All the yelping about President Obama's* address to school children has been amazingly informative. Media reports on it have been concise and accurate, with little need for harsh comments by pundits to make the crazy obvious. When you've got quotes from wingers like "I don't want Obama indoctrinating my child into socialism" and such, it doesn't take much reflection to realize they are merely projecting all of their own strategies and desires onto the scary black prez who somehow (inexplicably!) was given control of their country.
Thinking back on when Reagan was sincerely, with all the dishonest cheerful seriousness his Hollywood Actor background could provide, informing school children ("using my tax dollars", as the wingers like to put it) back in the 80s that, yes, government really does get more tax revenue with lower tax rates.
Do you suppose maybe it isn't just a coincident that a lot of people believe this lie, and even those that don't can't easily explain why it is a lie? It isn't just about the facts, which are only occasionally reported, it is mostly about the noise machine...
This same crap, you'll recall, was pulled by Charlie "Geppetto's Son" Gibson, during the Presidential Debates last campaign season. Once again, it doesn't seem coincidental that 'mainstream media' itself is incapable of (unwilling to) correct this fundamental dishonesty.
Money is a convenient thing because it comes in numbers. There is no need to convert qualities to quantities, to consider formats or history. You just count up the numbers. Now, granted, to get any really interesting knowledge, or the kind of guesses we call knowledge when it pertains to human beings, you do need to recognize that not all money is money, that dollars and a bond worth the same number of dollars are not identical. But the beauty and power of the nature of money is that it is, in its entirety and its essence, the most fungible material in the universe. Being nothing but numbers essentially bridges the gap between belief and truth sufficiently that economists can study it and learn and know things about it in a more absolute sense than, say, sociologists or historians.
This has been studied. When government lowers tax rates, some of the money now available because it isn't owed in taxes gets re-invested and thus generates additional tax revenue. But the amount used to 'create jobs', what's called the stimulative effect, is generally about 10% of the amount not paid in taxes. I'll explain why in a bit, for now, just be aware that this can be demonstrated to a degree that makes it uncontroversially true to economists. (Which I am not, by the way, nor any other thing of authority and substance, just so you know. All this is just what I've learned by reading stuff for a few years and can recall without studious effort. Caveat emptor.)
Now, one of the reasons Reagan's Big Lie has survived so well is because of its completely disingenuous claim. The truth is that any dollar not 'spent' in taxes is, ultimately 'spent' some other way, and so one can call this 'economic activity' and say that somebody's job rests on that and would evaporate if the tax 'took' that money 'out of' the economy. This is all smoke and mirrors. The government will spend the money, if the taxpayer doesn't, so it 'creates jobs' in that way just the same, one way or the other. But if you watch and listen closely you can see anyone who is defending the Tax Lie using this 'abstraction error' confusion to flip back and forth from 'creating jobs means just spending money' to 'creating jobs means to invest in a business'.
Because businesses are why the Tax Lie endures. Sure, there are a lot of rich people who would still like to pay less taxes than they are (nobody gets rich just by being generous) but what really drives this bucket of false witness is corporate taxpayers. In their case, even the wiggle room they might have, as I've explained above, is packed with contra-factual treacle. Corporations only pay taxes on profits, not revenue. 'Income tax' for them would be as if you only paid taxes on what's in your savings account at the end of the year; anything you managed to spend is tax-free.
And that's where the 10% comes from. When a corporation pays taxes, it is only on that portion of their earnings they don't spend 'running the business', and that includes a practically unlimited amount of expansion. That is, creating jobs. Actually creating jobs. The money they spend on taxes is definitely not money spent on jobs, but neither is the money they're paying the taxes on. Net profits, not gross profits. Your savings account, not your income, not even your checking account.
So if you lower tax rates, yes, some money that would have gone to taxes instead goes to investment. Not 'expanding the business' investment, but 'capital' investment. Creating jobs once removed, lets say; a corporation buys bonds, and the bondholders create jobs. None of the money saved in taxes goes to creating jobs in the corporation, as any money that would have been used that way would not have been part of the taxable amount, and so no portion of it can be considered the tax.
So by taking lies three or four layers deep like this, they become semi-impenetrable to the typical news consumer, and Reagan's Big Lie goes on and on, crippling our government, our economy, and our nation. No major media outlet could possibly even consider actually educating people on this. Why waste time explaining, when most of your audience will misunderstand to begin with?
So instead of spending the money on business, lowering tax rates (income, corporate, business, capital gains, doesn't matter) instead has the opposite effect; freeing up money for other things, yes, but other less productive things, not other tax-revenue-generating things. When the government lowers tax rates, it doesn't end up making more in revenue; it makes, obviously, less. It doesn't make exactly as much less as it could have, true. To use fast-and-loose numbers for examples, if you drop the rate 20%, your tax revenues won't go down 20%. They'll go down 18%. The 10% re-investment does increase the total output of the capital that isn't paid in taxes. But only 2% of, not 10% of, the tax bill will be newly taxed 'wealth'. The other eight percent is, essentially, wasted (from a public policy perspective.) The BIG LIE conservatives (and even some moderates) tell is that tax revenues will increase when the tax rates go down! And by the same "logic", when tax rates go up, tax revenues go down. Which it doesn't; they go up. That's why H.W. Bush called it 'voodoo economics' to begin with.
Lowering corporate taxes doesn't create jobs, it creates million dollar birthday parties for investor's teenage daughers. Increasing tax rates doesn't decrease tax revenues, it increases tax revenues. It just doesn't increase them as much as it would if tax policy had no impact at all in behavior.
Now, to finish this up, let me address Charlie Gibson's 'empirical' approach. Rather than simply use slight-of-hand to tell the Big Lie, Charlie used data. The year after capital gains taxes are increased, capital gains tax revenues dropped. Well, he actually used slight-of-hand and data, because the revenues didn't drop in absolute terms. They only dropped in relation to what they would have been had there been no change in capital investment across three years of time: the year before the change took effect, the year it took effect, and the year after.
His data requires that we presume that nobody knew when or if a capital gains tax increase was going to take effect and affect investors. Capital gains tax revenue always rises the year before, as investors liquidate assets cheaply. They more-or-less plummet the year the tax rates change, as only someone who couldn't avoid holding until then or holding until rates might decrease again to sell capital assets liquidate during that year. They start to recover quickly though, because the market can stay irrational longer than you can stay solvent and at the new normal, the rate increase has the intended impact: lowering the motivation to keep money frozen.
It is the movement of money that is an economy, not the existence of it. By encouraging working assets instead of financial assets, increasing tax rates on corporations frees up money for creating jobs and investing in productive assets. Lowering tax rates encourages capital hoarding and can, all by itself, wreck an economy. Like its been doing for the last few decades. All thanks to the Big Lie about taxes.