This is part 2 of the taxes and economy. If you have not read Part one (the post immediately prior to this one) you may want to. It can be read either before or after reading this one)
To quickly catch you up in case you have not read the other, I was commenting on the issue of people posting so vehemently and positively about cutting taxes and the effect that has on the tax revenues. What amazed me is that the belief runs BOTH ways! It would seem to me that this is nothing more than a math problem. Now, although I hated math in school, I have always loved it for research and problem solving. Because, Open Core and Modern Math be damned, 2 + 2 should ALWAYS = 4! The same is true for complex problems. If you can distill it down to math, the answer is indisputable.
In the spirit of disclosure I did go into this with the hypothesis that cutting federal income taxes would increase tax revenues when given enough time for those with increased after-tax incomes to do something with it - spend it, invest it in a new business, add growth to an existing business, or just put it in a bank - then let them do the above. However, I did go into this needing to find proof of my hypothesis or to disprove it.
The first thing I found is that is is VERY difficult to find historical economic figures WITHOUT commentary or "adjustments". I was looking for raw data as well as different opinions. I found a lot of the latter and after research, enough of the former. With more disclosure I also found this issue, like a lot of complex issues with strong held opinions on both sides, is very hard to pin down. As I looked at tax rates, tax receipts, and the economic figures for the same period I realized just how complex this issue is! I also found that nowhere on the internet (at least that I can find and I am somewhat legendary for my ability to find things on the internet!) is a compilation of all or even most of the economic data over history. So, I made my own. Below is a spreadsheet I made to help me see the "big picture". (most entered by hand or cut and pasted by me when I could find data that allowed that!)
I hope you will be able to click on this and see it larger. If not, and you have an interest in the file - email me and I will send it to you.
The columns are: Tax rates at certain income levels by year for every year from 1960 through 2014. The income levels and the start and stop dates were arbitrarily picked by me early on when I realized I had to limit my data somewhat. Income taxes started in earnest in 1913, but to include that much data and to find corresponding data was too large a task. The "modern" tax cut did not start until JFK (implemented by Johnson after his death) in the mid-60s, so that is why 1960. These are at the rates with incomes NOT indexed by inflation. I struggled with that as well and have figures that are indexed but it did not make much difference in my evaluation.
Then we have Total Government Revenue for the same years, followed by Spending. These are indexed to either 2009 or 2012 dollars (sorry I lost my notes - there is not a lot of difference between those two luckily) The main takeaway I got from these figures is WE SPEND TOO DAMN MUCH! Our revenues have grown tremendously. But, our spending has grown even more!
That is followed by the Income Tax Revenue for the period. The first revenue number included all government revenue. This is just that portion that is collected from individual income taxes. Since that is the point of my study, it was critical that I find these figures.
Then we have GDP with the percentage increase/decrease year to year.
Next is the Median Household Income for each year. To refresh your memory, a median of a group of numbers is that number which has half the numbers above it and half below it. This and the other household income numbers start in 1967 as I cannot find these figures from years before.
Then is the Mean (average) Household Income for each quintile of population (fifth).
Again, for explanation for those of you that do not use math often, it is important to look at Medan and Mean when comparing a large group of data. Take a group of seven incomes - 10K, 12K, 16K, 25K, 28K, 30K, & 50K. The median = 25K. The mean is 28.5K. That is a close approximation of the same. Then use the same numbers but let's say the top wage earner makes 500K instead of 50. There are still six of the numbers exactly the same but the mean goes to 103.5K. That is not at all reflective of the 25K which is still the median. Both have relevance, so I found and posted both.
Lastly I found the Unemployment Rate for each of the years.
I have just decided to do this in three installments. You can study the figures above if you like and see what you see. I have already put my thoughts in the first post at a high level. I will do some more detailed analysis in the next post.
FYI, I have tried to be as thorough as possible. I have tried to look at this with an open mind and from as many "angles" as possible. Also, these figures were gathered from many, many sources. I did use .gov sources wherever possible. Every figure was found on in at least two places before I used it. Other than rounding errors, they all did so. There could be errors here, if so they are mine and totally unintentional. As I said above I did have to manually enter most of these numbers. They have been checked and rechecked but errors are possible. You are welcomed and invited to try to find conflicting numbers. Just remember I used numbers that were adjusted for inflation to 2009/2012 figures with the exception of the incomes on the tax tables.
More to come...
To quickly catch you up in case you have not read the other, I was commenting on the issue of people posting so vehemently and positively about cutting taxes and the effect that has on the tax revenues. What amazed me is that the belief runs BOTH ways! It would seem to me that this is nothing more than a math problem. Now, although I hated math in school, I have always loved it for research and problem solving. Because, Open Core and Modern Math be damned, 2 + 2 should ALWAYS = 4! The same is true for complex problems. If you can distill it down to math, the answer is indisputable.
In the spirit of disclosure I did go into this with the hypothesis that cutting federal income taxes would increase tax revenues when given enough time for those with increased after-tax incomes to do something with it - spend it, invest it in a new business, add growth to an existing business, or just put it in a bank - then let them do the above. However, I did go into this needing to find proof of my hypothesis or to disprove it.
The first thing I found is that is is VERY difficult to find historical economic figures WITHOUT commentary or "adjustments". I was looking for raw data as well as different opinions. I found a lot of the latter and after research, enough of the former. With more disclosure I also found this issue, like a lot of complex issues with strong held opinions on both sides, is very hard to pin down. As I looked at tax rates, tax receipts, and the economic figures for the same period I realized just how complex this issue is! I also found that nowhere on the internet (at least that I can find and I am somewhat legendary for my ability to find things on the internet!) is a compilation of all or even most of the economic data over history. So, I made my own. Below is a spreadsheet I made to help me see the "big picture". (most entered by hand or cut and pasted by me when I could find data that allowed that!)
The columns are: Tax rates at certain income levels by year for every year from 1960 through 2014. The income levels and the start and stop dates were arbitrarily picked by me early on when I realized I had to limit my data somewhat. Income taxes started in earnest in 1913, but to include that much data and to find corresponding data was too large a task. The "modern" tax cut did not start until JFK (implemented by Johnson after his death) in the mid-60s, so that is why 1960. These are at the rates with incomes NOT indexed by inflation. I struggled with that as well and have figures that are indexed but it did not make much difference in my evaluation.
Then we have Total Government Revenue for the same years, followed by Spending. These are indexed to either 2009 or 2012 dollars (sorry I lost my notes - there is not a lot of difference between those two luckily) The main takeaway I got from these figures is WE SPEND TOO DAMN MUCH! Our revenues have grown tremendously. But, our spending has grown even more!
That is followed by the Income Tax Revenue for the period. The first revenue number included all government revenue. This is just that portion that is collected from individual income taxes. Since that is the point of my study, it was critical that I find these figures.
Then we have GDP with the percentage increase/decrease year to year.
Next is the Median Household Income for each year. To refresh your memory, a median of a group of numbers is that number which has half the numbers above it and half below it. This and the other household income numbers start in 1967 as I cannot find these figures from years before.
Then is the Mean (average) Household Income for each quintile of population (fifth).
Again, for explanation for those of you that do not use math often, it is important to look at Medan and Mean when comparing a large group of data. Take a group of seven incomes - 10K, 12K, 16K, 25K, 28K, 30K, & 50K. The median = 25K. The mean is 28.5K. That is a close approximation of the same. Then use the same numbers but let's say the top wage earner makes 500K instead of 50. There are still six of the numbers exactly the same but the mean goes to 103.5K. That is not at all reflective of the 25K which is still the median. Both have relevance, so I found and posted both.
Lastly I found the Unemployment Rate for each of the years.
I have just decided to do this in three installments. You can study the figures above if you like and see what you see. I have already put my thoughts in the first post at a high level. I will do some more detailed analysis in the next post.
FYI, I have tried to be as thorough as possible. I have tried to look at this with an open mind and from as many "angles" as possible. Also, these figures were gathered from many, many sources. I did use .gov sources wherever possible. Every figure was found on in at least two places before I used it. Other than rounding errors, they all did so. There could be errors here, if so they are mine and totally unintentional. As I said above I did have to manually enter most of these numbers. They have been checked and rechecked but errors are possible. You are welcomed and invited to try to find conflicting numbers. Just remember I used numbers that were adjusted for inflation to 2009/2012 figures with the exception of the incomes on the tax tables.
More to come...
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