Cutting income taxes on the wealthy and on business activity seems innocuous, but the consequence of the Reagan revolution is clear. More and more wealth is being concentrated into fewer and fewer hands. What this means is that the overall economy now depends on economic decisions made by fewer and fewer people. This special group of people decide where the money in our economy goes. They decide whether it gets spent on investments at home or overseas. They decide whether it gets spent on startups or real estate. Most likely, whatever they decide, their decisions are almost always going to give them more leverage, which means this ever-smaller group of people decide how much rent to charge, where to put supermarkets, and so forth.
And I haven’t even touched on how their leverage enables them to control local, state, and federal politics. You want a new transportation system to make the morning commute easier? Well tough shit - they ain’t payin for it. And if you try to make them, they’ll just skip town and leave tens, hundreds, or thousands unemployed. You won’t need to worry about that morning commute then.
You aren’t following my point. I was not saying that X is more or less stimulative than Y, which is part of your point here. Nor was I addressing the political motivations for tax cuts. The only question I was addressing – which you went to great pains to ignore – is the allegation that “simple logic” tells us that increasing taxes on the rich helps the economy.
So it appears like your post is really nothing more than “I’m gonna attack conservative economics!!!” when you are directing your comments to someone who is not in any way a fiscal conservative.
You are right, I don’t understand what your point here is, it seems to be changing faster than I can keep up.
But you did make the assertion that:
Which is saying that tax cuts (X) are more stimulative than tax increases (Y). I did challenge that statement, as I see it as incorrect.
And I did not accuse you of doing so.
You said:
I did not go to great pains to ignore, I went to great pains to explain, as I thought your request was. It is simple logic, in that it requires no great leaps or anything, it’s pretty straightforward to follow. To me, having seen the effects of tax cuts to the rich, along with detailed analysis of the situation by economists that I trust, and personal experience in how the tax cuts effect my spending in my personal and business life, it is very simple logic.
Now, if your contention is that tax increases on the rich do not always result in stimulation of the economy, you would be correct, but that is not the claim the OP made.
Your conclusion is incorrect, as my post was nothing more than, “I’m going to try to explain this to someone who asked it to be explained to them.”
You made the statement that tax cuts stimulate the economy, and I challenged that. I am not saying that you are a fiscal conservative, but you did make a statement that is aligned with the fiscal conservative paradigm, and now seem rather hostile to that paradigm being challenged. If you defend the notion that tax cuts to the wealthy stimulate the economy, then that is the fiscal conservative position. My only reason for bringing politics into it is to explain why, when all current rational signs point to tax cuts for the wealthy being harmful to the economy, rather than beneficial, they are given anyway.
Now, I do realize that you made the statement in general, and I am only assuming that you were talking about the wealthy, in that tax cuts stimulate the economy; tax cuts in general can be defended, as there certainly are times and places and tax brackets that tax cuts will improve the economy. But, in a response directly about tax cuts to the wealthy, if you were making a statement about tax cuts in general, then that is not relevant to the subject, so I am really unable to follow your point there, if you were in fact, making a non-sequitur statement about tax cuts in general, rather than actually responding to the question about tax cuts to the wealthy.
Well, you seem really angry about all this, so I’m just going to ask one more time:
Given that there are a wide range of policies that are generally stimulative, I would include tax cuts, spending increases, and interest rate cuts as types of activities that are stimulative. And the policies that generally slow down the economy would be the opposite.
Now, that doesn’t mean that each policy is interchangeable, as they aren’t all equally effective.
However, the OP said that tax increases on the rich are stimulative. You keep arguing that tax cuts on the rich are a poor form of stimulus, to which I say, “No shit.” But that doesn’t mean that tax increases are stimulative. And nobody has actually explained the alleged mechanism by which tax increases on the wealthy create growth.
I didn’t include payroll taxes, and they do increase the percentage of tax/income paid by the middle class - but the second part of that story is this (bolding mine):
Look, I’m all for a more simple tax system that is transparent and “fair” but the one we have now at the Federal level is pretty damned progressive when you look at the whole picture. State and local taxes, especially property and sales tax, not so much.
OK, let’s raise taxes, say anything you make over $100,000 (the amount isn’t really that important) is taxed at 100% now why would anyone work after making that amount? Who would work for free?
But really we are now at the point where almost half of the households pay no federal income tax, so basically any tax break is now a tax break for the “rich” and given that top 50 percent of all households paid 97% of the federal income tax. How much more do you want them to pay?
As far as the logic goes, more tax = bigger government and what does the government produce? Not much. Now say I’m stupid rich, that money I would have spent on taxes I could have spent on building my business so I could make more money, but it would also mean I’m employing people, I could buy a new home, again I’m paying people to produce things.
Who’s better at spending my money, me or the government? Yes we need some tax, there are services that as individuates we couldn’t pay for, military for example. You see I believe we should have the smallest government possible, government should be at local level whenever possible. The needs in my town are different than the needs of say Seattle. But in many cases the federal government tries a one size fits all approach, which might work for Seattle, but not my town.
Taxes at the Federal level are NOT progressive when you look at the whole picture. Warren Buffett famously pays a lower percentage than his assistant. But, the main reason it’s important to always include payroll taxes is to avoid statements like the one in the post after yours – the meaningless statement that half the population pays no federal income tax. Most of that half pay plenty of federal taxes, they just don’t happen to be income taxes. On top of that, the SS surplus is being used, in part, to finance tax cuts on the rich, which will likely lead to cuts in those programs in the future.
Since all federal collections basically fall into a giant bucket, there’s no reason to specify income taxes when discussing federal taxes paid by various parts of the income spectrum. It’s inevitably used as an excuse to either disenfranchise people or as an excuse to cut taxes on the wealthy (and possibly raise them on the less so).
Back to federal taxes for the wealthy, with the lower rate on capital gains taxes and the carried interest loophole, various loopholes for S-corps, and so on, I find it very unlikely that the system is all that progressive once you start looking at the very top of the spectrum.
I am not angry in the slightest, I am simply having a discussion about economics on a message board on the internet. I have no emotional investment, and, while I am actually fairly passionate about economics in general, it is not the sort of thing that reasonable disagreement will upset me.
OTOH, this is the second time in this thread that you have made unsupported accusations as to my emotional state or motivations, and I do find that to be a bit annoying. Let’s cut out the personal comments and speculations as to the demeanor of the other, and talk economics.
They each have their time and place. Tax cuts targeted toward the lower income tiers will increase consumption spending. Spending increases obviously increase spending in the economy, and interest rates can encourage investments.
However, they need to be targeted. there are times when they do not have that effect. Spending increases on infrastructure produces jobs, and produces public goods. Spending on buying rich people yachts would be much less effective.
What you are saying, “in general” is true often enough, but it is not true all the time, and that needs to be accounted for.
I am arguing that tax cuts on the rich are not just a poor form of stimulus, but that they actually slow the economy. They encourage the wealthy to extract capital from where it was producing goods or services and providing jobs, and move it into consumption or foreign investments. A high tax means that people will want to invest into growing businesses, keep that money in the company, and let the controlled wealth grow in that fashion. A low tax does the opposite.
The very second sentence of my first reply to you was that explanation.
If you disagree with that explanation, then give your argument. But don’t claim that it was never explained.
Now, I will caveat that not all investments are tax deducible, and in the current tax environment, there are better places to put your money than investing it into a growing business, but that is why the tax code is needed to encourage investors to put money into long term investments, rather than short turnaround get rich quick schemes.
My experience is that I didn’t pay any taxes for the first few years that I was open, because my initial investments were more than enough to offset the taxes I was responsible for on my profits. I am now putting in more money to expand, and that money will be accounted for in my taxes for the next few years again, reducing my tax burden to probably zero again.
Here’s the thing, when I do pay taxes, I am paying on a fairly low marginal rate, so the tax code is not what is encouraging me to build my business. If instead of investing more money, I extracted it, and if I were much wealthier in the top tax bracket, I would still only be paying 39%, and that is assuming that I don’t have various ways of reducing that down.
If that marginal rate were much higher, if it were 60, 70, even 90%, then the wealthy would be putting as much of their liquid assets into investing into growing companies, as a tax shelter, even if they don’t care about the company. They would not be extracting the assets for their own personal consumption and use that the company needs to continue to grow.
That’s a fair request, and I apologize for mischaracterizing the vigor of your position.
Thanks for calling that out. I had read your post several times before replying, and I think your point here got lost in the rest of your argument.
However, I think we may be cutting the hair too finely if you wish to distinguish “cuts cuts” from “tax deductions.” If one wants to pass a bill to create a deduction for a new type of investment, or increase the deduction for other types of investments, I’d call that a tax cut, because it results in (some) people paying less in taxes. Seems to me that the OP was saying that increasing the amount – not just the rate – of taxes paid by the wealthy was stimulative, as a matter of common sense (or whatever his phrase he used).
So riddle me this: if the effective tax rate actually paid by wealthy people was raised from, say, roughly in the neighborhood of 30% to more like 40%, do you think that would be stimulative? Because I’m pretty sure that’s what the OP was saying.
I don’t agree with this. I would agree with Krugman here: “Anything that increases the budget deficit should, other things being the same, lead to higher overall spending and a short-run bump in the economy.” I also agree with his conclusion that they are a poor form of stimulus, and that the most obvious impact of tax cuts for the wealthy and corporations will be larger budget deficits, and other salutary effects will probably be lost in the noise.
I have never worked for a poor man or broke company, have you?
Withmost of the jobs being added by small business, cutting taxes back for corporations and entrepreneurs will, in fact, stimulate the economy.
A million dollars isn’t enough to last a lifetime, but I’d be okay with a small tax raise on those earning more than $10,000,000 in a year.
As we have read, the top 1 Percent Pays More in Taxes than the bottom 90 Percent.
It takes the average tax payer man how many months to pay his or her state, local, or federal taxes? I have readit takes 3 months and 3 weeks. Almost 4 months or 25% of the year to pay taxes.
This is nothing more than bait-and-switch rhetoric that acts as though the major corporations and the 1% are the same as the small start-up company that is actually creating jobs.
Cutting taxes for entrepreneurs and small businesses will stimulate the economy, but cutting taxes for major corporations and the top 1% will do no such thing. It is simply a hand-out to people who do not need it and will not use it for the purpose claimed. “Corporations” (the big guys) have been using their tax breaks to buy back stock, making their major investors more wealthy while not doing anything for the economy.
There have been a very few companies that actually increased worker wages. Most of the moneys handed to employees, however, have been “bonuses” that are one-time payouts that will not be repeated. (A million people buying cars will help the economy much more that a hundred people buying yachts.)
However, even the bonuses are pretty rare. Most of the money has gone to stock buy backs that deprive companies of capital to invest in new products.
Let’s talk real world. Families that are anything but rich got tax breaks. They can spend it any way they wish, to pay down a mortgage, or to stimulate the economy.
If you want that to go away, by all means, elected Democrats, and the average family who saves $2,500.00 which one prominent Democrats called peanuts will be going back to Uncle Sam.
Trump deserves credit for the economy and tax breaks. Unemployment is at historic low levels and he reversed many of Obama’s executive orders that were a burden for business.
You might want to check out the amount of raises and bonuses given to working and middle class people. Its trending upward.
As for corporations doing well, they are not the boogey man. They are how Americans in general make their livings.
Please read the article that I linked. Income and payroll taxes are progressive at the overall level. While the top earners may pay less as a percentage of income, they also receive less in benefits over their lifetime than the rest of us. You can’t just look at the cost side of the equation, you have to also consider the benefit side. Warren Buffet ain’t going to get much benefit from Medicaid, Medicare or unemployment, so his ROI on employment tax is zero. Everything he pays in goes to someone else like, for instance, his assistant - who may get more out than they ever paid in.
Uh, those are insurance programs. Nobody is assured that they will collect on ANY insurance program, whether administered through the government or bought on the marketplace.
So, just to be clear, my main complaint is when people talk about federal income taxes rather than just federal taxes (income+payroll, at least), since that’s nearly always used in a misleading way.
To address your point, I think that the wealthy benefit much more than the poor and middle class from other government outlays, but it’s indirect and a debate for another day.
Your point is clear, though wrong. However your example is absurd. Estimate what percentage of Buffet’s tax is “employment tax” and tell us why. Hint: His ROI on his payroll tax is non-zero, thanks, but in the context of his total finances it is (0÷0).
The reason why your point is wrong is that We Tax the Rich Because that is Where the Money Is. If you don’t like it, move to Russia or someplace where the most privileged rich aren’t mistreated like this. If you think it’s “unfair” to raise taxes on the rich, start an IMHO thread “The rich are getting richer but not fast enough for me.”
Sometimes I get sarcastic and pretend to complain about how U.S.A. treats its multimillionaires and billionaires so shabbily. I guess some people really fell that way.
What I’d like to know is whether or not the rich actually have enough income for any of these proposed taxes to work? Remember, we’re talking income, not wealth or assets here, and most of their net worth isn’t really income as the rest of us think of it- it’s potential income, if they sell those investments, real estate, etc… but not income as such.
So do they bring in enough actual income to pay for all this stuff that we think that taxing the rich will accomplish? Or is the motivation more in the line of sour grapes against the rich and a desire to stick it to them? Because it sure seems like the latter is way more prominent around here than the former…
What are you talking about? I don’t know anyone who wants to raise taxes to “stick it to” anyone. OMG. People just try to make the math work, and it’s third rail, almost religious. People who have opinions about taxes want their govt to work well. Period.
Oh wait. There is a whole wedge of americans who are dying to stick it to people. And that is where you are speaking from right? So you are projecting?