so the theory is that taxing the rich (undefined for simplicity) and redistributed to the poor will grow the economy from the “bottom up”, greating economic growth and employment. isnt this just a way to explain traditional trickle down economics, while masking your theft of the rich as compassion for the poor? is this anything more than political pandering, or does this have its benefits?
In a free market the wealthiest members of society are the ones that meet consumers needs most efficiently, the opposite goes for the poorest. So essentially in a free market such taxes would take from the most productive members and give to the least. Now, granted, we don’t live in a free market so the poorest and the least productive and vica versa.
However, taxes still take money from the use in which they’d satisfy consumers demands to whatever use government sees fit, thus distorting the price system. There’s also the point that taxes don’t always help the poor, and in fact work to impoverish them. Not to mention taxes on buisness only serve to restrict competition, once more working against the consumer.
It’s a difficult question to answer. Most people will tell you that low taxes are the best for have low for the rich. The problem is that there are other factors than come into play like government budget. Ideally we would want low taxes for all and small government reliance. With small government we could easily get away with a flat tax rate (although I do not believe in an income tax at all personally).
The Bush tax cuts would be a good thing if the government curbed spending. But they didn’t and because of the tax cuts we have a deficit that is growing fast. People may argue that the economy will do good even if the government is having trouble. Complete nonsense. Government deficits directly affect the value of the dollar and so do trade deficits. The value of the dollar weakening makes things more expensive and lessens the effect of the tax cut that was supposed to stimulate the economy in the first place. On top of that, deficits hurt our international investing because international businesses do look at a country’s financial stability. One major way to judge stability is the deficit.
The idea behind trickle up economics is that more money in people’s hands equals more money to be spent in the private sector. This is correct. The problem is that the excess money will come from businesses and corporations that are already seeing the second highest tax rate in the world. These one reason these companies leave for overseas are things like taxes and unions that make them near, if not, entirely unprofitable.
So Barack Obama has it half right. He could make it all right if he eliminated government spending so that everyone could have low taxes. That would be the best method for economic stimulus.
Generally economic growth is concurrent with savings and investment, not consumer spending. Savings and investment is generally done by the “rich” but with less money, there will obviously be less. More money for the bottom will result in more consumer spending, which doesn’t really help the economy.