interesting take on the tax breaks

[DKSuddeth]

tax article link

 

[acludem]

Big shocker here, George W. Bush lied about the tax cuts. I don't know what Kerry's plan will be yet, but it can't be any worse than the Bush plan to increase the wealth of the superwealthy.

acludem

 

[Hobbit]

MSNBC is full of liberal crap. I know more econ proffesors than you can shake a stick at, and every one of them says that tax breaks are good in the long run and that deficits don't really matter. The only reason the liberal media talks so much about how it didn't benifit poor people is so they can bash Bush. The truth is, the impoverished minority that didn't benifit from the tax breaks...didn't pay taxes to begin with, and now that bracket has increased in size.

Edited to prevent further ridicule for my bad choice of words, seeing as how my follow up post clarifying it seems to have been ignored.

The maximum yearly income for the bottom tax bracket increased, which is what I was referring to when the bracket increased in size. It didn't mean that there are more poor people, just that the requirements have been broadened. Now stop calling me an idiot.

 

[Reilly]

Tax breaks are only good to the extent that they stimulate domestic growth. Even then however, deficits still matter. The money still must be repaid, with interest. In the long run, deficits only don't matter if GDP growth is so strong that the overall increase in tax revenue, even at the lower rate, surpasses the deficits in the near future. However, the GDP growth rate over cycles in the economy (from periodic recession to recession) has remained consistently at about 3% since the 70's. Tax policy does not effect GDP growth long term, only short term. The only way to increase GDP long term is through better efficiency (i.e., technological improvements, infrastructure improvements, a better educated workforce). Tax rates don't do anything to change the basic elements of worker and industry efficiency, long-term.
The idea that deficits don't matter is a notion that originated with Keynes in the 20-30's and was adopted by F.D.R. to get us out of the Great Depression through high government spending, but even Keynes only meant this to be a temporary initiative. In the end, just as in your personal life, if you keep borrowing large amounts for a significant period of time and your income doesn't rise significantly, you're screwed.

 

[Reilly]

Coincidentally, you are also wrong that poor people don't pay taxes. They do. Even if their earnings are such that they don't pay income tax, they still have to pay FICA taxes, which are significant. So it is wrong to suggest that you can't give tax cuts to poorer Americans. You can, by cutting the FICA rates for lower earners.

 

[DKSuddeth]

Originally posted by Hobbit
MSNBC is full of liberal crap. I know more econ proffesors than you can shake a stick at, and every one of them says that tax breaks are good in the long run and that deficits don't really matter. The only reason the liberal media talks so much about how it didn't benifit poor people is so they can bash Bush. The truth is, the impoverished minority that didn't benifit from the tax breaks...didn't pay taxes to begin with, and now that bracket has increased in size.

obvious which side of the hobby horse you're sitting on

take a look at your last sentence, that should say it all.

 

[rtwngAvngr]

Originally posted by DKSuddeth
obvious which side of the hobby horse you're sitting on

take a look at your last sentence, that should say it all.

Very good dk, you can identify people's sides. Do you have a point to a make. A refutation perhaps?

 

[rtwngAvngr]

Reilly? Tax breaks are only good in the short term? Isn't the long term comprised of repeated instances of short term? You do not compute.

 

[rtwngAvngr]

Tax cuts work. It's econ 101. Libs refuse to acknowledge the importance of the business man in society. They are strictly fodder for villification.

 

[Hobbit]

Yes, deficits do matter, but not as much as people seem to think. I don't recall them having caused us any problems in the past except for a couple of minor tax hikes, and I doubt that'll be the case here unless Kerry gets elected. Economic growth is on the incline, and I don't think there'll be a big problem with deficits. As for my last sentence, yes, people who made less than $7000 a year did not pay income taxes. As a person who only works during the summer, I was and still am in that bracket. Now, the borders of that bracket have been extended to $9000/year. The tax cuts are stimulating growth and, all in all, will be benificial.

 

[DKSuddeth]

Originally posted by rtwngAvngr
Very good dk, you can identify people's sides. Do you have a point to a make. A refutation perhaps?

Yes RWA, I did have a point to make.

"The truth is, the impoverished minority that didn't benifit from the tax breaks...didn't pay taxes to begin with, and now that bracket has increased in size."

His last sentence closes with the impoverished increasing in size despite the fact that tax cuts were supposed to help stimulate job growth is obviously the complete opposite of what we were all told the tax cuts would do and that the wealthy would not be the only beneficiaries.

 

[Hobbit]

Read my last post. The tax bracket increased in size by the maximum yearly earning that fit into the bracket. That's why it increased in size, not because more people are poor. Bad choice of words, I admit, but read the follow-up posts, will you? Pay attention to how the tax cuts worked. Basically, every bracket had the maximum yearly income increased, with a few brackets having their percentages lowered.

 

[Reilly]

Originally posted by rtwngAvngr
Reilly? Tax breaks are only good in the short term? Isn't the long term comprised of repeated instances of short term? You do not compute.

Actually, that is not what I said. I said that tax breaks will only stimulate GDP growth in the short term, but don't effect the rate of efficiency that dictates GDP growth between cycles. To illustrate, in a period of recession, a tax break/ gov't spending stimulus will help pull the economy from a -1% growth rate to a 3.3% growth rate faster than no stimulus plan at all, but it won't pull it to 6%, for a variety of reasons (including that high gov't borrowing crowds out private investment, thereby hampering growth if deficits continue). So, looking at the GDP growth rate between recession cycles, you still end up with an approx. 3%, to which we are restrained by the efficiency of our workforce, infrastructure, etc. So that is what I meant.
However, even your inartful and innacurate representation of what I said is clearly wrong. Chemotherapy (tax cut) may be a good short term solution to Cancer (recession), and may put it into remission (economic growth), but if you continue chemotherapy once the cancer is already in remission, you are just injuring your health.

 

[DKSuddeth]

Originally posted by Hobbit
Read my last post. The tax bracket increased in size by the maximum yearly earning that fit into the bracket. That's why it increased in size, not because more people are poor. Bad choice of words, I admit, but read the follow-up posts, will you? Pay attention to how the tax cuts worked. Basically, every bracket had the maximum yearly income increased, with a few brackets having their percentages lowered.

Thank you for the clarification.

 

[rtwngAvngr]

Originally posted by Reilly
Actually, that is not what I said. I said that tax breaks will only stimulate GDP growth in the short term, but don't effect the rate of efficiency that dictates GDP growth between cycles. To illustrate, in a period of recession, a tax break/ gov't spending stimulus will help pull the economy from a -1% growth rate to a 3.3% growth rate faster than no stimulus plan at all, but it won't pull it to 6%, for a variety of reasons (including that high gov't borrowing crowds out private investment, thereby hampering growth if deficits continue). So, looking at the GDP growth rate between recession cycles, you still end up with an approx. 3%, to which we are restrained by the efficiency of our workforce, infrastructure, etc. So that is what I meant.
However, even your inartful and innacurate representation of what I said is clearly wrong. Chemotherapy (tax cut) may be a good short term solution to Cancer (recession), and may put it into remission (economic growth), but if you continue chemotherapy once the cancer is already in remission, you are just injuring your health.

So it's good in the short term only. That is what you're saying.

"tax break/ gov't spending " these two are not even similar and are not "/"-able (slashable).

With all your malignancy and mental gymnastics, you're still just plain wrong.

Of course the efficiency of infrastructure matters, but free markets take care of that. What the government can do best is just stay the hell out and keep taxes low. Life does just fine without the negative mojo of socialism.

 

[Reilly]

Interestingly enough, tax breaks and government spending are very similar when it comes to fiscal stimulus. Both pump money into the system (either by taking less in taxes or by putting the money directly into the system by increased gov't hiring or production orders or whatever). Money into the system means more consumer purchases or private investment (equals jobs). The key is that tax cuts should be focused toward increasing private spending in the economy. If people getting the tax cuts just put the money under their mattresses, it doesn't work. This is Econ. 101 my friend.

Now if you would care to elaborate on your very thoughtful statement "you're still just plain wrong." I will be waiting.

 

[rtwngAvngr]

Originally posted by Reilly
Interestingly enough, tax breaks and government spending are very similar when it comes to fiscal stimulus. Both pump money into the system (either by taking less in taxes or by putting the money directly into the system by increased gov't hiring or production orders or whatever). Money into the system means more consumer purchases or private investment (equals jobs). The key is that tax cuts should be focused toward increasing private spending in the economy. If people getting the tax cuts just put the money under their mattresses, it doesn't work. This is Econ. 101 my friend.

Now if you would care to elaborate on your very thoughtful statement "you're still just plain wrong." I will be waiting.

The difference is this: Entrepeneurs are incented by tax cuts because they are allowed to keep more of their profits. The decisions they make regarding specifically how they conduct their business still must make sense according to the laws of supply and demand and free markets. The temporary and ill-conceived spigot of direct government assistance and jobs programs is so artificial that it's fleeting existence does nothing for innovation or the long term efficiency you hollowly trumpet. That's one difference.

Tax cuts at all levels work best.

 

[rtwngAvngr]

kind of like a hatchet between the eyes, aye reilly?

 

[Reilly]

No, you are right. That is one distinction, although I would phrase it differently. Nonetheless, the aim of both at fiscal stimulus is the same.

However, you are not considering a couple of points.
(1) Lower taxes on the wealthy are not as effective in a time of recession as they are in a time of boom. In a period of recession, where demand is low (because more people are concerned about their jobs and finances), production is rarely ramped up to 100%. Therefore, tax breaks to the wealthy are less likely to lead to direct business investment (creating more jobs, new plants, etc.) This is because there is not the demand for more production. Therefore, wealthy individuals are less likely to contribute a high percentage of each dollar received toward job creating investments. However, a tax break on middle and lower income individuals results in higher percentage of each dollar saved towards consumption, because these people have less ability to save (they have to meet current financial demands - i.e., buying a new washing machine, car, spending a little more on a vacation, etc.) Therefore, by providing tax breaks to these individuals, demand is increased overall, and investors will have more incentive to increase production to meet the new demand (which in turn creates more jobs).
(2) Gov't spending, by pumping more money to these same lower income individuals (even if through unemployment insurance) helps raise demand for goods as well, once again providing the proper incentive for private investment in plants and the like. Also, some of this money will likely be put towards education (i.e, college tuition), which does contribute to higher efficiency.
To one extent you are right. Well placed tax cuts, at the right time, can help spur innovation, which may lead to a more efficient workforce. However, government investments in roads, bridges, education, scientific grants, etc. can also increase our overall level of efficiency.
The main concern with tax cuts, even if well placed (and the Bush tax cuts are not well placed), is that, combined with high spending, you just get large goverment deficits, which, besides have to be paid back with interest, cause government borrowing which crowds out private borrowing and investment. I agree that gov't spending is too high, but in light of this, tax cuts at the same time is dangerous.

 

[Reilly]

Not so much a hatchet as a bothersome fly.