meme(?): tax cuts do not spur economy: deficit spending temporarily does

[expatriot]

*'s 2nd argument for tax cuts (remember that his first argument made in 2000 campaign was that americans deserved part of the surplus back) was that americans would spend more if they were allowed to keep more, thereby increasing spending and helping the economy. What this argument fails to take into account is that the government does just not burn all of its tax revenue, it spends it. Very simply and not considering deficit spending for the moment, it is a zero sum game. If government collects x dollars in taxes, it spends x dollars. It is a zero sum game.

What can give the economy a temporary boost is through deficit spending just as the use of credit cards can temporarily give the appearance of a great boon to a household... "Wow the Jones' just remodeled their house, bought a home theater system and went on a trip to Europe."

GWB's tax cuts have not boosted America's economy, they have only boosted the economy of George Bush's America, a boost that has come about by kicking down the America of the lower 95%.

[MissMarple]

1. Well...I read something just a bit different..

Tax cuts work, but only in a very narrow window that is usually missed by the politicians. Deficit spending, you can get away with that for a bit. Cheney thinks it doesn't matter. :shrug:

[shockingelk]

2. It's the gov spending that stimulates the economy

deficit spending + tax savings spending > A GNP larger than before tax holiday

[dcfirefighter]

3. It really depends on what you tax

the Laffer curve exists, we just never know where we are on it. More to the point, some things are productive, some things aren't. Reduce the tax those thing that are productive and you get more production. Increase taxes on those things that aren't productive, and you get the revenue necessary to provide government.

Productive things:
Wages, Jobs, Buildings, Machines, Factories, Transportation, Agricultural improvements, Computers, Networks, Communications, Power Plants, Refineries, Mines

Nonproductive things:
Real estate (except buildings), Pollution, Resource Exploitation (OIL PROFITS!!!), License manipulation, Monopolies (utility profits), etc.

The most damaging tax we face is the payroll tax: it raises the price of labor, decreasing the consumption of labor. This keeps people unemployed and suppresses wages. This forces people to keep jobs they hate, work two jobs, fail to adequately provide for themselves and their families, and, in more desperate cases, abuse drugs & commit street crimes. Taxing the first $50,000-$100,000 of income has a similar effect.

The second most damaging tax we face is the local property tax on buildings: it raises the price of housing, and reduces the availability of places of business.

The least damaging tax we face is the local property tax on land. It can be viewed as a user fee for society recognizing your exclusive right to a peice of the commons. It does not decrease the supply of land one bit. It encourages 'smart' development, following economic rules. It increases the availability of sites and reduces the cost of housing. Capital gains taxes against real estate appreciation have a similar, though lesser, effect. Put it another way: market forces dictate that you are going to have to pay for the right to claim a piece of land. Currently, you pay the previous (or current) owner who has created nothing, and has provided you with nothing, nothing other than what God/Nature/Providence/FSM has provided all of us. This money pretty much goes down a hole. Alternatively, by taxing land values, this money goes to fund public goods - which largely provided the value of the land in the first place. With funding in place, taxes that keep people out of work can be reduced.