Wintery Knight

…integrating Christian faith and knowledge in the public square

Thomas Sowell explains the historical effects of tax cuts

Thomas Sowell

Thomas Sowell

Here’s part 1 of 3.

Excerpt:

The actual results of the cuts in tax rates in the 1920s were very similar to the results of later tax-rate cuts during the Kennedy, Reagan and George. W. Bush administrations — namely, rising output, rising employment to produce that output, rising incomes as a result and rising tax revenues for the government because of the rising incomes, though the tax rates had been lowered.

Another consequence was that people in higher-income brackets paid not only a larger total amount of taxes, but a higher percentage of all taxes, after what were called “tax cuts for the rich.” It was not simply that their incomes rose, but that this was not taxable income, since the lower tax rates made it profitable to get higher returns outside of tax shelters.

The facts are unmistakably plain, for those who bother to check the facts. In 1921, when the tax rate on people making over $100,000 a year was 73%, the federal government collected a little over $700 million in income taxes, of which 30% was paid by those making over $100,000.

[...]By 1929, after a series of tax-rate reductions had cut the tax rate to 24% on those making over $100,000, the federal government collected more than a billion dollars in income taxes, of which 65% was collected from those making over $100,000.

There is nothing mysterious about this. Under the sharply rising tax rates during the Wilson administration, fewer and fewer people reported high taxable incomes, whether by putting their money into tax-exempt securities or by any of the other ways of rearranging their financial affairs to minimize their tax liability.

Under Wilson’s escalating income-tax rates to pay for the high costs of the First World War, the number of people reporting taxable incomes of more than $300,000 — a huge sum in the money of that era — declined from well over a thousand in 1916 to fewer than three hundred in 1921. The total amount of taxable income earned by people making over $300,000 declined by more than four-fifths in those years.

Secretary Mellon estimated in 1923 that the money invested in tax-exempt securities had tripled in a decade, and was now almost three times the size of the federal government’s annual budget and nearly half as large as the national debt. “The man of large income has tended more and more to invest his capital in such a way that the tax collector cannot touch it,” he pointed out.

Getting that money moved out of tax shelters was the whole point of Mellon’s tax-cutting proposals. He also said: “It is incredible that a system of taxation which permits a man with an income of $1,000,000 a year to pay not one cent to the support of his government should remain unaltered.”

Here’s part 2 of 3.

Excerpt:

Empirical evidence on what happened to the economy in the wake of those tax cuts in four different administrations over a span of more than 80 years has also been largely ignored by those opposed to what they call “tax cuts for the rich.”

Confusion between reducing tax rates on individuals and reducing tax revenues received by the government has run through much of these discussions over these years.

Famed historian Arthur M. Schlesinger Jr., for example, said that although Andrew Mellon, secretary of the treasury from 1921 to 1932, advocated balancing the budget and paying off the national debt, he “inconsistently” sought “reduction in tax rates.”

Nor was Schlesinger the only highly regarded historian to perpetuate economic confusion between tax rates and tax revenues. Today, widely used textbooks by various well-known historians have continued to misstate what was advocated in the 1920s and what the actual consequences were.

According to the textbook “These United States” by Irwin Unger, Mellon, “a rich Pittsburgh industrialist,” persuaded Congress to “reduce income tax rates at the upper-income levels while leaving those at the bottom untouched.”

Thus “Mellon won further victories for his drive to shift more of the tax burden from the high-income earners to the middle and wage-earning classes.”

But hard data show that, in fact, both the amount and the proportion of taxes paid by those whose net income was no higher than $25,000 went down between 1921 and 1929, while both the amount and the proportion of taxes paid by those whose net incomes were between $50,000 and $100,000 went up — and the amount and proportion of taxes paid by those whose net incomes were over $100,000 went up even more sharply.

And here’s part 3 of 3.

Excerpt:

President Kennedy, like Andrew Mellon decades earlier, pointed out that “efforts to avoid tax liabilities” make “certain types of less-productive activity more profitable than other more valuable undertakings” and “this inhibits our growth and efficiency.” Therefore the “purpose of cutting taxes” is “to achieve a more prosperous, expanding economy.”

“Total output and economic growth” were italicized words in the text of Kennedy’s address to Congress in January 1963, urging cuts in tax rates. Much the same theme was repeated yet again in President Reagan’s February 1981 address to a joint session of Congress, pointing out that “this is not merely a shift of wealth between different sets of taxpayers.”

Instead, basing himself on a “solid body of economic experts,” he expected that “real production in goods and services will grow.”

Even when empirical evidence substantiates the arguments made for cuts in tax rates, such facts are not treated as evidence relevant to testing a disputed hypothesis, but as isolated curiosities. Thus, when tax revenues rose in the wake of the tax-rate cuts made during the George W. Bush administration, the New York Times reported:

“An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.”

Expectations, of course, are in the eye of the beholder. However surprising these facts may have been to the New York Times, they are exactly what proponents of reducing high tax rates have been expecting, not only from these particular tax rate cuts, but from similar reductions in high tax rates at various times going back more than three-quarters of a century.

It’s Thomas Sowell – the official economist of the Tea Party.

Filed under: Commentary, , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Thomas Sowell explains the historical effects of tax cuts

Thomas Sowell

Thomas Sowell

Here’s part 1 of 3.

Excerpt:

The actual results of the cuts in tax rates in the 1920s were very similar to the results of later tax-rate cuts during the Kennedy, Reagan and George. W. Bush administrations — namely, rising output, rising employment to produce that output, rising incomes as a result and rising tax revenues for the government because of the rising incomes, though the tax rates had been lowered.

Another consequence was that people in higher-income brackets paid not only a larger total amount of taxes, but a higher percentage of all taxes, after what were called “tax cuts for the rich.” It was not simply that their incomes rose, but that this was not taxable income, since the lower tax rates made it profitable to get higher returns outside of tax shelters.

The facts are unmistakably plain, for those who bother to check the facts. In 1921, when the tax rate on people making over $100,000 a year was 73%, the federal government collected a little over $700 million in income taxes, of which 30% was paid by those making over $100,000.

[...]By 1929, after a series of tax-rate reductions had cut the tax rate to 24% on those making over $100,000, the federal government collected more than a billion dollars in income taxes, of which 65% was collected from those making over $100,000.

There is nothing mysterious about this. Under the sharply rising tax rates during the Wilson administration, fewer and fewer people reported high taxable incomes, whether by putting their money into tax-exempt securities or by any of the other ways of rearranging their financial affairs to minimize their tax liability.

Under Wilson’s escalating income-tax rates to pay for the high costs of the First World War, the number of people reporting taxable incomes of more than $300,000 — a huge sum in the money of that era — declined from well over a thousand in 1916 to fewer than three hundred in 1921. The total amount of taxable income earned by people making over $300,000 declined by more than four-fifths in those years.

Secretary Mellon estimated in 1923 that the money invested in tax-exempt securities had tripled in a decade, and was now almost three times the size of the federal government’s annual budget and nearly half as large as the national debt. “The man of large income has tended more and more to invest his capital in such a way that the tax collector cannot touch it,” he pointed out.

Getting that money moved out of tax shelters was the whole point of Mellon’s tax-cutting proposals. He also said: “It is incredible that a system of taxation which permits a man with an income of $1,000,000 a year to pay not one cent to the support of his government should remain unaltered.”

Here’s part 2 of 3.

Excerpt:

Empirical evidence on what happened to the economy in the wake of those tax cuts in four different administrations over a span of more than 80 years has also been largely ignored by those opposed to what they call “tax cuts for the rich.”

Confusion between reducing tax rates on individuals and reducing tax revenues received by the government has run through much of these discussions over these years.

Famed historian Arthur M. Schlesinger Jr., for example, said that although Andrew Mellon, secretary of the treasury from 1921 to 1932, advocated balancing the budget and paying off the national debt, he “inconsistently” sought “reduction in tax rates.”

Nor was Schlesinger the only highly regarded historian to perpetuate economic confusion between tax rates and tax revenues. Today, widely used textbooks by various well-known historians have continued to misstate what was advocated in the 1920s and what the actual consequences were.

According to the textbook “These United States” by Irwin Unger, Mellon, “a rich Pittsburgh industrialist,” persuaded Congress to “reduce income tax rates at the upper-income levels while leaving those at the bottom untouched.”

Thus “Mellon won further victories for his drive to shift more of the tax burden from the high-income earners to the middle and wage-earning classes.”

But hard data show that, in fact, both the amount and the proportion of taxes paid by those whose net income was no higher than $25,000 went down between 1921 and 1929, while both the amount and the proportion of taxes paid by those whose net incomes were between $50,000 and $100,000 went up — and the amount and proportion of taxes paid by those whose net incomes were over $100,000 went up even more sharply.

And here’s part 3 of 3.

Excerpt:

President Kennedy, like Andrew Mellon decades earlier, pointed out that “efforts to avoid tax liabilities” make “certain types of less-productive activity more profitable than other more valuable undertakings” and “this inhibits our growth and efficiency.” Therefore the “purpose of cutting taxes” is “to achieve a more prosperous, expanding economy.”

“Total output and economic growth” were italicized words in the text of Kennedy’s address to Congress in January 1963, urging cuts in tax rates. Much the same theme was repeated yet again in President Reagan’s February 1981 address to a joint session of Congress, pointing out that “this is not merely a shift of wealth between different sets of taxpayers.”

Instead, basing himself on a “solid body of economic experts,” he expected that “real production in goods and services will grow.”

Even when empirical evidence substantiates the arguments made for cuts in tax rates, such facts are not treated as evidence relevant to testing a disputed hypothesis, but as isolated curiosities. Thus, when tax revenues rose in the wake of the tax-rate cuts made during the George W. Bush administration, the New York Times reported:

“An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.”

Expectations, of course, are in the eye of the beholder. However surprising these facts may have been to the New York Times, they are exactly what proponents of reducing high tax rates have been expecting, not only from these particular tax rate cuts, but from similar reductions in high tax rates at various times going back more than three-quarters of a century.

It’s Thomas Sowell – the official economist of the Tea Party.

Filed under: Commentary, , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Why won’t Christians defend their faith in public?

UPDATE: The Pugnacious Irishman has linked to me! Thank you for the link Rich! EVERYONE: GO READ HIS POST RIGHT NOW!

UPDATE: Neil Simpson has a debate going on about whether faith is opposed to reason. 50+ comments so far.

Shout out: Brian Auten of Apologetics 315 helped me to make this post nicer. He’s much nicer than I am.

I would like to describe a situation that arises frequently that concerns me. The situation I describe below brings out a flaw I see in the way that rank-and-file Christians respond to criticisms of Christianity in the public square.

Here is the situation

Eve is busy programming away at her desk, rushing to check in her unit tests so she can spend her lunch hour reading the latest Stephenie Meyer horror novel, or looking through an Avon catalog. Suddenly Eve hears Alice talking to Bob on the other side of her cube. She stops typing to listen to the following unencrypted conversation.

Alice: I was watching a documentary on the Discovery Channel last night that said that the universe has always existed, so there is no God!

Bob: I was watching a documentary on PBS last night showing simulations of how the first life started on Earth! God didn’t do it!

Alice: I saw “Inherit the Spin” on the weekend! The only reason people oppose evolution is because of the Bible! Not because of science!

Bob: I’m going to see “The Va Dinci Code” this weekend! It says that the Gospels are unreliable and that Jesus didn’t even die on the cross!

Alice: I just bought the latest Dichard Rawkins book “Christians Should Be Fed to Lions and the Bible Should Be Burned”!

Bob: I will read that as soon as I finish Histopher Chritchens’ book “Why God is the Evilest, Stupidest Person in the World”!

Eve double-majored in business and computer science at the Indian Institute of Technology, and has an MBA from the London School of Economics. She has spent a ton of time, effort and money studying very difficult subjects for her job, and she even publishes research. She works full-time and runs her own business part-time, and earns about 200K per year. She lives in a huge house, drives a huge car, and goes on vacation abroad to all the best vacation spots.

Eve thinks she is a Christian. She has attended church since childhood, her husband is a church elder and she sings in the church choir. She reads the Bible and prays. She gives money to the poor. She teaches Sunday school to children.  She has even read all of the Narnia novels three times!

But even though God is being maligned in Alice and Bob’s conversation, Eve is not going to stand up to defend God’s reputation to them, (or even to her own children, who are both committed atheists).

Why won’t Eve stand?

I am wondering if anyone can explain to me why it is that most church Christians are not able or not willing to make a public defense when God’s reputation is called into question. It seems to me that there are two bad effects that follow from Eve’s unwillingness to stand up and invite Alice and Bob to lunch so that she can address their questions and concerns.

1) God’s reputation is being trashed by Alice and Bob on the basis of lies they’ve swallowed from pop culture. These lies about God’s existence and character could be easily corrected with a minimal amount of study, which Eve is capable of.  If someone said similar lies about her husband or children, she would speak up, but she won’t speak up for God.

2) Alice and Bob are bound for Hell unless someone cares enough to correct their mistaken beliefs, which, along with their sinfulness, is what is keeping them from a relationship with God that would go on in Heaven. If Eve’s husband or children were mistakenly about to drink poison thinking it was Aspirin, then Eve would speak up. But to save her co-workers from Hell, she won’t speak up.

Eve is capable of studying to defend the faith, because of her great success in other areas where so much time and effort were required to master difficult material. So why has she not applied herself to answering public challenges to her Christian faith from her professors, teachers, actors, the media, politicians, scientists, historians, etc.?

It seems to me that if she did spend some time studying, and then made her defense to her co-workers, then two things would follow:

D1) Eve would be demonstrating her love for God and her friendship with God by protecting his reputation when it is called into question by unbelievers in public settings. That’s what friends do – if Eve wanted to be God’s friend, she would care that no one believed lies about him and told lies about him in public settings.

D2) Eve would be demonstrating her love for her neighbor if she was able to correct some of these false beliefs, such as that the universe is eternal, or that a historical case cannot be made for the resurrection, or that evil is not compatible with theism. It’s important for Alice and Bob to know that Christianity is not stupid.

So why is it that Eve is able to go to church for 20 years, sing in the choir, read the Bible, read the Narnia stories, pray on her knees, and yet still be unwilling to do the best thing for God and the best thing for her neighbor?

Questions for my readers

Can anyone help me to understand why Christians are willing to accept this? Why is this not being addressed by churches?

Do you have an experience where a Christian group stifled apologetics? Tell me about that, and why do you think they would do that, in view of the situation I outlined above? My experience is that atheists (as much as I tease them) are FAR more interested in apologetics than church Christians. Why is that?

My answers

My answers to these problems are given in the following previous posts.

In general:

Also, this debate I blogged about before talks about postmodernism and relativism, which has infected the church and has an impact on this question of whether we will study and defend our beliefs in public. I highly recommend giving it a listen – you will learn something about how we got to this point.

Disclaimer:

I want to clear that this is a problem for male and female Christians. I have seen it manifested by equal numbers of men and women in leadership roles. I picked these names because there is a running gag in computer network security where these names are used to describe the actors. Eve is the eavesdropping hacker, get it?

Filed under: Mentoring, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

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