John F wrote on May 14, 2008 10:12 AM: The Bush tax cuts were skewed disproportionately to the very people who would NOT use their money for consumer goods. That was one of the problems with them.

As for the wealthy spending money on luxury items, I'd rather give the tax breaks to people who need the money for food or medical care. As for the wealthy using their tax breaks to invest in industry, I say what I did before: nobody is going to invest in production if there isn't a market for the product being produced.

It doesn't do any good to measure the proportion of taxes paid between classes, because much of the lower class is not paying a great deal in income taxes to begin with. If you cut the taxes of a man paying $2,000 a year in income by 25% you're cutting his taxes about $42 a month. That's not going to have much of an effect on his consumer spending; he might buy his family meat twice a week instead of pasta. But cut the taxes of someone paying $50,000 a year in income tax by 25% and it's a bonanza. The Bush tax cuts were not equitable.

But you're also forgetting that tax money isn't hoarded by the government; it's spent. The government spends money on salaries, goods, and services, all of which stimulate the economy (of course in the case of the war it's stimulating Iraq's economy, but that's another argument). Unfortunately the government also spends money paying the interest on our debt. That interest has to be paid no matter how much or how little the government collects in taxes. Therefore we will be better off if, rather than cut taxes, we pay off our debt as fast as we can. Then we can really cut taxes.

Sad Summerlin wrote on May 13, 2008 10:15 PM: John,

You support my argument in your own statement:

"But the economy is demand-driven. Nobody is going to sell any goods if nobody has money to spend on them. Further, suppliers won't produce goods if nobody has money with which to buy them."

Exactly my point... put the money in the hands of the consumer rather than the government... Remember the multiplier effect from your Econ 101 classes.

I believe the cuts should be shared proportionally across all those who pay taxes and I believe the Bush cuts did that... by real dollars, the highest bracket saved the most money, but in proportion to the taxes paid, all brackets faired the same. We keep forgetting to mention that the money the "rich" don't pay in taxes does go somewhere... it does go to luxury items (which provide jobs and tax revenue), it goes to investment (which in turn provides jobs and tax revenue) or it goes into a savings account (where interest is taxed) and the money can be used for loans for mortgages, cars, etc to support all classes.

I agree with your national debt argument, but unfortunately, we need to cut our spending as well as our taxes to reduce that monster... and this is something I hope we both can agree on...

John F wrote on May 13, 2008 08:50 PM: Sad Summerlin,

You're forgetting one thing: the cost of the ball. Imagine the ball costs you seven dollars to make. If you sell 20 of them at $10 you make a $60 profit. If you sell 30 at $8 you only make a $30 profit. You have to sell many more to make the same amount of money.

The analogy isn't really apt, though. Taxes are not revenue in the business sense; they're not the result of sales.

The supply side argument says that if you put money in the hands of people of means they will use it to produce goods and fuel the economy. The only problem is this theory is based on a false premise, namely that the economy is supply-driven. But the economy is demand-driven. Nobody is going to sell any goods if nobody has money to spend on them. Further, suppliers won't produce goods if nobody has money with which to buy them.

If you want to use tax cuts to stimulate the economy they should be going to those people who will spend the money on consumer goods - the poor and the middle class.

But I think we'd all be better served - poor, middle class, and wealthy alike - by getting our fiscal house in order. Let's eliminate the national debt.

Imagine the tax cut we could give ourselves if we no longer had to pay interest on our trillions of dollars of debt.

John F wrote on May 13, 2008 07:12 PM: Sad Summerlin,

You're forgetting one thing: the cost of the ball. If you're profit margin is 20% then the ball costs $8. By selling 20 of them you make $16. If you lower the price to $8 you don't make a profit no matter how many balls you sell.

Anyway, the analogy isn't really apt, because it assumes that people will spend the money they're given in the form of a tax cut.

The argument for supply-side economics is that, by giving tax cuts to wealthy people (i.e. producers) they will use the money to produce goods. The problem is, the economy isn't supply-driven, it's demand-driven. You can produce all the goods you want, but nobody will buy them if they don't have the money. Further, producers aren't stupid; they won't produce - no matter how much spare cash they have - if nobody has the cash to buy their goods. So if you cut taxes for the wealthy they'll just sit on their cash until somebody has money to buy what they want to sell.

Anyway, the record is pretty clear about this. Go to the CBO web site and look at what happened to governmental revenues starting in 2002, in the wake of the Bush tax cuts. They declined dramatically.

If you want to use tax cuts to stimulate the economy, cut the taxes of those who will spend the money on consumer goods, namely the lower and middle classes. But I honestly believe that we'll all be best served - wealthy, middle class, and poor alike - by paying off our debt and getting our fiscal house in order.

Imagine the tax cut we could give ourselves if we no longer had to pay interest on our debt.

Sad Summerlin wrote on May 13, 2008 06:02 PM: John F - It was not the tax cuts that generated the additional debt, it was the increase in spending (which I am not pleased about).

Tax cuts to a specific degree that are measured appropriately will generate additional tax revenue. If we take something out of the tax context and put it into a "rubber ball" analogy it goes as follows:

A rubber ball costs $10 and 20 people can afford it... you now have $200. But if you lower that price to $8 30 people can afford it... so you now make $240. That extra two dollar savings opened up spending. If you make the cost $5 you now make it available to only 40 people, you are back to $200... so it doesn't pay to lower the price to that amount.

Cost of the ball stays the same...

This is how the tax cuts work... lowering taxes to a degree opens up additional spending opportunities which in turn causes more tax revenue than what would have existed at the high tax rates... Raising the price or the taxes will only depress spending which will depress tax revenues.

But back to the Sharpton argument... Jail would be too kind for him. He has done more damage to the black community than any back taxes paid can rectify. Just "ax" him what he thinks about that...

As to American ex-pats overseas... they still pay taxes to the US government even though they take advantage of none of the US services.

dennis1944 wrote on May 13, 2008 05:26 PM: Ho Hum! I've said it before, but let me put it another way that even the stupidest people can understand. If you own a business and one of your friendly neighborhood governments (local, county, state, federal etc.) raise your taxes, exactly WHAT will you do? You will simply raise the price of your goods and/or services that you provide to your customers. Now who is paying the higher taxes? Welcome to Economics 101. It's amazing how many politicians are ignorant or just plain don't care about this simple fact. Any questions??????

Shirly wrote on May 13, 2008 02:42 PM: John,
Shirly here...take a 'google' of blackwater and their offshore account etc. You have been misinformed, a great many war companies are set up offshore and honestly pay no taxes. Legally. Congress is now (as it was in 1923) trying to shut down these tax loop holes (created by republican congress). Just 'google' "military contractors escape taxes."

John F wrote on May 13, 2008 02:04 PM: Jep,

Look at what I said. Option 2 is CUT SPENDING.

As for tax cuts as a way to increase revenue, haven't the last eight years taught you anything? If lower tax rates meant more revenue, then a zero tax rate would mean infinite revenue. Go to the Congressional Budget Office web site and look at what happened to tax revenues in the years following the Bush tax cuts. Bush's tax cuts added WELL OVER A TRILLION dollars to the debt held by the public.

That's not to say that I'm against cutting taxes. But to cut taxes and then not account for the lost revenue by cutting spending was the height of irresponsibility. Our grandchildren may never be able to pay off our debt.

taxed wrote on May 13, 2008 12:54 PM: I can't even get my stimilus check because I owe 1k in back taxes and this clown owes them 1.5 mil!!!!!! sc**w you Sharpton

jep wrote on May 13, 2008 12:08 PM: Tax cuts do NOT need to be paid for. Spending costs money. Tax cuts usually bring in more income.

Cuts taxes some more to increase revenue and cut spending to decrease the deficit.

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