Quote from SWhiting:
I think now is a great time to debunk that theory that 'cutting taxes' is the way to spur the economy. What difference does it make, in the velocity of money, whether the government spends it or the consumer spends it? In either case the money 'moves'. I would also argue that government spending, if done properly, would be better for the nation. MAintaning roads, investing in space & ocean research, investing in all other kinds of research, improving our infrastructure, etc. is far better than consumers buying more crap in a nation that already has too much crap.
BTW, Rangel's tax bill would relieve middle-class of the current tax burdens and shift the taxes to the weathly. If 10% of the population control 85% of the wealth then they should pay 85% of the country's tax bill.
Obviously, the very worst thing is to continue the current levels of DEFICIT spending which have occurred under Bush and wll continue under McCain.
I apologize in advance that this probably belongs in the economics thread, but just had to respond to the above quote.
I'm not promoting cutting taxes further, just don't raise em. The Laffer Curve is very valid BTW, but experiences declining marginal returns at these lower rates.
Its been shown time and again that high taxes have several negative effects. First of all, it only increases revenue significantly for the year immediately following the tax increases. Then people go out of their way to avoid paying any draconian increase, even if it costs them money to do so (such as larger IRA contributions, investment property that may not even make money, but can be depreciated, etc). This is instead of blowing the said money on consumer goods, additional vacations, etc. And it decreases any funds that they may have for economic based investment incentives vs tax based incentives.
Or they stop working. Why work harder when 50% plus of the marginal pay goes to the Gov? (Federal + State).
They definitely have less to invest in equities outright. And then factor in the nearly doubling of cap gains that Obama wants. Waddya think that's going to do the equity markets?
Finally, yes, the rich control most of the wealth, but they already pay a ridiculously disproportionate percentage of the taxes (top 5% pay 53 to 55% of all taxes). You raise their taxes noticeably, and what do they do? They hire the best tax accountants to change their investment or expense patterns to not pay these higher taxes. Those cap gains taxes are going to hammer the middle class investor, and BTW, 60% of the middle class now invests in equities. This was not the case back before the Reagan tax cuts were enacted. It was about 25% then.
The socialist regimes of Hillary or Obama WILL hammer the economy. What we need is a tax system that stays the same for at least a decade at a time (like most countries have), so that we can plan forward. And yes, we need infrastructure investments, as well as spending less on the military imo. This is going to take awhile. What we need more than anything else, is to get a handle on entitlement spending, and outlaw worthless pork.
We are now bringing in RECORD revenue with the current tax system, and revenues have been growing substantially faster than GDP. Enough said. If its not broke, don't fix it. Spending side is broken. I am an economist by training BTW, and that is not just university degrees.
