often leads to environmental degradation.
Degrowth advocates argue reducing economic activity can decrease pollution and CO2 emissions, 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.
(end CGPT)
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Arguments for opposite rapid economic growth include it results in faster:
-movement of people out of poverty into prosperity, everyone becomes 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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