Cuts to pretty much any govt services or entitlement payments are also political suicide. Continuing to run up the debt until the nations credit rating is in tatters is political suicide. Cuts to the military seems to be political suicide. Raising taxes on the rich and the corporations is donor suicide.
This tax bill really does put the country into a precarious situation where there are no good choices, and our options get fewer and less palatable as we dig ourselves deeper.
How do you think it will play out in 8 years when the tax cuts for the middle class expire as dictated by the republican tax bill? Do we borrow even more to keep paying for cuts? Do we cut spending, and if so, where? Do we dare raise taxes on the wealthy who finance the politician’s campaigns?
If the economy is doing well in 8 years, then continuing to go into debt to finance renewing the tax cuts is fiscally irresponsible. If the economy is not doing well in 8 years, such stimulus may be needed, but we may find ourselves unable to afford to finance it.
I agree; there’s no way Congress - in principle - will want to let the cuts expire.
Problem is, no one has to actually raise taxes, all they have to do is do nothing. Democrats may want to make the cuts permanent, but the Republicans will dig in and refuse without deep cuts to social programs, content with the optics that “the Democratic majority let your taxes go up.”
If it’s a Republican majority, they will certainly want to make the cuts permanent on the backs of social programs, but the Democrats will dig in, content with the optics that “the Republican majority wants to kill your favorite social program, and so they let your taxes go up.”
A standoff means the middle-class tax exemptions expire, and the taxes go up.
Over the years, I have found that the cynical perspective, regardless of where you are on the political spectrum, turns out to be the safer bet.
(P.S. On preview, a big “yeah, that” to what k9bfriender said.)
The smart thing politically would be to restore the traditional SALT/mortgage deductions on top of the new lower rates, keep the lower rates actually lower by using legitimate rather than fake inflation adjustments, and pay for it by restoring millionaire rates to Clinton-era levels.
Many who are very wealthy take advantage of the tax code in order to remove profits from the economy, and use them towards fulfilling their own desires. With low taxes on profits, this is encouraged by the tax code.
By having very high taxes on profits for the wealthiest individuals, that encourages them to leave the wealth in the company, and grow it there, which translates into more and better paying jobs for workers, higher demands for real estate and construction, and a better value for products for the consumer.
Profit is a measure of inefficiency in a free market economy. The less profit taken by owners and investors, the more efficient the economy is.
If I can produce a widget for $1, and I sell it for $2, then I profit one dollar. But, by charging $2 for my widget, the consumer is not able to buy something else. Their ability to buy another object is absorbed by my taking of a profit, that is less efficient than if the consumer had purchased other goods or services rather than pay my profit.
In a true free market economy, you could produce that widget yourself for the cost of $1, so buying my $2 widget is less efficient than making it yourself. If there are no barriers to entry, the price of everything would be essentially the same as the cost. Any seller pricing their widget higher would be undercut by someone else.
As we do not have a true free market economy, profit is possible, but the more profit is taken, the farther we are from a true free market. The farther we are from a true free market, the more the govt needs to intervene to ensure it stays competitive.
If you look at industries with fairly low barriers to entry, like restaurants, they usually have a 3-5% profit margin, if they are well run. The higher the barriers to entry, the higher the profit margin.
So, to my point. If I am a wealthy owner, and I take $500k from my company as profit, that is $500k more that I had to charge my customers over what I paid in rent, capital, labor, and resources. If I take a million dollars, that is a million dollars more that I charge my customers than I paid to produce what they desire. By my taking more money for myself, I lower the relative value of my product over its price. If I am in a situation where I don’t have any competition that will undercut me (whether that is because of being a monopoly or an oligopoly with and “understanding”) and my product is desired by the population, then I can raise my prices to whatever maximum I choose to give myself the optimal profit position on the supply/demand curve. The money that is spent on my product above that of the cost of producing it is an inefficiency. The consumer could have bought more items from more people if I had charged less.
By having high tax rates, it is encouraged that owners keep their profits low, giving the consumer a better value on their money. By having very low taxes on profits, it is encouraged to increase profits, lowering the value that the consumer receives in return for their money.
ETA: Or what Adam Smith said that septimus so helpfully quoted. (I was looking for that exact quote, thank you ninja.)
I find it odd that folk are suggesting that folk who were stupid enough to vote for Trump in the first place, are not stupid enough to be taken in by a blatant attempt to buy votes.
Not at all, Smith said “the ordinary profit as low as possible.”
As low as possible does include the profit needed in order to attract people to open and invest in business.
If you have many people participating in a free market, each will take a profit that makes it worthwhile to them to be in the market. If the profit is not high enough, they drop out. If it is higher, more join in.
It is when you do not have a free market, when barriers to entry are substantial or even monopolistic, that profits can be maximized by a business, at the expense of the society as a whole. If no one can come into my market to compete, then I can charge what price gives me the most profit, rather than charge the price that distributes the largest number of goods to the largest number of people.
The goal of capitalism is to make the most efficient use of limited resources, profit reduces that efficiency. The goal of capitalism is not to make the most profit for the ones who own the means of production.
That only refers to being responsible for the handling of someone else’s money or financial dealings. It does not mean the only proper way for a corporation to act is to maximize short term profits at the expense of a company’s long term health.
A Board of Directors can very well decide that a company is better served by giving workers a raise and retain benefits than laying off workers simply to increase profits.
