TAX CUTS WILL THEY STIMULATE THE ECONOMY? READ MY POST BEFORE RESPONDING PLEASE

There are many who believe that tax cuts are needed to promote economic recovery. I would like to look at this particular idea and see if we can have a reasonable, exchange of ideas. I will begin by giving my view point. I do not believe that tax cuts will generate an economic boost and he is why. Although this is a tried and true tool in the GOP tool bag, I think this only works when the economy is still viable but slowing. I think that once you are in a recession it no longer has the same effect because by this point companies are looking at increasing the bottom line and recouping some capital which has been lost with the slowing of business. This desire to recover lost money will supersede the idea of expanding. There is nothing which says, cut taxes and we will use the savings to expand. In this case I think they use it to recover the balance sheet. If there was a stipulation which said that in order to get the tax benefit the company must first expand or some wording which would ensure that the money saved is used to develope more jobs, then it might but without this, its my opinion that tax cuts alone do not generate economic growth.

Kansas recently passed a tax break on valuation of business equipment...an example of a tax break that a business would only get if it expanded (I think it may have been repealled this year )

I think the more urgent discussion is the upcoming expiration of the Bush Tax cuts. Every kind of tax under the sun will go up...and some very serious economist are saying that any uptick in business inventories and capital investments this year are a pre-response to the looming increase....and predicting a very sluggish 2011.

Now if we look at the approximately $900 trillion stimulous plan...based on the concept of borrowing money from the Chinese and spending it in the economy...well, around half of it has been spent. Lets imagine if we borrowed the exact same $900 billion from the Chinese, but instead of letting the government spend it, it was used to offset a $900 billion tax break. Would that money get into the economy faster? I think so.

And what would be the downside of a tax break right now? Federal revenues would go down, right? Not so fast. I have talked about the Laffer curve before, and I won't bore everybody with a repeat...but there is substantial evidence that federal revenue would go up.

So what's the downside then? Well, its not fair. Since the bulk of taxes are paid by the wealthy, its very hard to have a tax cut that does not diproportionally benefit the wealthy...and alot of people have been class-baited enough to cry foul.

I still believe that tax cuts will stimulate the economy. However, I'd like to take this one step further. What will happen when taxes are raised? That will guarantee that less money will be spent, because there will be less disposable income. Regardless of whether you believe what the result of tax cuts are, tax increases are a guarantee that economic growth will decrease significantly - and the economy is stalling now. Raising the federal tax rate on Jan. 1, 2011 by allowing the tax cuts to sunset will put the economy into a free-fall that will make the 1930's look like the 1990's.

There are some who believe that tax cuts are a temporary fix and once their initial boost has expired the economy is worsened each time. What if, instead of tax breaks, businesses were given tax credits tied to some form of expansion of jobs. Those who produce jobs are rewarded with a break for doing so, those that dont can pay the additional tax.

Why don't we try to emulate what we just celebrated? Freedom. Instead of trying to figure out how to manipulate people into doing what the government thinks is best, let's adopt the Fair Tax, let people make their own decisions, and watch the economy boom? If we insist on a state-controlled economy, let's quit fooling ourselves into thinking we are a free country. The Fair Tax promotes liberty, market driven economics, and independent decision making. And the government will collect as much or more money as it does now. Jobs would return to this country, and businesses located in tax-repressed countries would relocate here.

Think locally, what effect would the Fair Tax have on the aviation industry? Boeing would immediately become the best bargain aircraft on Earth. Auto industry - Ford, GM, Chrysler - automatically become competitive overseas. The list goes on. The only downside to the Fair Tax is that the control freaks in Congress would no longer have as much power to make people do what they want them to do.

This is exactly why I hate both political parties, and have no faith in either. This act should have passed unanimously and signed into law within a week after being introduced. But, in order to keep power, both parties demagogued and lied about the Fair Tax. Solely to hold on to their power.

I've taught university level economics, so I know whereof I speak. And at this point, we are racing uncontrollably toward European socialism. The only thing that will turn us around is the Fair Tax. Read the books, don't listen to the lies about it.

And for the record, tax cuts always spur economic growth and increased revenues to the Treasury. Tax increases slow growth and decrease revenues. The reason the effects of tax cuts are short lived is because when Congress sees the revenues coming in, they spend 3 or 4 dollars for every new dollar that is collected. The added interest on the National Debt slows or eliminates any benefit the tax cuts generate. Congress has to quit spending.

The Fair Tax. Read it. Understand it. Love it.

COG, Clinton raised taxes and the economy skyrocketed. Could someone explain this? Why would higher taxes cause an economic boom? I know the answer, but want to see what thoughts chime into others heads.

"let people make their own decisions"

Really you think we should let people decide on their own how much to pay, yeah I would love that, because it would be zero.

"Think locally, what effect would the Fair Tax have on the aviation industry? Boeing would immediately become the best bargain aircraft on Earth. Auto industry - Ford, GM, Chrysler - automatically become competitive overseas. The list goes on. The only downside to the Fair Tax is that the control freaks in Congress would no longer have as much power to make people do what they want them to do."

Arnt you assuming that they would put the money back into the company, seems to me I have seen a history of companies who take the money and run.

Remember sometimes I just play the Devils advocate.

Do you really think we can generate enough money to run the government and pay all the entitlements with a national sales tax. Seems to me the average American if he spends any kind of money at all ends up paying more tax in the long run. This will curb spending which in itself could cause an economic slow down. I mean what would the rate be 10% heck a new car and a flat panel TV and you would pay more in tax than the 4500.00 they withhold from your check. I am being pretty simplistic, but I am not sold on a naional sales tax. You got to remember the government would be controlling the percentage rate.

Papa, I am not sure what the answer is, I know it happened, so I wait for the answer.

DD, you haven't read the book. That is why you have so much misinformation, you don't understand the concept.

The economy didn't skyrocket because Clinton raised taxes. The Republicans took over congress, and we had a unique situation with the birth and rise of the internet. New technology like that can drive an economy in spite of tax policy.

With all due respect, you need to get your facts straight. Do you really think the equilibrium price for labor is zero? Come on, be real. An employer who paid nothing would have, oh, I don't know, zero employees? This is why we have the government that we do, we get caught up in stupid arguments over things that just aren't real. Politicians love this kind of crap, keeps the masses entertained while they run roughshod over our liberty.

The Fair Tax website, along with the books, will answer these questions.

And if you want the government to set wages and prices, then admit you are a socialist. It's ok to be a socialist, I just disagree with it. I like freedom.

But don't set up straw men and then knock them down without doing at least a little bit of research. The Fair Tax is a replacement tax. That means, the IRS is disbanded, no more income tax, payroll tax, corporate tax or death tax. These taxes are now embedded in the price of everything we buy. If those taxes were removed, prices would drop commensurately.

You say "Companies wouldn't drop their prices" That means you don't know economics. If Pepsi decided to keep their price, and Coke lowered theirs, which will you buy? It's basic economics, people. The Fair Tax would be added to the products and services in an amount approximately equal to what the embedded taxes were. So the general price level does not rise. But, your paycheck would no longer have withholding taxes, you would get your entire check. So you could buy more, which means economic growth.

Then, if Boeing, etc. didn't have to pay those embedded taxes, they could sell their planes overseas for approximately 25% less than they do now. What would that do to the market? Boeing would boom. That means more American jobs. More people, making their whole paycheck, buying stuff. Economic growth. Increased revenues to the Treasury.

Now, overseas companies will see that they can come to the US, manufacture their products with no tax liabilities, sell them overseas cheaper, so they move their operation here. More jobs, more people buying stuff. Economic growth.

The US would become the economic powerhouse of the world. As we should be. And that isn't the end of the story. Everyone in the US would receive a monthly prebate, which would cover the tax imposed on goods and services purchased up to the poverty level. So the poor effectively pay no tax whatsoever.

Where's the downside? I don't see one. Sure, the rich will get richer, but even in socialist countries the rich figure out how to do that. But, the poor get richer too. And the scarcity for labor will naturally drive up wages. People getting paid more, keeping their entire check, buying stuff - economic growth! AND, you only pay the tax when you buy something! You can save or invest without any negative tax consequences!

Many economists have examined this. Read the book, research the website. It will work, if Congress will give up their need for power. Otherwise, our children are going to live in a much different country than we knew.

I believe that cutting taxes does benefit the economy and JFK cut taxes (so it is not a tried and true GOP tactic). Why does this work? A major part of growing the economy is getting people who create the jobs to do so. If they are convinced that they will not be punished for success then they feel more positive about creating a few jobs. Those jobs can lower unemployment and raise the confidence of the average job seeker (whether warranted or not). Some time passes and employers put one up in the win column and decide to create a couple more jobs.
Cute old guy is right. Clinton raised taxes but he inherited a strong economy brought about by the Reagan tax cuts. Clinton also got the great present of a GOP congress in 1994 which forced him to keep his campaign promise of a balanced budget. It also guaranteed that no more tax increases were coming down the pike which relieved business people were thrilled about.
Clinton got so lucky with inheritance and a GOP congress.

I believe that tax cuts WILL NOT stimulate our economy because so many manufacturing jobs have moved over seas.

Correct me if I have it wrong but the idea behind the tax cuts is when people spend and purchase they create demands for more production. The people who produce stimulate the economy when they are paid and spend as a result of being employed.

When the production is here it's good for the ecomony. But the production is not here anymore, it's in China (and other places). So tax cuts will not stimulate our economy as effectively as they might have in the past.

"DD, you haven't read the book. That is why you have so much misinformation, you don't understand the concept."

Maybe I understand it but just dont agree with it, or maybe I was playing Devils advocate, but now you'll never know.

"The economy didn't skyrocket because Clinton raised taxes. The Republicans took over congress, and we had a unique situation with the birth and rise of the internet. New technology like that can drive an economy in spite of tax policy."

I was not the one who stated it did, you might direct this at Kcpapa.

"With all due respect, you need to get your facts straight. Do you really think the equilibrium price for labor is zero? Come on, be real. An employer who paid nothing would have, oh, I don't know, zero employees?"

With all due respect you may have to emerse yourself in the art of reading, I never said this. You said "let's adopt the Fair Tax, let people make their own decisions, and watch the economy boom? If we insist on a state-controlled economy, let's quit fooling ourselves into thinking we are a free country. The Fair Tax promotes liberty, market driven economics, and independent decision making. And the government will collect as much or more money as it does now. Jobs would return to this country, and businesses located in tax-repressed countries would relocate here." To me this inferred that people would make their own decisions regarding how much tax to pay, so I responded by saying "if I had my choice it would be Zero", even so not once did I discuss labor rates. Just because "YOU" knew what you meant does not mean others did. If you were talking about how much business is paying labor you did not make that clear, at least to me.

This is why we have the government that we do, we get caught up in stupid arguments over things that just aren't real. Politicians love this kind of crap, keeps the masses entertained while they run roughshod over our liberty.

The Fair Tax website, along with the books, will answer these questions.

Your diatribe has killed any interest I might have had regarding this subject, which I actually discussed several threads back expressing my support for it. So its doubtful I will take the time to read the propaganda cause you know us "socialists" got other things to do.

And if you want the government to set wages and prices, then admit you are a socialist. It's ok to be a socialist, I just disagree with it. I like freedom.

I will give you $100.00 dollars if you can quote me saying this. This thread lasted 4 posts before you started name calling. Like I said quote me and get paid, if not you owe me an appology.

But don't set up straw men and then knock them down without doing at least a little bit of research. The Fair Tax is a replacement tax. That means, the IRS is disbanded, no more income tax, payroll tax, corporate tax or death tax. These taxes are now embedded in the price of everything we buy. If those taxes were removed, prices would drop commensurately.

You say "Companies wouldn't drop their prices" That means you don't know economics. If Pepsi decided to keep their price, and Coke lowered theirs, which will you buy? It's basic economics, people.

Yeah big business has shown a history of passing their savings onto us. They would take the money they no longer pay in taxes and pad their bottom line. Thats the greed factor in corperate America that you are dismissing.

The Fair Tax would be added to the products and services in an amount approximately equal to what the embedded taxes were. So the general price level does not rise. But, your paycheck would no longer have withholding taxes, you would get your entire check. So you could buy more, which means economic growth.

I think Kcpapa and I debated this month ago, you might look at my threads discussing taxes before you call me a socalist.

Then, if Boeing, etc. didn't have to pay those embedded taxes, they could sell their planes overseas for approximately 25% less than they do now. What would that do to the market? Boeing would boom. That means more American jobs. More people, making their whole paycheck, buying stuff. Economic growth. Increased revenues to the Treasury.

Now, overseas companies will see that they can come to the US, manufacture their products with no tax liabilities, sell them overseas cheaper, so they move their operation here. More jobs, more people buying stuff. Economic growth.

The US would become the economic powerhouse of the world. As we should be. And that isn't the end of the story. Everyone in the US would receive a monthly prebate, which would cover the tax imposed on goods and services purchased up to the poverty level. So the poor effectively pay no tax whatsoever.

Where's the downside? I don't see one. Sure, the rich will get richer, but even in socialist countries the rich figure out how to do that. But, the poor get richer too. And the scarcity for labor will naturally drive up wages. People getting paid more, keeping their entire check, buying stuff - economic growth! AND, you only pay the tax when you buy something! You can save or invest without any negative tax consequences!

Many economists have examined this. Read the book, research the website. It will work, if Congress will give up their need for power. Otherwise, our children are going to live in a much different country than we knew.[/quote]

After being called a socialist once to many times, I quit reading the vomit you projected into this thread, but I will paraphrase what I think you wrote, blah, blah, blah, blah blah blah blah blah blah blah, blah, blah, blah blah blah blah blah blah blah, blah, blah, blah blah blah blah blah blah blah, blah, blah, blah blah blah blah blah blah blah, blah, blah, blah blah blah blah blah blah blah, blah, blah, blah blah blah blah blah blah blah, blah, blah, blah blah blah blah blah blah blah, blah, blah, blah blah blah blah blah blah

Here is a link regarding Taxes, while its not exactly the Fair Tax it is a discussion about a flat tax and ended in a discussion on the fair tax. As I said I was playing Devils advocate, and I even stated this, but maybe us "socialists" read better.

http://www.eccie.net/showthread.php?t=40605

Arnt you assuming that they would put the money back into the company, seems to me I have seen a history of companies who take the money and run.

Papa, I am not sure what the answer is, I know it happened, so I wait for the answer. Originally Posted by dirty dog

DD, you got most of the answer. While the middle class and poor spend all of their income, the rich do not, thus they are not taxed as much. Thus lowering their tax liability to a level much less than that of the middle class. Effectively, you would have the middle class paying a much higher percentage of their income on taxes as opposed to the rich.

It comes down to one thing that COG said. It comes down to the rich getting richer.

Here is a fairly lengthy discussion of the 'Clinton Defense'. Essentially it argues that the 1993 tax increase slowed down the economy...and reminds us of the 1997 tax DECREASE which is so often forgotten. Essentially, we tried his higher tax plan for 4 years...and for some mysterious reason decided it was a bad idea.

http://www.heritage.org/Research/Rep...the-1990s-Boom

Here is a chart that shows tax revenues...they kept going up after the 1997 decrease...and really shot up after the 2003 Bush tax cuts.

http://www.taxpolicycenter.org/taxfa....cfm?Docid=200

Also look at the revenues as a percentage of GDP....they are at their highest after the Bush tax cuts. These cuts are due to expire...and odds are revenue will drop, in real dollars, and as a percentage of GDP...that means less money to the treasury.

If I recall the 92 election it hinged on "it's the economy stupid." We were in recession and that is what Clinton inherited.

Clinton made a deal with Alan Greenspan to raise taxes in exchange for lower interest rates and that spurred the economy and investment.

As a businessman I cannot cut prices to get more volume when I am losing on each transaction. If 54% of us are paying the bill then we need to take a look at the tax exemptions and off shore banking to get more revenues. The poor don't hide their money in Grand Cayman or Switzerland Banks

LOL! I'm going back to the reviews.