[Psudo]

I keep seeing these terms misused, or misunderstandings arising due to people assuming someone used them wrong. I'm starting to get fed up with it.

Tax rates and tax revenues are not the same thing, and the correlation between them is inexact. If you raise rates but also provide broad tax credits, revenue might actually go down. If you lower rates a little but the population grows and the economy improves, revenue might go up.

Properly, "tax increase" means tax rate increase and "tax cut" means tax rate cut. If you mean changes to revenue, you really need to explicitly use the term "revenue." Other changes to tax law that do not affect tax rates are better termed "tax reform" regardless of their effect on revenue. These things establish or eliminate tax credits, tax expenditures, tax incentives, tax exemptions, and various other terms that all mean "loopholes." Alterations to the filing regulations (such as who can file jointly) are also "reform."

If tax law remains entirely unchanged, tax revenue will go up a few percent every year. This is because, under normal circumstances, the economy improves and the population increases. If you cut taxes and the next year revenues increase, that is insufficient proof to claim that we're on the wrong side of the Laffer curve.

I called them "loopholes," but not all tax incentives are inherently bad. Government employees do not pay income taxes because it's stupid for government to bill itself. The tax exemption of donations to apolitical charities encourages people to aid the poor and disadvantaged. With the impending financial crisis of baby boomer retirements, we need more folks planning for their own retirements; tax exemptions for retirement accounts make sense. Lots of such exceptions exist and their value should be judged on a case-by-case basis, but too many of them in the tax code will undermine revenue.

In summary, tax credits are not tax cuts, if you don't explicitly mention revenue than you're talking about rates, and if you're Republican and opposed to tax reform than go reread your Reagan. Thank you.

[Proculation]

I always see that chart in the media in Quebec about how the deficit of the US is divised. According to that chart, about half the deficit is due to 'Bush tax cuts'. The media succeeded in transforming a revenue in a cost. Plus, as you said, they mix tax rate cuts and tax 'revenue'.

[Psudo]

The Bush Tax Cuts bring up another issue, too: they have a built in expiration date. When tax cuts expire, is that a tax increase? Rates are actually going up, so it seems like yes. Maybe I should say "tax cut expiration" just to be precise.

If your spending exceeds your income, is it because your income is too low or because your spending is too high? When you measuring the size of the Bush tax cuts, do you compare to the law before the cuts pass or to after they expire? There was some tax reform in Obama's stimulus bill that makes that a non-negligible distinction.

I guess Quebec could be thinking is that tax revenue should've increased at the same rate as it did between 2005 and 2007 (about $0.2 trillion per year). (That was during the brief period when Bush cared about the deficit.) Based on that, we're missing a triangle of tax revenue about a trillion dollars wide at the base and 3 years tall (or about $1.5 trillion dollars). I don't know what spending and economic factors they were weighing against that, but that's a heck of a lot of money.

US tax revenue is down a half trillion from it's 2007/8 peak to about the same as 2005, but expenditures are up a trillion per year from their 2005 rate. All in all, there has been $3 trillion in spending and $1 trillion in tax revenue above the 2005 level in the 5 years since. That makes it sound like taxes are 1/3rd of the problem.

If I compare taxes and spending to economic growth (real GDP 2004-2009, averages +2.3% annual), we're $147 billion low in tax revenue and $1,667 billion high in spending over those five years. That suggests the deficit is 9% the fault of taxes and 91% the fault of spending. Judging by how the spending cap debate is going, something like this is probably the prevailing methodology in Congress. (To consider taxes and spending equally at fault one would have to predict +3.84% annual economic growth.)

None of these figures is really reliable because they all depend on comparing reality to some subjective expectation of what should have happened. That's also why the results very so wildly.