Like the Heisenberg uncertainty principle, wherein looking at a particle affects it’s movement, increasing a tax affects the revenue stream.
http://www.boston.com/news/loc…
September revenues came in $243 million below expectations, a shortfall that may trigger more state cutbacks and layoffs.
Please share widely!
christopher says
I read the article as saying revenues declined DESPITE tax increases, not BECAUSE of them. One could argue that maybe we should have increased them further to make up the difference.
mr-lynne says
… Laffer curve nonsense. How many variables go into any equation that determines net revenue? But supply siders seem always to be sure that they know the single variable to point to for any net revenue statistic.
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p>I can’t find the article, but somewhere recently (within the last several weeks) a group of economists finally tried to figure out where on the Laffer curve we are in regards to tax policy. The answer they came up with was that we’re on the opposite side of the Laffer curve that says ‘increasing taxes decreases revenue’. That is, we could afford to increase taxes by quite a bit before we reach that equilibrium state where further increases would be counter-productive to the revenue stream. Of course, whether being at that state of equilibrium is desirable is a different question. What it does say, if you buy the results, is that tax cuts won’t increase revenues at the point of the Laffer curve that we’re on.
seascraper says
Your second paragraph is a good explanation of what you say is nonsense in the first para. As somebody commented below, 0% tax = 0 revenue; I add that 100% tax = 0 revenue. The optimal point is somewhere in between. Keeping the rate between 0 and the optimal point is the job of government.
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p>But the basis for my 0% to 100% graph, each point of taxation will result in a downward line of production. All I have tried to say on this site is that happiness includes much more than having a high yield from taxes, so even the optimal point of highest revenue may not result in highest happiness.
edgarthearmenian says
to do their shopping in NH. The fact of the matter is that we are down in revenue significantly.
christopher says
If you’re suggesting we match NH with zero sales tax that would mean zero revenue from sales. Trust me we don’t want to follow that all the way. Immitating NH would mean huge property taxes inter alia. I’ve expressed concern over increasing the sales tax because of this issue, but the money has to come from somewhere and I’ll take our way anyday. Can you confirm a correlation that you suggest? Nobody’s arguing we’re not down in revenue, the question is why. Almost thirty years of experience with supply side/trickle down suggests that such is NOT the way to go.
edgarthearmenian says
It’s simply that many people, probably out of anger, are going up there to save a few bucks on their purchases. In fact, I supported Deval’s idea of raising the taxes on gasoline because it would have the secondary benefit of decreasing consumption and pollution as well as raising the necessary revenue.
christopher says
How can we get to the point where people do not reflexively try to avoid taxes? That is, become closer to attitudes of say Scandinavia where people are more likely to see paying taxes as the noble and patriotic thing to do. My guess is it would start by a massive cleanup of the government to clear out any possible waste (not that things will never fall through the cracks) so that people can see that they are getting their money’s worth.
liveandletlive says
a progressive income tax. You know, the kind of tax that doesn’t cut into middle class budgets, but simply skims the top of disposable income for the highest paid earners.
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p>The gas tax, across the board income tax, sales tax, and even T fare hikes cut into middle class basic needs budgets, the household budgets that are already used for housing, utilities, food, clothing, and healthcare. It just makes no sense to me to always turn to those revenues sources when the least harmful of all would simply be taxing the highest paid earners, who would probably not even notice it, in a “cost of living” sense.
christopher says
…this requires a constitutional amendment, which I’m sure will be demagogued to death:(
somervilletom says
Can we please examine the data, rather than speculate?
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p>The data is in the Globe please, let’s look at it please.
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p>Here, from the data, are the highlights:
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p>Income: ($58M)
Sales & Use – Total: ($37M)
Corporate and Business – Total: ($144M)
Total: ($243M)
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p>Here is the same data, expressed as percentage contributions of the total shortfall:
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p>59% Corporate tax revenues are down, and
24% Income tax receipts are down (fewer people are working),
15% Sales tax receipts are down.
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p>There is simply no way a modest sales tax hike caused this shortfall, not when the decline in sales tax revenues is such a small portion of the total shortfall.
somervilletom says
seascraper says
Maybe the sales tax cut into corporate profits by decreasing sales.
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p>How much did economic activity have to “shortfall” for taxes to have a $200M shortfall? I have always tried to get you guys to consider that life happens in the untaxed part, not the government intake part. By raising some money through taxation, the government destroys a much higher multiple of pleasurable or necessary activity.