Cutting taxes on the rich

[ShaneEnochs]

I'm curious is cutting taxes on the rich actually creates jobs. I understand the theory of it, but does it work in practice? Obviously no taxes would be ideal, but short of that, is this how you create jobs?

 

[Brian4Liberty]

The question itself is not specific enough. What kind of taxes are you cutting? What is "rich"? What is the starting and ending tax rate?

Too many variables to test this hypothesis in the real world even if you have the specifics.

 

[ShaneEnochs]

Let's take the Bush tax cuts, as an example.

 

[oyarde]

Any , Any , tax cut creates the possibilty that some of that money, goes back into the economy, gets invested where it can be borrowed by the ordinary , to create with , or is used to expand a business that the ordinary may benefit from . Any , Any tax hike, does exactly , the opposite.

 

[oyarde]

Taxes are like leaches, a couple three, a few, may be painful & annoying,multiples, can suck the life from the host.

 

[oyarde]

Let's take the Bush tax cuts, as an example.

You may get to see that quickly, when the "newest" recession starts when it stops .

 

[ronpaulfollower999]

At the very least I would imagine that a tax cut on the wealthy would give them more money to accumulate capital for further expansions. The jobs might not be there immediately, but they will be in 5, 10 years, or so.

 

[CaptUSA]

Rich people do not keep their money in their mattresses. They have it invested in the economy. In other businesses. In their own businesses.
If you rob their wealth to feed the government, that's more money taken out of the economy. Fewer jobs.

People invest where they think they can get the most return. It sends proper signals to the market. Government screws up the signals and wealth is misallocated.

I've been trying to break this down in the simplest form possible.

 

[tttppp]

I'm curious is cutting taxes on the rich actually creates jobs. I understand the theory of it, but does it work in practice? Obviously no taxes would be ideal, but short of that, is this how you create jobs?

Would you rather smart rich people decide where to put money, or a bunch of stupid polititians who end up making problems worse?

 

[tttppp]

Rich people do not keep their money in their mattresses. They have it invested in the economy. In other businesses. In their own businesses.
If you rob their wealth to feed the government, that's more money taken out of the economy. Fewer jobs.

People invest where they think they can get the most return. It sends proper signals to the market. Government screws up the signals and wealth is misallocated.

I've been trying to break this down in the simplest form possible.

Excellent point. Well said.

 

[CaptLouAlbano]

When I was in business, taxes were a huge concern for what I did with my money. They were a cost of doing business, and something that was always considered when I would purchase a business, hire employees, make investments, etc. I had a very simply strategy with business - if I put money into the market, I wanted to get more out than I put in. Pretty basic. So if I had more money to invest, because of lower tax rates, I would spend that money which in turn would generate more money for me. It was a snowball effect.

Additionally, my prices were set by market conditions of course, but taxes went into that price as well. If the taxes went up, my costs went up and then so did my prices. If the market conditions would get to a point where I could no longer make the level of profit that I wanted to make off of a particular business, I would shut it down.

 

[AuH20]

The Bush tax cuts affect a lot more than just the rich.

http://www.paywizard.org/main/salary/incometax/bush-tax-cuts

Tax Brackets - The 10% tax bracket will expire, reverting to 15%, which would apply to all incomes below $34,550. The 25% rate would rise to 28%, the 28% rate to 31%, 33% to 36% and the 35% bracket would go up to 39.6%.

 

[ILUVRP]

we can look at the bush tax cuts and look at the way things are now . they don't work , i am a strong beliver in the mult/velocity effect of money as it moves through the economy , give more money to the avg/poor american and they will spend it all , give the rich ( i think over 1 million $$ income ) more money and they will spend very little of it , they will buy more stock/bonds ( or put it in swiss/clayman islands banks ).

the rich have about everything they need where as the avg american has enough trouble buying-- food--clothes--paying property taxes--electric bills , as warren buffet said one time give him more money and he would buy nothing , give his secertary more money and she would spend it all.

everyone hates taxes as washington will always spend it all , my thoughts on taxes are simple , everyone pays no fed income tax on the 1st $40,000 then pays 20% on everything over 40k , no deductions on anything . no one could bitch as everyone gets gets the same 40k w/o tax.

no one ( getting a pay check ) would have to fill out a tax form as the 20% would be taken out automatic after the 40k is reached .

we would see the economy grow like crazy.

 

[FrancisMarion]

Its interesting that rich people will work to find ways to have their money untaxed when the rates are high, but when the are lower, it might be in their best financial interest to just pay them. In this sense, and its certainly not talked about as much as the other, lower tax rates actually create more tax revenue for the government on an individual basis too.

If you are interested in "Trickle Down" theory, please read this Sowell essay. Its about a 20 minute read and well worth it (imo).

No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter's monumental 1,260-page History of Economic Analysis. Yet this non-existent theory has become the object of denunciations from the pages of the New York Times and the Washington Post to the political arena. It has been attacked by Professor Paul Krugman of Princeton and Professor Peter Corning of Stanford, among others, and similar attacks have been repeated as far away as India. It is a classic example of arguing against a caricature instead of confronting the argument actually made."

http://www.scribd.com/doc/105544135/Trickle-Down-Theory-and-Tax-Cuts-for-the-Rich-by-Thomas-Sowell

 

[The Gold Standard]

Tax policy is just a small part of the job environment. Of course in a healthy, productive economy cutting taxes on business owners would allow them more money to put into expansion and they would hire more people.

In this current economy, profits do not come from customers. They come from government subsidies and contracts. In this economy if you aren't getting money from the government you are struggling. That means you can give them all of the money they want, there is no incentive to expand. Their customers are the government, and that is expanding rapidly enough for them.

If you slash tax rates and cut off the corporate welfare, and then addressed monetary policy, you could again have real economic growth and companies hiring. That won't happen now though. They will have to change the way they calculate the unemployment rate again to get the number back to where it used to be.

 

[CaptUSA]

we can look at the bush tax cuts and look at the way things are now . they don't work , i am a strong beliver in the mult/velocity effect of money as it moves through the economy , give more money to the avg/poor american and they will spend it all , give the rich ( i think over 1 million $$ income ) more money and they will spend very little of it , they will buy more stock/bonds ( or put it in swiss/clayman islands banks ).

the rich have about everything they need where as the avg american has enough trouble buying-- food--clothes--paying property taxes--electric bills , as warren buffet said one time give him more money and he would buy nothing , give his secertary more money and she would spend it all.

everyone hates taxes as washington will always spend it all , my thoughts on taxes are simple , everyone pays no fed income tax on the 1st $40,000 then pays 20% on everything over 40k , no deductions on anything . no one could bitch as everyone gets gets the same 40k w/o tax.

no one ( getting a pay check ) would have to fill out a tax form as the 20% would be taken out automatic after the 40k is reached .

we would see the economy grow like crazy.

Lots of points in here.
First, you can't look at the Bush tax cuts in a vaccuum. A lot of other things happened too. They were as successful as they could be given the circumstances. They did work, but not enough to stave off the rest of the idiocy.
Second, if the rich invest in stocks, that's money other businesses are using to create jobs. That's a good thing.
Third, we can look at the incentives to invest overseas or store money in off-shore accounts. This is a real issue. We need to make investing here more attractive, higher rates on investments won't help that cause one bit!
Finally, I like your 20/40 plan. At least to start. Of course, it would starve government which I would love! I agree the economy would grow. Maybe then we could get to a 10/40 plan... Then a 10/80 plan... Then finally a 0/100 plan!

 

[ILUVRP]

i don't think the wealthy are investing overseas , i think they are sheltering a part of their wealth ( which i would also do in case tshtf here if i were rich ).

as far as the rich investing in stocks , they are trying to get the max return they can and i see nothing wrong with that , i would add that the stock market is very close to a all time high and the idea of job creation is not working , i do have a problem with people making money by trading paper and paying 15% tax on it , where as someone digging a ditch pays over 20% fed tax.

one thing everyone should remember is that business pays no tax , the taxes are built into the price of the product/service. the people buying the product or service are the real tax payers , business is just the middle man .

 

[CaptLouAlbano]

i don't think the wealthy are investing overseas , i think they are sheltering a part of their wealth ( which i would also do in case tshtf here if i were rich ).

How would you define sheltering?

Personally, I don't have any money overseas, never did either. Everything I have right now is in real estate, cash, silver & gold, TIPS, bonds, and then some more "exotic" investments (art & classic cars). Of course, being in retirement I want my money (at least the majority of it) to be as liquid as possible in the event of a major health issue. Prior to retirement I had a lot more of my money tied up into the businesses that I owned.

 

[Acala]

i don't think the wealthy are investing overseas , i think they are sheltering a part of their wealth ( which i would also do in case tshtf here if i were rich ).

as far as the rich investing in stocks , they are trying to get the max return they can and i see nothing wrong with that , i would add that the stock market is very close to a all time high and the idea of job creation is not working , i do have a problem with people making money by trading paper and paying 15% tax on it , where as someone digging a ditch pays over 20% fed tax.

one thing everyone should remember is that business pays no tax , the taxes are built into the price of the product/service. the people buying the product or service are the real tax payers , business is just the middle man .

The implication here is that paying taxes is the goal of economic growth. It isn't. The goal of economic growth is for the people to have more wealth. Taxes should be at the lowest level possible, consistent with the protection of persons and property.

 

[ILUVRP]

The implication here is that paying taxes is the goal of economic growth. It isn't. The goal of economic growth is for the people to have more wealth. Taxes should be at the lowest level possible, consistent with the protection of persons and property.

can't disagree with that like i stated above on my 1st post , the thing is everyone knows we will always be taxed , we must make the best of it and everyone has to share the burden equally , there should not be a set of rules for different levels of incomes and business , like i said anyone that thinks exxon/shell/wallymart/mcdonalds pays taxes are not looking at the real world, there are times thru their special write offs they don't even give our tax money to the feds , they keep it as profit.