Bolstering the economy with a tax cut? Yep. -- Adilbrand Noblesword's Hall of Warriors

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Date Posted: 21:42:08 03/29/04 Mon
Author: Adilbrand
Subject: Bolstering the economy with a tax cut? Yep.
In reply to: mvd 's message, "Re: I (mostly) agree" on 20:13:32 03/29/04 Mon

Kerry's plan, in theory, is that lowering corporate taxes will encourage job growth here in the states. I also believe Adilbrand may be somewhat mistaken when he says that lowering taxes will invigorate the econonomy.

Kerry's plan is sound if that is correct. Lowering taxes encourages job growth because usually the rate of interest lowers as well, which encourages corporate borrowing. It also shifts demand to the right, which increases revenues for businesses. So long as they can keep their variable costs under control, this could mean more marginal revenue, which will increase retained earnings and increase capital investments.

A tax cut also increases disposable income for consumers, a determinate of demand, shifting it to the right, which increases overall quantities demanded at any given price level. If stores sell more, the economy is at least somewhat invigorated, I think.

A lot of Bush's tax cuts, I believe (and I admit I may be mistaken here), are aimed at lower taxes on most stock dividends and on long-term capital gains. I am not so sure that will be of benefit to most people. I personally have few stock dividends and rarely have a capital gain. He also reduced personal income taxes, but I don't know the actual percentage drop. If we are in a recession, then that is the right thing to do, as it will shift demand to the right and bolster the economy.

I think the idea of the Republicans is that consumer spending has driven much of the economic growth of our country for the past few years, but there has been little business spending on capital improvements, especially in the small business sector. The Republicans want to stimulate that sector of the economy by cutting corporate tax rates, if I am understanding it all correctly (listening to politicians is a boring, pain-staking process for me, so if I am incorrect, hopefully one of the Republicans here can correct me on that score).

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Replies:

In Short -- Adilbrand, 22:03:25 03/29/04 Mon
Re: Bolstering the economy with a tax cut? Yep. -- mt. healthy mountaineer, 22:04:46 03/29/04 Mon
- That all makes sense! Thanks! -- Adilbrand, 22:17:36 03/29/04 Mon