Hey,
With the GOP refusing to negotiate on any issue other than these tax cuts I thought it would be interesting to get the viewpoints of people on here. Generally, tax cuts are viewed as good things because less money going to government. However, with the extreme amount of deficits the government is in.
Is this the best thing to do overall? Permanently vs temporary and for all income levels?
Please respond with some explanation economically preferably.
Thanks!!!
Think Laffer curve.
The big issue is: are they also talking about spending cuts? Without dramatic budget cuts slashing taxes is worse than useless. Reagan tried that trick (cutting taxes and not cutting spending) in 1981 and he was forced to backpedal when Social Security became technically insolvent in 1983.
In the present environment I am still to find a single politician (well, there’s the usual suspect…) proposing budget cuts. At best they talk about “freezing” spending or indirectly rising taxes (higher retirement requirements). You cannot have tax cuts and no budget cuts: around here we’d say it’s like having a drunken wife and a keg full of beer. You need to get the beer from somewhere else.
My take,
Best: lower whichever among income and expenditures is highest.
Second best: lower whichever you like.
Worst: get no spending cuts merely because expenditure are higher than inflows.
To hell with fiscal conservatism, we all know the state has to go, better sooner than later (and let us keep more of what we own in the meantime).
It doesn’t matter. What the U.S. Government doesn’t steal directly via taxes will be stolen via inflation. The game is rigged.
The solution to bad government is no government.
Current political debate:
The Right: Low taxes, high deficits, and high inflation will revive our economy!
The Left: High taxes, (lower) deficits, and (lower) inflation will revive out economy!
Both scenarios are bad. Which one is less bad is debatable. Until they start talking about cutting spending, none of their “solutions” will fix the economy.
Bush never cut taxes; he merely postponed them.
Increased revenues don’t go to discharged debts, but go to create new debts.
"Current political debate:
The Right: Low taxes, high deficits, and high inflation will revive our economy!
The Left: High taxes, (lower) deficits, and (lower) inflation will revive out economy!
Both scenarios are bad. Which one is less bad is debatable. Until they start talking about cutting spending, none of their “solutions” will fix the economy."
The right wants higher inflation than the left? Also, higher taxes usually just lead to even higher expenditures leaving the deficit intact.
The Right (1997-2006): Low taxes (to get elected), high deficits (to get elected), currency manipulation (to get elected)
The Left (2007-2010): Tax the rich (to get elected), high deficits (to get elected), currency manipulation (to get elected)
The Right (2011): Low taxes (to get elected), cap deficit (we’ll see if they actually do it), currency manipulation (status quo)
The Left (2011): Tax the rich (to get elected), high deficits (to get elected), currency manipulation (status quo)
Preference is for people to keep their own money (tax cuts), and have a sound currency that isn’t being manipulated. Tax increases just lead to additional spending. Selective tax cuts (what the Left desires) has less impact on real savings and production. Tax cuts for the poor and middle classes are more often consumed rather than saved or invested. The Left is in the tank with Keynes. The Right has heard about Austrian economics, but will they actually listen?
The promise to cut spending was a Republican ploy to get independents on board in order to get elected. The party itself is split. There is not a significant majority to enact any meaningful spending cuts on the scale that would be required to address the deficit. The conduct of those elected on the promise to cut spending, and the results of the 2012 elections will determine whether this is a real movement or just another in a long line of broken promises. One of the first things the Right claims they will do is not extend the deficit ceiling. While this doesn’t reduce spending, it is at least a first step away from the status quo. The Right must still overcome their strong desire to pump money into the military and other operations in order to be taken seriously as being fiscally responsible.
Prior to 2008 very few politicians on either side were even talking about inflation. The Fed’s plan for inflation as a solution to the Housing Bubble kicked into gear around 2008. Both parties are continuing down the path of monetary destruction. Unless they end the Fed, they are complicit.
The Congress under Bush cut taxes for a limited period to stimulate the economy. The cuts were never intended to be permanent. Bush and many on the Right have pushed to make them permanent, but there hasn’t been enough political will to make it so. Unless the current Congress acts, taxes will increase and both parties share responsibility for it. Rising taxes during a recession does not lead to positive results.
What is this silly language on Mises.Org?
Just because tax rates have not been increased, they are “extending tax cuts”? Pshaw! Even pro-government progressives have balked at such transparent language.
We’re getting into Orwellian language here.
There were no “tax cuts”.
There were tax RATE cuts, which were TAX INCREASES
Tax revenue increased.
There were tax RATE cuts, which were TAX INCREASES
Tax revenue increased.
That’s what matters, isn’t it? Who gives a hoot about the revenue the government is getting, as long as you pay lower rates?
Yeah, I wonder if most people are aware that income tax laws around the world are such that certain specified categories of individuals can be exempted from tax if they use their income in such and such manner. A big part of the taxation system is creating what the government calls “economic incentives”, and a tax rate cut is basically telling those individuals that it’s now less costly for them to simply pay their taxes.
What is interesting is that those incentives mean that the government can carry out certain policies by having people directly spend their money that way instead of taxing it from them and then doing it. Like funding inefficient muncipal power corporations.
And the most interesting part is that it is not a rich v. poor issue, since the rich buy bonds or donate money to political parties anyway. But an ordinary person who suddenly gets a huge inflow of cash from selling his or something will fall into the highest tax bracket, but will not fall in that specified category. I have studied Indian Income Tax law in college, so I know basics of how tax systems work.
And ultimately, talking about taxes is a little pointless. In case of India, the government owns all the banks and can use their huge pool of capital for whatever purpose they want. They also have strong inflationary powers, with India being one of the most inflationary Third World nations out there, and the income tax is paid only by 10% of the working population here. It’s more for solidarity or maybe having just another source of revenue, but governments have so many ways of getting money, that taxes are only the modest ways of getting it. The worst thing about libertarians is that they waste time talking about taxes, since removing taxes will still leave the government capable of getting it through other dangerous means.
Still, with lower income taxes, one can keep more of his income. In the absence of domestic capital controls, he can then invest more money in inflation hedges, such as gold and silver. (Ceteris paribus, of course.)
Thanks everyone with the great replies.
I agree without major spending cuts, then these tax extensions or cuts or rate hikes or w/e they like to call them to appease the population, then we will just go into more debt. More debt usually more inflation. However, recently the dollar is getting stronger, and what I believe is the issue is that not only is the US in this large amount of debt but many countries like our own.
Any comments?
Since the real problem is spending, and not revenue, getting spending under control basically guarantees that the government can help the economy recover.
Currently US expenditures are $6.4 trillion while revenue is $4.5 trillion for 2010. Suppose in 2012 expenditures are $3.5 trillion while revenue remains $4.5 trillion. With an extra $1 trillion, the government has a variety of ways to cut taxes, all of them good (although not necessarily equally good). Fundamentally, it doesn’t matter if the government takes its surplus and cuts personal income taxes, corporate taxes, payroll taxes, or pays off the national dept – every possible solution is beneficial for the economy.
All this debate over tax breaks for the rich or tax breaks for the poor or tax breaks for corporations is rather trivial. If the government was actually in the position to offer a tax reduction, we would already be set for economic recovery.
“If they can get you asking the wrong questions, they don’t have to worry about answers”
I care because governments use tax revenue to enslave, torture, steal, and cage people.
I care because governments use tax revenue to enslave, torture, steal, and cage people.
Sure, but would you prefer higher rates if you knew it would mean lower overall government revenue? I don’t think that would be a sensible choice. What is good form the government’s POV and what’s good form the individual’s do coincide up to a point, the Laffer maximum.
With rates of, say 99% overall revenue would plummet. Should we advocate that?
I don’t understand why anyone thinks we’re higher than the Laffer maximum. After the Bush tax cuts Income taxes as a percentage of national income went down. It’d probably take 50 years for increase in relative national income due to the tax cuts to result in higher income tax revenues as well. And that’s assuming that the theory of Ricardian Equivalence is untrue (I think it’s true.)
I don’t see what the fuss about the Laffer Curve is anyway. It may be useful if you’re the government, but if you’re anti-taxation you have no use for it.
Besides, it’s not just the federal government that collects taxes. Usually under half of taxes are federal taxes in the U.S.