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

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Date Posted: 22:04:46 03/29/04 Mon
Author: mt. healthy mountaineer
Subject: Re: Bolstering the economy with a tax cut? Yep.
In reply to: Adilbrand 's message, "Bolstering the economy with a tax cut? Yep." on 21:42:08 03/29/04 Mon

Adilbrand: 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.

Stores selling more means more employees at stores, more employees at factories making stuff for the stores, more truckers hauling stuff to the stores, etc. That has been Bush's theory all along.

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.

Over 50% of the American people own stock - either outright or through retirement programs. A Lower capital gains (profit on an investment) tax also increases incentives to invest in business (if there is a profit, it will be larger since the tax on it will be smaller).

And, yes a lot of the tax cut went there.

It also benefits those who are retiring and using 401K's.

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.

I think the number was 2% taken off of each tax level. So, if you were paying 25%, you are now paying 23%. Which is why you hear that the rich received a bigger tax cut than anyone else because the same percentage was taken off of each level. Since it was done that way, all people who paid lots of taxes got an absolute amount of money back that was larger (since they paid more to begin with) but the actual percentage tax cut was larger for those at the bottom end.

If you are saying, huh? than follow this simplified math.

Let's say you are paying 10% in taxes and I lower that rate by 2 percentage points to 8%. Your taxes have actually been lowered by 20%!

If you were paying 20% in taxes and I lower that rate by 2 percentage points to 18% your taxes have been lowered only by 10%, but you will receive a larger refund since you've been putting in more money.

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).

I'd say your assessment is correct.

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That all makes sense! Thanks! -- Adilbrand, 22:17:36 03/29/04 Mon