Serious discussion: Why are tax cuts contentious?

[AndrewR]

Ok, there are two aspects that I want to list.

1) If the tax cuts are affordable, why shouldn't they be made? In other words, it's our money, as taxpayers, and if the government can give it back to us, isn't it our right to have it back to make use of it as WE see fit?

2) If tax cuts are not affordable given the current economic situation, are they still justifiable in terms of economic stimulus through targeting certain areas even if there's a deficit?

I want to see both sides of the issue.

 

[konichiwa]

1) The issue is, can we really afford it? With a $100b bill for the war on Iraq and the federal gov't on track for a damn large budget deficit, I think calling a $700b (or even $300b) tax cut "affordable" is a bit of a misnomer

2) I guess the question really is whether a tax cut is a veritable means for "economic stimulus"

 

[CADsortaGUY]

I spouted my feeling on tax cuts in a different thread but it boils down to this:
I'm all for tax-cuts to stimulate the economy but I'm not for "token" tax-cuts like the 350billion that looks like it will pass. But the real problem lies in the fact that when the gov't runs a deficit because of a tax-cut stimulus plan - they never seem to pay off that loss of the previous year(s) once times get better. Our govt just need to manage it's books better. Trim the fat(there is alot to cut ) make payments on old debt and if there is money left over then by all means - give it back not dream up new things to spend it on! But right now - the economy sucks and needs a boost which a sizable tax-cut will do. Then when times get better - the gov'twill get more $ to pay off for "borrowing" $ to pay for a tax-cut.

Was I clear as mud?

CkG

 

[BaliBabyDoc]

1) Tax cuts are not affordable b/c the government is borrowing money to function. It would be a different story if WE were going to pay the bill but in all likelihood it will be a different generation that gets the tab. Without the tax cut, CBO was projecting deficits in excess of $300B for each of the next 3 years. Which means President Bush's administration would have added over a TRILLION dollars to the national debt.

The government has fixed liabilities like SS/Medicare and then it has the bloated DOD and various other forms of government largesse. We should cut spending to reduce deficits but not cut taxes until we can meet (or at least approach) current outlays. The newest neo-con chant is that deficit as a percentage of GDP is what matters. Curiously, I don't remember that expression during the early years of the Clinton administration.

The current interest on the debt is greater than ANY proposed tax cut. Our parents and grandparents have saddled us with their debt AND the future liability of their healthcare/retirement. Bush and his minions are apparently quite happy to continue passing the responsibility to stop the insanity.

2) Ending corporate income taxes (granted many companies already cheat) would mean there's no reason to end dividend taxation, or you can end dividend taxation but rigorously enforce corporate taxes . . . personally I prefer the former b/c their lobby kicks mad derriere and their accountants/lawyers have no morals. Either route will give a boost to the stock market but I'm not sure it makes sense to base fiscal policy on the stock market . . . isn't that why we are in such a pickle already? Depending on the choice above, capital gains and (dividends if not ended) should have the first $1K exempted and then tax at 1/2 the regular income rate.

Exempt the first 20K of income from FICA but raise the ceiling so the change will be revenue neutral. Drop the top bracket to 36%, then cut the rest by 2% points. The liberals will complain the upper classes are getting more but in all likelihood they will pay more taxes due to FICA. These adjustments might throttle consumer demand which would help business considering they are sitting on inventory. Then again . . . we still like to buy foreign goods . . .

 

[CADsortaGUY]

Originally posted by: BaliBabyDoc
The current interest on the debt is greater than ANY proposed tax cut. Our parents and grandparents have saddled us with their debt AND the future liability of their healthcare/retirement. Bush and his minions are apparently quite happy to continue passing the responsibility to stop the insanity.

Current figures show that interest payment on the debt for 2003 is going to be ~170billion - linky and current proposals for the tax cut package are for ~350billion. But anyway - as to your Bush Bash - Everyones favorite ex-prez seemed just as content in continuing to pass the money down. Did he slow the rate of increasing the debt? sure but he didn't have to cut taxes to stimulate the econome either

Is cutting taxes to stimulate the economy a double edged sword? absolutely! Will a large tax cut pump up the economy? yes it will. will it also then increase our future interest expenditures? yup. What we need is to find the balance and 350bil just isn't big enough in my opinion to stimulate enough growth to cover the increased expenditure.

As I posted in other threads - we need to treat our nation's debt like any normal person treats it - by making payments. Do we all get to just make interest payments on our mortgages? hell no -the bank wants some of the principle too. We need to force our gov't to not only budget money to pay the interest but also make principle payments as well. My figures from the other thread showed that it would take a budgeted 600billion a year to pay off the "debt" at 8% interest. Yikes! :Q

CkG

 

[charrison]

The democrats lost a big chance to make a big powerplay this year. They could have filibustered the budget because they felt so strongly about it being $370B over. But they decided to filibuster judges instead and complain about not enough money being spent at the federal level.

 

[AndrewR]

I guess I didn't phrase my initial post correctly. The two items were separate and theoretical, not applicable to the current tax debate. So, if a tax cut is "affordable", meaning that we don't have deficit spending already, or there's a projected surplus, why do Democrats (typically) still fight it?

The second item is related to the situation we have now with President Bush's current tax proposal.

 

[Moonbeam]

Tax should be voluntary so that only Republicans, the real patriots would pay them.

 

[HappyGamer2]

some of my real life freinds are hardcore Repulicans, they also are the biggest Tax cheat's I know.

as for the the latest tax cuts/rebates, they are nothing more than a re-election bribe

 

[DealMonkey]

Didn't we have a $1 Trillion + tax cut when dubya first got into office? What I'd like to know is -- if tax cuts are so great at stimulating the economy, then why didn't that work?!

 

[zephyrprime]

1) If the tax cuts are affordable, why shouldn't they be made? In other words, it's our money, as taxpayers, and if the government can give it back to us, isn't it our right to have it back to make use of it as WE see fit?

Well, some people see fit to spend on various government programs. Not everyone operates under the premise that more government is bad.

2) If tax cuts are not affordable given the current economic situation, are they still justifiable in terms of economic stimulus through targeting certain areas even if there's a deficit?

For many Keynesians economists, this is exactly true. I agree with this also. Even if a deficit is produced. I'm surprise how many people don't realize that running a deficit is the generally accepted prescription among economists to ameliorate recessions. Unfortunately, the way deficit spending is supposed to work is that we're supposed to substantially reduce our debt during good times so we can better afford to go into hoc during recessions. This doesn't happen because fiscal discipline is apparently a forein concept to congress.

 

[cpumaster]

Originally posted by: AndrewR
Ok, there are two aspects that I want to list.

1) If the tax cuts are affordable, why shouldn't they be made? In other words, it's our money, as taxpayers, and if the government can give it back to us, isn't it our right to have it back to make use of it as WE see fit?

2) If tax cuts are not affordable given the current economic situation, are they still justifiable in terms of economic stimulus through targeting certain areas even if there's a deficit?

I want to see both sides of the issue.

1.) We shouldn't make tax cut because it's affordable, but because there's a surplus in the govt budget and the money should be given back to the people who paid for it. Right now, there is no surplus in our govt budget, so tax cut is not possible nor "affordable"
2.) Tax cut is not the only way to stimulate economy nor should it be used right now given the current situation.
Tax credit for business activities/investment/spending is a better way to stimulate economy and govt economic policy that encourage investment and competitive production and many more other ways are more suitable to encourage job creation and economic recovery.

 

[BaliBabyDoc]

Current figures show that interest payment on the debt for 2003 is going to be ~170billion - linky and current proposals for the tax cut package are for ~350billion.

I will give you a pass since it's Friday . . . all I will say is 170B/1 year vs 350B/10 years . . . hmm, I wonder which one is larger?

But anyway - as to your Bush Bash - Everyones favorite ex-prez seemed just as content in continuing to pass the money down. Did he slow the rate of increasing the debt? sure but he didn't have to cut taxes to stimulate the econome either

My favorite ex-prez is dead. But if you've got a theory about Teddy R. I would love to hear it. Clinton didn't just slow the rate of increasing debt . . . the US government actually PAID back some of the money it borrowed. Clinton and his predecessor raised taxes. Clinton even tried to get a stimulus package but Congress rightfully gave him the Heisman.

You ended your post by talking about paying off the debt but didn't provide any solution other than cutting taxes by some amorphous amount above 350B that would justify cutting taxes by more than 350B. You cannot give a number b/c the larger the debt the greater the required marginal increase in growth that will be required to overcome the larger tax cut. Of course, a stimulated economy will increase interest rates which will increase the costs of doing business in America (and for the consumer). And of course, the growing debt will consume some amount more than $170B/year in interest for the foreseeable future. As Greenspan would say, "as deficits APPEAR to become more structural than temporary; they will have a profound negative effect on the US economy."

The only way to avoid this situation (ie return to Reaganomics/Voodoo Part I) is to cut spending FIRST. This administration has done nothing which demonstrates a commitment to budgetary restraint other than limit future tax revenue. Anybody who has read a newspaper since 1982 knows how successful that tactic turned out to be.

 

[CADsortaGUY]

Originally posted by: DealMonkey
Didn't we have a $1 Trillion + tax cut when dubya first got into office? What I'd like to know is -- if tax cuts are so great at stimulating the economy, then why didn't that work?!

No we didn't have a 1 trillion dollar tax cut

Now as for BaliBabyDoc - while I agree that paying the debt off and cutting taxes aren't going to "really" work until we curb wasteful spending, but your interpretation of Reagonomics is wrong. Go read up on it and then we'll have a discussion on it. I'm not a Reagan fanboy but I do respect him as a former prez and think he did alot of good for this nation. But for people to incessantly slam Reaganomics without having a good base knowledge of the philosophy is laughable. You take what you hear the Liberals spout and just repeat it. I won't defend Reaganomics as a perfect "system" but it wasn't near as bad as you all like to think.

Now back to the subject - I'm all for tax-cuts (keeping my own money) until Congress is willing to put their wallet where their mouth is. They all talk this "fiscal responsibility" crap and then proceed to slip their own special interest monies into bills.:| If Congress would pass a comprehensive budget reform bill then I'd be all for rethinking my tax-cut "strategy" but until then....my money want's to stay in my wallet

CkG

 

[Thraxen]

I'm in favor of just leaving taxes alone for now and using the money to pay down the debt.

 

[cpumaster]

Originally posted by: CADkindaGUY

Originally posted by: DealMonkey
Didn't we have a $1 Trillion + tax cut when dubya first got into office? What I'd like to know is -- if tax cuts are so great at stimulating the economy, then why didn't that work?!

No we didn't have a 1 trillion dollar tax cut

Now as for BaliBabyDoc - while I agree that paying the debt off and cutting taxes aren't going to "really" work until we curb wasteful spending, but your interpretation of Reagonomics is wrong. Go read up on it and then we'll have a discussion on it. I'm not a Reagan fanboy but I do respect him as a former prez and think he did alot of good for this nation. But for people to incessantly slam Reaganomics without having a good base knowledge of the philosophy is laughable. You take what you hear the Liberals spout and just repeat it. I won't defend Reaganomics as a perfect "system" but it wasn't near as bad as you all like to think.

Now back to the subject - I'm all for tax-cuts (keeping my own money) until Congress is willing to put their wallet where their mouth is. They all talk this "fiscal responsibility" crap and then proceed to slip their own special interest monies into bills.:| If Congress would pass a comprehensive budget reform bill then I'd be all for rethinking my tax-cut "strategy" but until then....my money want's to stay in my wallet

CkG

But if you keep the money for yourself and every companies in US are doing the same thing with the tax cut, how will that really help the economy or create more jobs?
Companies will be more interested with using the tax cut to rellocate their production line somewhere in the world with cheaper labor/wages and cut even more jobs in US.
unless of course if Bush could eliminate all taxes for 1 year, it could really create the necessary boom to push the economy, but at that time the US govt probably is running on fumes...

 

[Moonbeam]

Neither a borrower nor a lender be.

 

[Tiger]

Didn't we have a $1 Trillion + tax cut when dubya first got into office? What I'd like to know is -- if tax cuts are so great at stimulating the economy, then why didn't that work?!

Because the majority of that cut gets rolled in over a 10 year period. The actual cut the first year was paltry but it grows every succeeding year.

1. Any tax proceeds the government takes in over and above that neccesary to run the govenment and provide modest (tied to inflation) growth in government programs should be returned to the taxpayers. Contrary to popular opinion 2/3 of our GDP is consumer (taxpayer) spending as opposed to government spending. You want to stimulate an economy give the consumers in that economy the resiurces to do it.

2. Some, not all for sure, dems think that point #1 is wrong. They use the government trough as a means to get and keep political power. Any reduction in their abilty to invent and finance their own pet project through decreased taxes is considered an assault on their real or perceived power.

For years liberals have used, and some would say abused, the federal tax code in an attempt at social engineering.

 

[CADsortaGUY]

Originally posted by: cpumaster
But if you keep the money for yourself and every companies in US are doing the same thing with the tax cut, how will that really help the economy or create more jobs?
Companies will be more interested with using the tax cut to rellocate their production line somewhere in the world with cheaper labor/wages and cut even more jobs in US.
unless of course if Bush could eliminate all taxes for 1 year, it could really create the necessary boom to push the economy, but at that time the US govt probably is running on fumes...

No - No - No What was meant by keeping it in my wallet was in context of the gov'ts or mine. I'd rather have the money(to spend) instead of giving it to the gov't to spend.

CkG

 

[BaliBabyDoc]

No - No - No What was meant by keeping it in my wallet was in context of the gov'ts or mine. I'd rather have the money(to spend) instead of giving it to the gov't to spend.

Nobody disagrees with your perspective. But you certainly believe there are some things the government SHOULD spend your money on.

 

[DZip]

If tax cuts are bad that means tax increase is good. All patriotic Americans should demand higher taxes so we can support more social programs that only benefit the poor.

Everyone has forgotten that even when the economy was booming, people were overspending and creating personal debt. Now that the overtime has stopped and bonuses are not given, families are having a difficult time paying for the 3 new cars, new house, RV, boat, $5000 family vacations, broadband, etc. We were convinced that we not only deserved overspending, we were encouraged to do so by lending institutions (remember all the platinum pre-approved credit cards).

Big government needs big revenues. Let me make decisions on how I spend my money. Paying fewer taxes gives me more of my money to spend or save. A better government is a smaller, more local government.

 

[Moonbeam]

If tax cuts are bad that means tax increase is good. A better government is a smaller, more local government.
------------------------------
Therefore no government is best of all.

 

[SuperTool]

Originally posted by: AndrewR
Ok, there are two aspects that I want to list.

1) If the tax cuts are affordable, why shouldn't they be made? In other words, it's our money, as taxpayers, and if the government can give it back to us, isn't it our right to have it back to make use of it as WE see fit?

If the tax cuts were "affordable", we wouldn't have deficits. The fact that we are running a deficit shows that we are already not paying enough in taxes, and definitely cannot afford a tax cut.

2) If tax cuts are not affordable given the current economic situation, are they still justifiable in terms of economic stimulus through targeting certain areas even if there's a deficit?
I want to see both sides of the issue.

No, tax cuts are not justifiable for stimulus, and certainly not decade spanning long term tax cuts in light of deficits.
You are basically expecting the government to bail you out in tough economic times by borrowing money that future generations fo Americans will have to pay off. Why should they be doing that, if they are going to have economic problems of their own to worry about. Economy is cyclical, we shouldn't be getting into huge debts in the down cycles unless we run equally huge surpluses in the up cycles. Since we are barely breaking even in the up cycles, we don't deserve to run deficits in the down cycles.

 

[SuperTool]

Originally posted by: DZip
If tax cuts are bad that means tax increase is good. All patriotic Americans should demand higher taxes so we can support more social programs that only benefit the poor.

Yes, only poor benefit from government spending. All these corporations that get corporate welfare and fat government contracts, the military-industrial complex, the farmers, etc. don't benefit from our taxes at all.

If you don't want to pay taxes, shrink the government. Don't expect to pay less in taxes until you do so. We have to pay for the government that we created. If you don't like it, vote for politicians who want to shrink the government, if you can find them.

 

[Zebo]

Because unlike the conservaqtives would like the country to believe tax cuts have never spured economic growth and we can't afford to have our dollar defalated by adding further to the debt. The highest period of growth in U.S. history 3.6% annually (1933-1973) also saw its highest tax rates on the rich: 70 to 91 percent. While Reagan slashed rates to 28% and there was some growth 2.6% from 1981-89 it's all attributed to the increased borrowing instead of actual production. Voodoo economics.

The only way to have a strong economy is have faith in the financial systems (SEC/GAP), a strong dollar, and actually produce/make things from raw materials others want. Every piece of legislation requested by Bush goes against these tenents of economics we all must practice to insure our future. If you are in the top 1% though you will do very well in the short term.