Captain |
09-22-2005 06:13 PM |
Delay = RINO
Quote:
Originally posted by Spanky
Actually this is not true. Deficit prediction are almost always to high in a growing economy and too low in a slowing economy because of the multiplier effect. When the economy grows, tax receipts grow at a higher percentage than the economy. One of the reasons is "bracket creep". People get pushed into higher tax brackets where they pay a higher percentage of taxes. There are also many other factors.
If people remember, no one saw how quickly the budget was going to get balanced. Every quarter the deficit was being adjusted down because of unanticipated growth in revenue from the economic growth.
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I am happy to admit that budget numbers have some level of dynamism and don't respond in a straight line. As you note, there are many factors. These factors, of course, will go both ways.
But given the extraordinary differential (50% growth in GDP, 100% growth in receipts), I am not going to be convinced until you show some evidence that the dynamic factors have that big an impact.
Bracket creep, for example, can increase the rate by a percentage on income over a given level, but that is not a 50% increase in tax revenue.
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