You want a cite that lower taxes stimulate the economy? Ok. I’ll get back to you.
Answer: When taxes are too low, of course!
But, any raise in taxes is always going to be “recession-inducing” in the sense that it will be harmful to the economy. However, it’s like turning on a hose pointing into the ocean. It raises the level of the water, but that doesn’t matter if the tide is going out. If the economy is picking up steam for a period of growth, increasing taxes might curb it some, but certainly won’t stop it. Just like cutting taxes won’t stop a recession, raising them won’t stop a growth period.
Even 20 years ago everyone got one capital gains exemption from selling a house. I believe that things are much better now. When is the last time someone got slammed by selling a house and moving to Florida?
A table here shows that for real cases, ( a study of 440 estates) no one paid more than 23% on average, and the average rate for estates up to $3.5 million was 7.9%. So, yes, only the rich will benefit in any significant way from an estate tax repeal.
As for the benefits of the tax cut, the debate was not about whether a cut was a good idea, but how to distribute it for maximum benefit. It is unlikely that structuring a cut so the rich get as big a piece as they did increases consumer spending as much as if it were targeted more towards the middle class. The official recession was short, true, but the recovery was very weak, especially in terms of employment.
But the rich benefit disproportionately. And, the middle class only benefits in the end if you believe that you benefit if I take a cash advance from your credit card, give most of it to my rich friends and then give a little bit to you. In other words, there ain’t a pot of free money lying around…so just cutting taxes basically amounts to a loan (assuming spending is not cut proportionally).
Look, the exemption was something like 1.3 million dollars for a couple before Bush began the gradual phase-out of the estate tax. And, factually speaking, it applied to only a few percent of estates left each year (although due to accounting gimics, the phase-out sunsets right now the year after it is complete)…so, yes, it was basically a tax on the rich. Besides which, there was bipartisan agreement to raise the phase-out somewhat…just not to completely get rid of the tax.
That is simply not factually correct. The tax cuts reduced the total federal tax burden on the rich by a higher percentage than the total federal tax burden on the middle class and the poor. If you look at the total overall tax burden (federal, state, and local), the cuts are even more regressive. This is in part because the federal income tax is the most progressive federal tax we have whereas others such as the payroll taxes are regressive.
Well, I don’t know about motivations but the fact is, as I have stated above, that the tax system has become more regressive under Bush. It is as simple as that. To the extent that people in the middle class haven’t seen their federal tax cuts gobbled up by state and local taxes, it is only because we are going deeper and deeper into debt.
I’ve been consistent. Everyone benefits from the cuts. The rich benefit more because they pay more. If you look at my first quote there in context it’s clear what I meant.
In post #30 you described how to get to the page where you pulled the numbers from. I went to factcheck and couldn’t find them. The link to “tax policy center” doesn’t work for me. Rather than continue to investigate where you got them, I simply asked you for the dates.
I don’t have time to research your cites for you. I’m busy trying to respond to everyone.
(You know what comes next if I can’t keep up, right? All the indignation and huffing about how I’m ignoring people’s arguments.)
More correctly, it is the biggest of the progressive taxes. The estate tax, for example, is more progressive but a smaller player…and, at any rate, Bush eliminated that too.
If they are smart, they do it by cutting taxes in a way that puts most of the money in the pockets of the poor and middle class who then go out and spend it. If they are stupid (or really are doing the cuts for other than their stated reason), then they do it in a way that puts most of the money in the pockets of the wealthy.
No doubt, the tax cut did have some short-to-medium term stimulus effects. However, it was about the least bang for the most buck that you could possibly imagine. I think that even if you believed the administration’s own figures for how many jobs it was supposed to create, it worked out to be extremely pricey on a per-job basis. (And, there is no reason to believe that the administration’s job creation numbers turned out to be correct given the general anemic growth in the job market.)
Of course, it is not surprising that the cuts were lousy for stimulus since that is not what they were even originally designed for. As you might recall, the original motivation for Bush’s tax cut plan was to give the surplus back to the people; it only became a stimulus plan after the economy began to tank. Like the Iraq War, the administration’s plan on the tax cuts was to decide what they wanted to do first and then come up with lame justifications second.
Well, not to play the partisan hack, but if the rich folks are getting such a big tax break (and Kimstu’s table from factcheck.org seems to indicate that is true - to the tune of $112,925), then what’re they doing with that money? Even if they’re just buying trout fur parkas, instead of investing it, they’re stimulating the economy. At least that’s an argument being made by the naysayers of trickle-down here - spending is good, particularly spending that isn’t financed by credit.
I’d be all for cutting spending to go along with the tax cuts, folks! I’ve posted that a couple times already that I’m dismayed over this. I’m not defending Bush’s spending. I really thought that he’d be more conservative fiscally in his second term. (Once he no longer had to worry about re-election he could have been more aggressive in cutting social programs.) He let me down, and I’m pissed about it.
Now, would you all stop beating up on me about this. Please?
I’ll tell you what: The next person who beats me over the head about how Bush is spending too much as if it’s in response to me arguing the contrary I’ll just go ahead and carve Bush spends too much! on my chest with a rusty meat cleaver, take a web cam pick and post it on the internet as I bleed out and lose consciousness. Fair?
Somewhat, sure. The question is, are they stimulating the economy more effectively than lower-income spenders would? And are they more likely than lower-income people to invest or shelter their tax breaks overseas in somebody else’s economy?
There there there, sorry if we’ve been snappish (me, at least). But the point is that the question of deficits does have a big impact on how we answer the OP’s question of what the effects of the Bush tax cuts have been. We’re not trying to accuse you personally of being a borrow-and-spend Republican.
Well, back to the topic then. Tax cuts during a recession are good. Every sane person agrees on this. Some tax cuts are in a better position to jump start an economy. The taxes Bush chose to cut weren’t necessarily the best taxes to cut if his true purpose was to jump start the economy. While most everyone saw some semblance of a tax cut, the wealthiest saw the most benefit. And the middle class generally saw their state and local taxes increase due to the nature of squeezing a water balloon. While the wealthies one percent also saw some state increases, it was non in line with their cuts.
The Republican position of less government is an honerable and truly defensable position.
Good question. They’re either spending it or saving it. This is measured by the MPC or marginal propensity to consume, which I believe is something like 96% in the US. This means that Americans spend 96 cents on every incremental dollar we earn. But our spending it is equivalent to the government spending it. Thus, the government could have stimulated the economy on its own by spending an equivalent amount. I believe that the term “boondoggle” comes from the government paying “workers” to dig holes and then fill them in during the Depression just to stimulate the economy.
Saving the money can help the long-term economy by providing more funds to lend and driving down interest rates and leading to real investment. Of course, this is equivalent to the government saving money by not spending it.
Investing is a term that means 2 things. Investing in stocks, bonds or real estate does not add any value to the economy. It simply inflates the value of these investments. Only investing in new businesses (or current companies investing in new capital) adds real value. Thus, the real estate bubble is not a good sign of the economy because it shows us that people don’t have many new businesses in which to invest, and must put their capital in safe assets. A $150K house that is now a $500K house is still, well, the same house.
I apologize if this post is not clear, but I’ve got to catch a train.
But the point is that the issue of how the tax cuts will eventually be paid for has everything to do with the issue of fairness of them…i.e., who benefitted, if at all. As I made clear with my analogy to a credit card, it makes little sense to conclude that everyone magically benefits from a tax cut without considering where the money is coming from…what is going to be cut spending-wise or where the money is eventually going to come from to pay down the deficits. So, the fact that the rich disproportionately benefitted in what is not exactly a zero-sum game but is closer to that than the alternative view is very relevant to understanding what has actually happened.
I mean if everyone unambiguously benefitted when taxes were cut then who would oppose them?
I suspect this number is much lower for the income levels in question. I know it is for me.
And a stock priced at 50 times earnings instead of 10 because of overinvestment in the market is still the same stock.
The big problem with the benefit of the tax cuts to increase investment is that when they were done, there was tremendous overcapacity. A lot of companies were left with billions of dollars of inventory, the telecoms built out for demand that was not going to come for ages. At this time increased investment was the last thing we needed, increased consumption would have been far more useful. If the tax cuts had been targeted lower, there would likely be more investment, more employment, and maybe more of a tax base. It was just terrible economic policy.
Like I said before, I didn’t notice any increase in my paycheck, and apparently I was not supposed to. In another article whcih I can’t fidn right now, there may be an increase in property taxes for home owners somewhere in the mix too.
Unfortunately, this sort of thing is kind of useless without a cite. It is true that the federal tax revenues have been recovering somewhat recently…but that is after hitting record lows (as a percent of GDP). Here is a report from April 2004:
Well, really only until a new equilibrium is formed.
Not exactly true. This is true if the government spends in for the public: infrastructure, military, parks, things are easily commoditized; education is debatable. If the government spends in the private market, this will only lead to inflation.
[off-topic]I find the logic of this statement to be suspect. Elected officials will always do what the electorate wanted them to do when they (the electorate) voted them in the first place. Also, most of the world/people in this country is less wealthy compared to the “rich” (those who are supposedly reaping too much benefit). The majority of voters should easily out vote the rich for their own self-interest.
I’m not as up to date on my supply-side theory, but in theory, this is the simplest way to look at it. Another way to state it, one which I’m more comfortable with stating is: Tax cuts increase GDP growth, all other factors remaining equal.
To the OP: The direct effect of Bush tax cuts is to raise GDP, i.e. raise the economy out of recession. Bush’s tax cuts, while across the board, gave back more nominal dollars to the rich (but, then, they pay more/continue to pay more of the total tax burden.) Also, rather than say that the taxes are more regressive (which is true, depending on your context), it is more apt to say that the tax cuts made the overall tax structure flatter. Following this, another direct effect will be to increase wealth inequality. Whether that is good or bad is debatable.
I’m busy trying to respond to everyone.