CLAIM THAT TAX CUTS “PAY FOR THEMSELVES” IS TOO GOOD TO BE TRUE

[dtotire]

Interesting web site I came across.




CLAIM THAT TAX CUTS “PAY FOR
THEMSELVES” IS TOO GOOD TO BE TRUE


Data Show No “Free Lunch” Here
Richard Kogan and Aviva Aron-Dine

http://www.cbpp.org/files/3-8-06tax.pdf
http://www.cbpp.org/files/3-8-06tax.pdf

[scheming daemons]

1. If tax cuts truly paid for themselves, then a 0% tax would generate infinite revenue

..

[Hosnon]

15. Heh. +1 for brevity. nt.

[krispos42]

21. And if we had a NEGATIVE income tax, we'd have infinity squared for revenue!

:crazy:

Or would that be infinity plus one?

[JDPriestly]

2. In addition: Check the numbers. Check the charts. What you see is what you get.

. . . .


Q. Do you have any evidence that lowering taxes on the wealthy is bad for the general public's living standards while raising taxes on the rich benefits the whole country?

A. Yes. In the roaring twenties (1918-1929) the top marginal income tax rate (that's the rate paid by the rich) went from 60% on incomes over 100,000 in 1920 down to 25% in 1929. A major part of the money not paid in taxes now went, instead of going to the government, into the hands of speculators who had only one interest: to make more and more money. High risk speculators are gamblers who use the stock market as their casino.

Q. Can you explain?

A. Like gambling, high risk trading in the financial markets becomes an addiction. A gambler at a roulette table experiences the thrill of a winning bet. As the thrill lasts only a short time , a player will put his winnings back on the table, hoping to recapture the exhilaration again and again by doubling and then quadrupling his money etc. This goes on until the player's luck changes and he loses all he has won the last time he doubles his bet.

Q. So the big market crash in 1929 came as thousands of gamblers lost their shirts in the stock market?

A. Yes, and as the gamblers lost everything, they could no longer pay debts owed on houses, businesses and other loans. This set off a domino effect. Banks who had lent money to people who had been able to repay their loans before the crash now had to write off the loans because their borrowers no longer had an income. For so many of the banks and their customers bankruptcy was the only option. People became desperate for money to keep farms producing, to keep businesses going and to get food on the table.

Q. Isn't that an oversimplification? Weren't there those among the wealthy who managed to hang on to their money and property because they were simply better at financial management? Why should they care about reckless gamblers who lost everything? Would there be a risk that the disciplined and wise who have survived the economic collapse might experience losses of their own?

A. Perhaps not at first. But if not stopped, economic decay brings social collapse. Without recovery, cities eventually turn into ghost towns, people die of starvation, communicable diseases begin to ravage the country, and eventually even the wealthiest of the wealthy would be unable to escape ravaging pandemics.

Q. So ultimately, it is to the interest of the wealthy to have a prosperous country with healthy people?

A. Without a doubt.

Q. So how did the country pull out of depression?

A. When businesses, factories and farms no longer had any cash to stay operational, they looked to the government for a rescue. The government, in order to bring society back on its feet, created jobs through public works projects and other means.

Q. So how did the government get the money?

A. In 1932 the government raised the marginal tax rate on $100,000 that had been lowered to 25% back up to 56% and this made it possible to finance a recovery. People got back to work as dams, roads and public buildings were built, and after the end of World War II, ordinary people managed to find prosperity as the government educated returning soldiers through the G.I. bill.

Q. How was it possible to get the money to educate millions of returning soldiers?

A. It was possible because the government imposed a marginal tax rate of 92% on $100,000 in 1945. A rate of 89% in 1946 stayed in place until 1954. Then the rate was lowered gradually until it hovered around 75% through the early 1960s. It was a time during which the U.S. became the greatest industrial power of the world, with the result that not just the rich, but everyone got richer.

---Tax data based on figures provided by the Tax Foundation, http://www.taxfoundation.org/publications/show/151.html

http://howardthecoach.blogspot.com/

[jtown1123]

3. Tax cuts don't pay for themselves

Whenever people discuss tax cuts, especially for businesses, I always imagine the tax cuts they are receiving in no way make up for an entire year's salary, health benefits, etc. If people aren't buying your products because there is no disposable income (high unemployment rate) then a tax cut of 5,000 or even 10,000 is not going to encourage you to hire someone with a salary of 35,000 or higher. LOGIC people.

[JDPriestly]

4. jtown, I'm sorry, but I don't understand your point.

I think i don't understand your perspective. Please explain because I want to understand what you are saying.

[Oregone]

6. It seems they are referring to the hiring incentives in the last stimulus

Correct me if Im wrong


I thought they were dumb too

[JDPriestly]

18. The hiring incentives were thrown in to please the Republicans.

Of course the don't work in an economy in which prospective employers know that there is not enough demand for their products and services to justify hiring more people.

[jtown1123]

11. Explanation

What I meant was when people say, "Tax cuts are incentives for businesses to hire," I just don't think the math ever adds up. Say I own a small business and I receive a tax cut of $10,000 as a government incentive for me to hire an employee and create a job, I wouldn't do it. If that new employee isn't going to make me a profit, $10,000 doesn't cover his or her salary for a year.

[JDPriestly]

17. I agree. But, I add that in addition to the tax cut, the employer should profit from

the work of the employee. So, in that sense, the tax incentives explicitly drafted to cut the taxes of employers who hire here in the U.S. are useful.

Of course you are right. It is never all that simple. Completely independent of the incentive for hiring, an employer needs to feel pretty sure that he has a market in which he can sell the products or goods he is producing. The problem is that tax cuts can cause an incentive to hire, but as you point out, will that incentive be enough to cause an employer to risk hiring someone in a weak economy? Right now, employers are not refusing to hire because they lack tax incentives. They simply don't need employees.

That is the dilemma that we are all in. People aren't buying because they don't have money, so employers don't hire and the would-be employees and consumers have even less money.

Also, you have to have money to pay taxes.

What needs to be taxed are the bonuses of people who work on Wall Street, the megasalaries of CEOs of huge companies. (Those personal salaries should be taxed at 50% or close to 50% marginal tax rate.) And, above all, people should pay high taxes on the sale of stocks that they do not hold for a fairly long time. Quick trades on the stock market create volatility that is unhealthy for ordinary people. Those trades, in my opinion, should not be prohibited, but should be taxed at a high rate. Those trades need to be limited to instances in which people are making enough money to be willing to pay taxes on them. In my opinion, we need to reward investment but not strategies that create a lot of volatility in the markets and discourage stability in the Main Street economy. I may be wrong about this. I have not considered all aspects of it. It's kind of a gut reaction on my part. What do you think?

[JDPriestly]

20. After writing my response to you, I found this article on

Ezra Klein's Washington Post website:


Why businesses aren't hiring in two graphs
Chris Gaun notes that we don't have to theorize about what's scaring businesses. We can ask them instead. The National Federation of Independent Businesses -- a small-business trade association that is considered the most right wing of the major business groups -- continually polls its members and releases the results. Here's what they say is their single most important problem:



As you can see, sales -- that is to say, demand for their products -- dominate the chart, while fear of taxes is lower than in the '90s. The concern over sales is understandable. Not only is the economy bad. But as the next chart shows, it keeps underperforming what the businesses assume will happen.



So, if anything, businesses have been too optimistic over the past few years.

Graph credit: NFIB/Business Insider.

By Ezra Klein | July 22, 2010; 2:18 PM ET | Permalink | Comments (14)
Categories: Charts and Graphs

http://voices.washingtonpost.com/ezra-klein/

Interesting comments below this article.

[Warpy]

5. Ordinary people were throwing everything they had into the stock market

because, since they could buy all those "sure things" with 10% down and recoup the entire loan in "days, weeks, months! It's unstoppable!" they avoided doing prudent things like saving. When the market crashed, they lost everything but the debts. That's why people said all the money disappeared overnight. It pretty much did.

If that sounds heartbreakingly familiar, it is. People in the last decade were able to buy "sure things" for NO money down. Yes, there were often ridiculous loan terms that would have them make impossible balloon payments three to five years later, but it was unstoppable! They're not making any more land! You can't lose!

Once again, anybody who went into debt they couldn't afford found out the hard way that they could lose everything they had but that debt.

[JDPriestly]

8. Warpy. You are so right. The get-rich-quick in real estate ads were all over

the newspapers and radio stations. It was disgusting and totally realistic.

People were desperate.

Let's don't forget the dot.com boom in the 1990s that went bust in the late 1990s and early 2000s. It's just been one boom and bust after the other, especially since Reaganism took over (Reaganism = hooliganism - just a different name). When we we wake and learn something.

We should raise taxes on the rich and invest the money in infrastructure designed to make us energy independent. Our entire country would be the richer for it -- rich and poor. Raising the standard of living for everyone, rich and poor, while protecting the environment should be our goal.

We need to work together to achieve that goal. The Bush tax cuts for the rich drew the battle lines between rich and poor. It was the wrong move. There was nothing good about it -- nothing for the rich, nothing for the poor.

Let the Bush tax cuts disappear. They have not helped anyone.

[zbdent]

13. makes me wonder how many of those "ordinary people" who lost their money

(and their homes, not the "Fannie Mae/Freddie Mac" people of RW mythology)

were buying into the hype (at $130/barrel) that oil was going to go to $200+ a barrel, and put all their money into "the sure thing" ...

remember, with oil nearing $150/barrel, the Dow was hitting its all-time high ... or was it just "co-incidence" that the housing market collapsed as the oil prices went back down to a relatively "normal" level?

[Warpy]

14. Collapses always hit quickly, which is why they're called collapses

instead of slow slides, and when they do, they take a lot of other things with them. As the real estate bubble popped, hedge funds and other institutional investors found themselves sitting on a mountain of funny paper based on bad real estate loans and began to sell things like commodities futures (which they had pumped up across the board, remember the rice riots in Asia?) and even equities in order to shore up their balance sheets.

That's why so many bubbles popped at the same time. Panic.

[AnArmyVeteran]

7. If tax cutting increases taxes then it favors the rich.

When the rich get huge tax breaks and republicans claim those tax cuts pay for themselves who is paying the those taxes? If the rich aren't paying them then the taxes are shifted to the middle class and poor. Under Reaganomics we had the biggest transfer of wealth in history from the bottom of society to the extremely rich. And because of lack of revenue to the federal government states didn't receive as much money from taxation. So they increased every state fee, license and tax they could. So it shifted the burden of taxation onto those who could least afford it.

My Dad complained in the mid-80s about having to pay a $45 increase on his car license tags. They were $15, but went up to $60 in one year. $45 dollars isn't much to a rich person, but it is a huge amount to someone on a fixed income. So when Reagan gave huge tax breaks to the wealthy, the poor and middle class ended up paying those taxes. The same thing happened during both of GW Bush's tax cuts.

I wish to hell democrats would expose republicans as the frauds they are. Taxation isn't rocket science, but democrats CONSTANTLY let republican get away with their corrupt schemes. It looks like Grayson is one of just a handful of real leaders in our government. Why are the rest of the democrats letting republicans get away time after time with their hocus pocus, voodoo economic plans that have NEVER worked.

[JDPriestly]

10. Run a red light and trigger a camera in L.A. and you pay $446.00

That is acceptable for a movie mogul making millions each year. But for the movie mogul's gardener with four kids to feed and a tiny house on the East side of L.A., that is several days' if not a week's groceries.

But who can say that they have never, inadvertently, run a red light.

The fines are so high because California and the City of L.A. have no way to raise taxes on the very, very wealthy individuals who live in the state and in the communities surrounding L.A. The City has no way to tax internet companies that may be located thousands of miles from the city streets in L.A. that Fed Ex or UPS uses to deliver the cheap goods ordered on the internet.

Sure, running a red light can be extremely dangerous. But, most of the time running a red light (especially when no one is around), is not hazardous.

Caveat: I do not run red lights although I suppose that I have, on occasion, not seen a light or miscalculated the timing of a light. I am a very cautious driver. I haven't had to pay this fine yet. But if I did, let me tell you, it would eat up a big portion of my Social Security check for a whole month.

Jesus' parable of the widow's mite puts the tax issue in perspective.

The fine for a red light violation captured by the red light camera system is $446.00. You may pay by check or money order. Submit the bail amount listed on the Notice of Violation, payable to Clerk of the Court. Write the citation number and your driver's license number on your check or money order.
DO NOT MAIL CASH. Mail to: Los Angeles Metropolitan Court,
P.O. Box 77388, Los Angeles, CA 90007

http://www.lapdonline.org/get_informed/content_basic_view/1026

[AnArmyVeteran]

16. Fines should be proportional to a person's income!

Only then would there be equity. The rich don't have to obey the laws. They buy their way out of them with token fines. And look at Roman Polanski who got away with drugging and raping a girl. I agree with you completely about traffic fines being out of whack. A gardener should pay a $20 fine, a millionaire should have to pay a $20,000 fine. Aren't punishments supposed to deter crime? Like you said, a rich person wouldn't even give a damn about a $446 fine. He'd laugh at it.

What's that proposition number passed in California in the late 70s that preventing the government from raising taxes unless they had a 3/4 vote? That proposition was a failure and only helped the rich. The middle class and poor get screwed because the rich are completely insulated from additional taxes. And while they are living in their mansions and avoiding serving in the military, the children of those gardeners are the ones who go into the military and die protecting their property.

We need to completely overhaul our ultra corrupt system. It's hard to believe conservatives are so damned stupid. Conservative leaders must laugh at all their supporters because they know they have them duped into passing legislation that hurts their own pocketbooks.

[JDPriestly]

19. Prop. 13. It has good and bad aspects. It does keep older people

in their homes and protect them from tax rates that rise enormously with inflation or a boom in the housing market. And that is a good thing.

[SammyWinstonJack]

12. Wish I could rec your post!

:thumbsup:

[tsuki]

9. Idiots that say that to me, I try to sell a bridge, a nice one, in NY, cheap. nt