Cutting taxes on the rich

[Zippyjuan]

If the goal is jobs, we need to look at what will encourage an employer to add more people. First, let's give a tax cut to wealthy people. What will they likely do with it? They probably have pretty much all the stuff they need so will probably save or invest it. That means more money available to be lent out. If you are a business, will you hire more people becasue there is more money available to borrow? Unless you already want or need to borrow, that will not enter your calculation to decide to hire or not hire more people.

What is more important? Demand for what you are producing. If you are having no problems making as many goods as you can currently sell, you won't be adding more workers. Unless you think you can sell more goods than you currently do. More money going into saving and investments is not going to change the demand for your goods and services (unless you are selling financial services).

Now lets give the same dollar worth of tax cuts to lower income people. They have more pent up demand and are more likely to go out and spend most of that money instead of saving it. This DOES increase the demand for goods and services. As companies see demand for what they produce rising, they will eventually hire more people (after first trying to get more out of current workers). This is creating more jobs.

Thus, if the goal is using tax cuts to increase jobs, give the money to those at lower incomes will be more effective than giving the same dollar value of tax cuts to the wealthy. In the case of the Bush tax cuts, most of the benefits went to those at higher income levels so it was not very effective as an economic stimulus and ended up adding to the budget deficit (since they were not offset by comparable reductions in spending which instead was increased to fight two wars).

 

[Acala]

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.

Job number one is to reduce government to its proper, extremely limited, role. Then, and only then, we can look to see if any tax beyond a small, uniform tariff is needed and, if so, talk about how to apply it. Trying to adjust taxes for fairness when 99% of government revenue is being misspent is just a means of distracting and factionalizing the public. Your argument is motivated by envy.

I am no fan of the government-created corporate business form, but that is not within the scope of this thread.

 

[Acala]

If the goal is jobs, we need to look at what will encourage an employer to add more people. First, let's give a tax cut to wealthy people. What will they likely do with it? They probably have pretty much all the stuff they need so will probably save or invest it. That means more money available to be lent out. If you are a business, will you hire more people becasue there is more money available to borrow? Unless you already want or need to borrow, that will not enter your calculation to decide to hire or not hire more people.

What is more important? Demand for what you are producing. If you are having no problems making as many goods as you can currently sell, you won't be adding more workers. Unless you think you can sell more goods than you currently do. More money going into saving and investments is not going to change the demand for your goods and services (unless you are selling financial services).

Now lets give the same dollar worth of tax cuts to lower income people. They have more pent up demand and are more likely to go out and spend most of that money instead of saving it. This DOES increase the demand for goods and services. As companies see demand for what they produce rising, they will eventually hire more people (after first trying to get more out of current workers). This is creating more jobs.

Thus, if the goal is using tax cuts to increase jobs, give the money to those at lower incomes will be more effective than giving the same dollar value of tax cuts to the wealthy. In the case of the Bush tax cuts, most of the benefits went to those at higher income levels so it was not very effective as an economic stimulus and ended up adding to the budget deficit (since they were not offset by comparable reductions in spending which instead was increased to fight two wars).

A nice statement of the Keynesian theory that consumption drives economic growth. The alternative Austrian view is that accumulation of capital drives economic growth. Guess which theory has brought us to our current situation?

 

[Odin]

Certain tax cuts would do more than others.

 

[Odin]

If the goal is jobs, we need to look at what will encourage an employer to add more people.

But that's not the goal, the goal is production and innovation. The private sector has also been distorted by malinvestment, caused by government policies. More jobs in the service sector is not going to help the economy, we need more jobs in manufacturing and technology.

 

[ILUVRP]

" Your argument is motivated by envy. "

i am not envyious of anyone or business , i do get tired of someone pi$$ing on me and telling me its raining.

i agree with the zippy post.

as far as goverment spending , when is the last time you have heard a elected person in washington refuse his/her( or their staff ) raise or benny / goverment insurance.

zippyjuan is 100% correct.

 

[Zippyjuan]

A nice statement of the Keynesian theory that consumption drives economic growth. The alternative Austrian view is that accumulation of capital drives economic growth. Guess which theory has brought us to our current situation?

Pretend you are an employer. Which is more likely to get you to expand your business and hire more people? More money for others to invest or more people buying from you? These (employers) are the ones making the decisions to hire or not hire. What will motivate them more?

 

[CaptUSA]

If the goal is jobs, we need to look at what will encourage an employer to add more people. First, let's give a tax cut to wealthy people. What will they likely do with it? They probably have pretty much all the stuff they need so will probably save or invest it. That means more money available to be lent out. If you are a business, will you hire more people becasue there is more money available to borrow? Unless you already want or need to borrow, that will not enter your calculation to decide to hire or not hire more people.

What is more important? Demand for what you are producing. If you are having no problems making as many goods as you can currently sell, you won't be adding more workers. Unless you think you can sell more goods than you currently do. More money going into saving and investments is not going to change the demand for your goods and services (unless you are selling financial services).

Now lets give the same dollar worth of tax cuts to lower income people. They have more pent up demand and are more likely to go out and spend most of that money instead of saving it. This DOES increase the demand for goods and services. As companies see demand for what they produce rising, they will eventually hire more people (after first trying to get more out of current workers). This is creating more jobs.

Thus, if the goal is using tax cuts to increase jobs, give the money to those at lower incomes will be more effective than giving the same dollar value of tax cuts to the wealthy. In the case of the Bush tax cuts, most of the benefits went to those at higher income levels so it was not very effective as an economic stimulus and ended up adding to the budget deficit (since they were not offset by comparable reductions in spending which instead was increased to fight two wars).

Whoa, do you really believe this?!!!

So I guess if you don't have a job, and thus have no income, an income tax break is going to give you a job?! What?

The best way to get demand up is to have more people employed. There is NOT a lack of demand that's driving this recession, Keynes. Wants are unlimited. Pent up demand?! Lol! Companies are not afraid to hire because they're worried about selling off their pent up inventory first. They don't want to hire because they can't afford it. The price of labor (with all the new regulations and unknowns) is too high.

You can't direct capital and think it's going to go where you want. The market directs capital in the most efficient manner. All you need to do is to take off the reins. It doesn't matter which side of the bucket you put the water in.

 

[Acala]

" Your argument is motivated by envy. "

i am not envyious of anyone or business , i do get tired of someone pi$$ing on me and telling me its raining.

i agree with the zippy post.

as far as goverment spending , when is the last time you have heard a elected person in washington refuse his/her( or their staff ) raise or benny / goverment insurance.

zippyjuan is 100% correct.

Um . . .what? I don't understand what you are saying.

 

[Brian4Liberty]

The subject was cutting taxes on the rich. If we want to limit the discussion to the current environment and situation, and the proposals of cutting Capital Gains taxes to zero, and expanding the tax base at the same time (i.e. tax the poor), then it probably won't help the economy at all (or create jobs).

 

[CaptUSA]

The subject was cutting taxes on the rich. If we want to limit the discussion to the current environment and situation, and the proposals of cutting Capital Gains taxes to zero, and expanding the tax base at the same time (i.e. tax the poor), then it probably won't help the economy at all (or create jobs).

Agreed. Romney's idea to cut taxes at the same rate he's raising them is asinine. That's putting water into one side of the bucket and taking it out of the other. You can't simply redirect capital and think it's going to help. Central planning - no matter whose plan - doesn't work. You need to allow capital to flow more freely, thus creating MORE capital.

 

[Zippyjuan]

Whoa, do you really believe this?!!!

So I guess if you don't have a job, and thus have no income, an income tax break is going to give you a job?! What?

The best way to get demand up is to have more people employed. There is NOT a lack of demand that's driving this recession, Keynes. Wants are unlimited. Pent up demand?! Lol! Companies are not afraid to hire because they're worried about selling off their pent up inventory first. They don't want to hire because they can afford it. The price of labor (with all the new regulations and unknowns) is too high.

You can't direct capital and think it's going to go where you want. The market directs capital in the most efficient manner. All you need to do is to take off the reigns. It doesn't matter which side of the bucket you put the water in.

Yes, if you have no income you don't get a tax break.

How do you get those people not working a job? What impact would a tax cut have on that was the question so that is what I tried to address. IF you wanted to use as a tool tax cuts, a tax cut to lower incomes would create more jobs than an identical tax cut for those at high incomes. That is my point.

It is not "targeting capital" since the people are free to spend their additional income on what they want and the market will decide where the money ultimately goes. It is targeting income levels. Why aren't companies hiring? Lack of money to borrow? No. Costs of borrowing are a low as they have ever been. It is lack of customers- sales of their goods and services. They won't hire until they see enough sales to justify hiring more people.

It does not address if taxes are good or what government should spend money on.

 

[CaptUSA]

a tax cut to lower incomes would create more jobs than an identical tax cut for those at high incomes. That is my point.

You are wrong about that. That is my point. And I can't think of any evidence that would justify your conclusion. I know there's plenty of Keynesian-type theory that suggests that, but it's all theory. It sounds good on paper, but it doesn't work that way. Politicians like to say that, too, because they can justify hadnouts to people who don't pay income taxes anyway, but it never works.

The identical size tax cut would have pretty much the same effect no matter which side it went to. However, the speed of the impact would be felt faster if it went to wealthier people. Only because the economic triggers would happen earlier because there are fewer of them. Which means fewer transactions of larger sizes.

 

[Zippyjuan]

What do you think would make a tax cut on the wealthy move faster through the economy? What are the wealthy spending their money on? As an employer, what would encourage you to hire more people? Investment or demand for goods?

 

[Acala]

For those interested in understanding why "stimulating consumption" fails at achieving economic growth, here is a nice explanation:

http://mises.org/daily/2492

 

[LibertyEagle]

I think Congress should have double the tax rates they impose on everyone else. That would go further to keep the rates low than most anything else I can think of.

 

[CaptUSA]

What do you think would make a tax cut on the wealthy move faster through the economy? What are the wealthy spending their money on? As an employer, what would encourage you to hire more people? Investment or demand for goods?

Demand is already there. You are talking about capital. The same amount of capital would move faster when fewer transactions take place. For example, if one person invests $1000 in a company, the company gets that money immediately. If 100 people buy something for $10, the benefit of this additional capital takes some time to accumulate. Still, the additional capital is $1000. But you can see the speed difference.

Please take a moment to read up on why your theory fails. Acala provided a link... I haven't read it yet, but I'm sure it will do the trick.

 

[DeMintConservative]

Agreed. Romney's idea to cut taxes at the same rate he's raising them is asinine. That's putting water into one side of the bucket and taking it out of the other. You can't simply redirect capital and think it's going to help. Central planning - no matter whose plan - doesn't work. You need to allow capital to flow more freely, thus creating MORE capital.

That's ridiculous.

What Romney wants to do is the exact opposite of redirecting capital: is stop the government from doing it by closing loopholes and tax expenditures via tax code reform.

And a well executed tax reform can allow a tax cut while keeping the government revenue neutral. Economy isn't a zero sum game.

 

[DeMintConservative]

a tax cut to lower incomes would create more jobs than an identical tax cut for those at high incomes. That is my point.

It is not "targeting capital" since the people are free to spend their additional income on what they want and the market will decide where the money ultimately goes. It is targeting income levels. Why aren't companies hiring? Lack of money to borrow? No. Costs of borrowing are a low as they have ever been. It is lack of customers- sales of their goods and services. They won't hire until they see enough sales to justify hiring more people.

It does not address if taxes are good or what government should spend money on.

No wonder you make so many posts supporting Obama/attacking Romney.

How do you know that "a tax cut to lower incomes would create more jobs than an identical tax cut for those at high incomes" anyway?

 

[Zippyjuan]

Demand is already there.

Interesting. There simply aren't enough goods in the market. People have the money to buy lots more stuff but can't find things to spend it on. They want more things. So if we make more cars we will sell more cars? If a company makes money on each car they sell and can sell more (since the demand is there) why don't they produce more cars? Their profits would increase and companies are all about increasing profits. GM should double production.

That must mean that savings are way up since they have unmet demand for more goods. Are they? Do people have more money to spend but not the goods to buy (since "demand for goods is already there").

Let's see.
http://blogs.wsj.com/economics/2012/05/31/u-s-savings-rate-falling-amid-stagnant-incomes/

.U.S. Savings Rate Falling Amid Stagnant Incomes

May 31, 2012, 10:36 AM

The government made a sharp downward revision to fourth-quarter income figures Thursday, a sign of stagnant wages and a potential hurdle for consumer spending.

The figures, tucked in to the latest GDP report, show real disposable personal income–income minus taxes, adjusted for inflation–rose only 0.2% in the fourth quarter, compared with an earlier estimate of 1.7%. The change is largely due to lower-than-expected paychecks. Real first-quarter income was unrevised at a 0.4% gain.

The upshot: consumers are saving less in order to spend more. Consumer outlays rose a solid 2.1% in the fourth quarter and 2.7% in the first three months of this year.

But the personal savings rate for the first quarter dropped its lowest level since the start of the recession. Americans stashed away 3.6% of personal income in the first quarter, down from 4.2% in the fourth quarter and a near-term peak of 6.2% in the second quarter of 2009.

“With real wages and salaries now estimated to have grown at only a 0.7% annualized rate in [the fourth quarter and first quarter], and the saving rate revised down, the consumer is clearly in a weaker position than previously reported. Lower gasoline prices will help to cushion the blow, but, as always, the direction of the labor market will be the key variable in coming months,” Joshua Shapiro, chief U.S. economist at MFR Inc., said in a research note.

The wage and salary revisions dragged down one measure of economic growth. Real gross domestic income, an alternative measure of growth which tallies the costs incurred and the incomes earned in the production of GDP, was revised to a 2.6% growth rate in the fourth quarter, down 1.8 percentage points from the previous estimate. GDI was up 2.7% in the first quarter.