Placed Correctly, Tax Cuts Actually Can Stimulate the Economy
As presented in this extremely well made video, it appears that the UK is wrestling with some of the same taxation and broader economic issues as we face here in the States.
Ronald Reagan’s cutting the top marginal tax rate from 70% to 28% (and then paying for it by taxing social security and Medicare benefits) was the first experiment in what is now known as “trickle-down economics,” the roundly discredited notion that tax breaks for the rich stimulate the economy via job growth.
The reason this doesn’t work is immediately understood by anyone who has ever run a business and had to hire employees. Financial windfalls go straight into the business owner/employer’s stock portfolio; they have nothing whatsoever to do with hiring. New employees are brought on only as needed to deal with demands placed on the business, e.g., new customers or clients, not because the employer can now afford to have more of them hanging around adding costs with their salaries and overhead multipliers.
Strangely, the fact that trickle-down (aka “voodoo”) economics is a proven failure in no way stands as a deterrent to its implementation in today’s world, where, for instance, the Trump administration is looking at a ballooning expansion in the national debt to pay for his tax cuts to corporations and billionaires. The Congressional Budget Office (CBO) latest release of its Budget and Economic Outlook projects that “debt held by the public will increase by more than $12.5 trillion under current law over the next decade – from $16.1 trillion today to $28.7 trillion by 2029.”
In summary: at least here in the U.S., rich people get the tax code they want; they care little about the nation’s overall economic health, and even less about the financial well-being of the bottom 99%.
Craig,
Once again you astound your readers with your total lack of knowledge of how tax and economics work!
For those who agree with your leftist political philosophy and agenda it’s okay, since, like you, they also have no interest in the real world.
For the rest, your brand of old fashioned socialist envy of those more affluent than yourself, is embarrassing.
” Financial windfalls go straight into the business owner/employer’s stock portfolio ”
You seem to be living in an odd sort of time bubble where the rhetoric of the 1920’s still exists.
Trickle down economics is only “discredited” among the ignorant or deliberately disingenuous.
(Switzerland is hardly a poverty stricken nation of oppressed peasants !)
“Tax the rich!” has always been the cry of those who lack any understanding of modern consumer economics. Prosperous economies are determined by generating consumer spending, not reducing demand.
” Equality for all! ” A noble sentiment, but in reality when applied to economics, it just means everyone becomes equally poor!
The US is in competition with other nations to attract capital investment. Without proper incentives, capital will simply move to friendlier locations.
Without investment capital, the tax base shrinks, economic activity slows, unemployment grows, the balance of trade worsens, innovation goes offshore and the nation slides into recession.
Industry leaves and never returns. Investment capital is attracted primarily by the huge American consumer market. Americans are affluent consumers, eager to try the widest varieties of new products and technology.
This process is hindered by “progressive” and oppressive tax laws designed for social engineering rather than economic stimulus.
Your economic policies would ensure lots of welfare and social security counselors, President Trump provides jobs, especially among blue collar workers!
The rich don’t pay tax! (ask Jeff Bezos or Bill Gates) If the tax system becomes too oppressive they simply move elsewhere or pay very expensive accountants and tax lawyers to minimize their tax obligations.
By cutting corporate and personal tax rates, corporations and individuals start to reinvest in America. (What do you think stocks are?).
This leads to more competitive industry and economic activity and the economy starts to grow. Wages rise as competition for labour increases and corporate profits are paid either to investors in the form of dividends.
Everyone benefits for the resurgence in economic activity. Superannuation funds start making more profit for retirees, who can spend more as consumers.
Small business is the real beneficiary. As consumer confidence grows and business returns to America, millions of small businesses can afford to expand.
National debt is a real problem for the USA, but at the moment, thanks to the President’s policies, the US can afford to service that debt.
The alternative is to reduce the capacity to service the debt by shrinking the econo0my.
The USA will have to learn to live with debt while America restructures and reforms the domestic economy. Debt repayment must take a back seat to economic prosperity.
Forget all that silly, childish, socialist “envy” economics!