Why the fixation with tax cuts?

[glenn1]

Another thread has made me think, why do Republicans/conservatives hate taxes so much, and then fall absolutely in love with candidates promising tax cuts? Bush used tax cuts as one of his primary platforms in 2000. During the recent California recall, McClintock basically could not reiterate his promises for tax cuts enough.

Okay, let's break this up into two parts. First of all, you can make an argument for lower taxes as a simple matter of principle. As a Libertarian, i'm absolutely horrified by both the tax rates and the amount of spending by the federal government in this country. That's a fair POV i think. I don't mind paying taxes, but despise what the bulk of my tax money gets used for. As far as i'm concerned, if it ain't in the Constitution, then the federal government shouldn't be spending money on it.

The second argument for lower taxes is an economic one. That's where it gets a bit trickier. One has to keep in mind that money is fungible... it doesn't matter if the government taxes and spends money or taxes are cut and left in the hands of the taxpayers, eventually it'll get spent. It doesn't really even matter who the tax cuts go to, this is still true. If the "rich" get the bulk of the tax cuts, unless they bury it in a coffee can in the backyard, it'll still get spent. Either the rich person will spend it on something, invest it (meaning he'll buy stocks or something, and the person whom he buys the stock from will spend the money), or he'll put it in the bank, who will loan it to someone else who will spend it. Any way you look at it, the money gets spent. So making the generic argument that tax cuts of the type Bush put into place are "good" for the economy because they "put more money in the hands of the private sector" or bad because "the rich got the bulk of the tax cuts" (when as i pointed out, it'll wind up getting spent anyway) are pretty much pointless.

So when is a tax cut worthwhile? Well, it depends on the size of the tax cut. The value added by tax cuts is by far most dependent on where rates were before tax cutting began. That is, when rates are inordinately high, tax cuts have the most immediate and pronounced effect because of the change in psychology that is induced by cutting the top rates by a large amount. That's why when Reagan cut taxes, it had such an immediate positive effect - the top marginal rate was over 70%, so slashing the top rate in half actually ended up being a positive for the economy. The Bush tax cuts didn't offer as much "bang for the buck" since the top marginal tax rate started far lower to begin with... cutting from 38% to 33% offers a bit of stimulus, but not a huge amount, and not really enough to hugely effect the market psychology.

I think what happens with Republicans and tax cuts, is that they're still fighting the last war of trying to reduce the crushing 70% plus tax burden down to something more manageable. Tax cuts are still a useful tool, but you have to keep in mind that tax policy is a rather blunt instrument.

 

[glenn1]

Another thread has made me think, why do Republicans/conservatives hate taxes so much, and then fall absolutely in love with candidates promising tax cuts? Bush used tax cuts as one of his primary platforms in 2000. During the recent California recall, McClintock basically could not reiterate his promises for tax cuts enough.

Okay, let's break this up into two parts. First of all, you can make an argument for lower taxes as a simple matter of principle. As a Libertarian, i'm absolutely horrified by both the tax rates and the amount of spending by the federal government in this country. That's a fair POV i think. I don't mind paying taxes, but despise what the bulk of my tax money gets used for. As far as i'm concerned, if it ain't in the Constitution, then the federal government shouldn't be spending money on it.

The second argument for lower taxes is an economic one. That's where it gets a bit trickier. One has to keep in mind that money is fungible... it doesn't matter if the government taxes and spends money or taxes are cut and left in the hands of the taxpayers, eventually it'll get spent. It doesn't really even matter who the tax cuts go to, this is still true. If the "rich" get the bulk of the tax cuts, unless they bury it in a coffee can in the backyard, it'll still get spent. Either the rich person will spend it on something, invest it (meaning he'll buy stocks or something, and the person whom he buys the stock from will spend the money), or he'll put it in the bank, who will loan it to someone else who will spend it. Any way you look at it, the money gets spent. So making the generic argument that tax cuts of the type Bush put into place are "good" for the economy because they "put more money in the hands of the private sector" or bad because "the rich got the bulk of the tax cuts" (when as i pointed out, it'll wind up getting spent anyway) are pretty much pointless.

So when is a tax cut worthwhile? Well, it depends on the size of the tax cut. The value added by tax cuts is by far most dependent on where rates were before tax cutting began. That is, when rates are inordinately high, tax cuts have the most immediate and pronounced effect because of the change in psychology that is induced by cutting the top rates by a large amount. That's why when Reagan cut taxes, it had such an immediate positive effect - the top marginal rate was over 70%, so slashing the top rate in half actually ended up being a positive for the economy. The Bush tax cuts didn't offer as much "bang for the buck" since the top marginal tax rate started far lower to begin with... cutting from 38% to 33% offers a bit of stimulus, but not a huge amount, and not really enough to hugely effect the market psychology.

I think what happens with Republicans and tax cuts, is that they're still fighting the last war of trying to reduce the crushing 70% plus tax burden down to something more manageable. Tax cuts are still a useful tool, but you have to keep in mind that tax policy is a rather blunt instrument.

 

[Bowfinger]

Originally posted by: dmcowen674

Originally posted by: Bowfinger

Originally posted by: Crimson
Because I pay WAY too much in taxes.. Obviously you don't.. try this.. get married, no kids, buy a house.. Between income, property, sales, state, fees, etc.. you pay a ****load in taxes..

Why am I obsessed? Because its not the governments money.. its MINE.

So why don't you move to a country with a more favorable tax climate? I am serious. We all make choices in life. If too many people leave the US because our tax "burden" is too high, the government will respond. The same principle applies to businesses. Until then, it seems like some 260 million people including you and me have decided that it's worth the tax cost to live here.

Why? Because it's awfully difficult for most people to make a decent income in those countries that have minimal taxes. Our taxes pay for the infrastructure and the progressive economic climate that enables us to make so much money. The problem is too many people are too greedy. They demand the benefits of living in the U.S. but they expect everyone else to pay for it. It doesn't work that way.

"The problem is too many people are too greedy. They demand the benefits of living in the U.S. but they expect everyone else to pay for it. It doesn't work that way."

Glad you agree. I get so tired of people who are in the world's top 1% (based on standard of living, i.e., the U.S.' top 20% or so) feeling sorry for themselves because they're expected to share a bit of it.

They remind me of my kids when they were younger; they loved to complain about things they didn't have and took for granted so much more that they did. One had a fit when I wouldn't buy an X-box a couple of years ago. He cried "it's not fair" because he had to make do with a Game Cube, PS2, Playstation, Nintendo 64, Super NES, two original NESs, three or four GameBoys and GBAs, and several computers (true story). Glad they are growing out of this greedy, materialistic view of their world. Otherwise, in a few years they'd be whining about how they can't afford that new 7,000 pound SUB (Sport Utility Barge) because their taxes are too high.

 

[glenn1]

Glad you agree. I get so tired of people who are in the world's top 1% (based on standard of living, i.e., the U.S.' top 20% or so) feeling sorry for themselves because they're expected to share a bit of it.

Thank you for being so kind as to give a perfect example of how the left gets it wrong also. I don't know what's more pitiful, the desperate grasping of the right to shave another few basis points off the top marginal tax rates, or the left's seeming inability to accept that the wealthy could possibly be deserving of any tax relief at all and should be ashamed for even wanting what every taxpayer wants, namely a lower tax bill.

 

[MonstaThrilla]

glenn1,

Thanks for responding seriously to the questions I posed. Your Libertarian strict-constructionist view of the Constitution is very admirable, but I'm not convinced its the right way to go, mainly because it promotes social darwinism. Would I not be correct in suggesting that our country gained the most wealth and evened up the distribution of wealth most successfully during the 40's, 50's, and early 60's? During these decades, there was a tremendous amount of government spending, both military and domestic, and it didn't turn out to be a disaster. Why? Because of superior leadership: FDR, Truman, and Eisenhower. These Presidents all worked to increase the numbers of middle class suburbia, to strengthen the nation's infrastructure, and to lay a solid groundwork for the future. Many of the programs they enacted (or continued to uphold) were probably unconstitutional to a strict-constructionist, but they were the right thing to do. Those policies led us to become a superpower, and eventually the world's only superpower. I think that as citizens, we should strive to be involved in our political process, so we make sure our leaders are putting our tax dollars to good use. While throwing money at a problem isn't going to fix it, neither is taking that money away. Then it boils down to whether the government should actually be solving that problem, but I think its been proven that the government can solve problems just as long as the leaders are strong, a system of checks and balances is upheld, they are following the will of the people, and the people and free press are watching the leadership.

About 100 years ago TR threw away the social darwinism view of capitalism, declared himself a progressive, and started enacting rather socialist policies. The argument I hear against Western European style socialism is that its only as successful as the amount of capitalism the Europeans allow in their economy. Well, the opposite could be said (and is true) of American capitalism - its only as successful as the amount of socialism we put into it. If we were to go back to the era preceding TR, why would we not fall back into a "Guilded Age" like the one of over a hundred years ago?

 

[Bowfinger]

Originally posted by: glenn1

Glad you agree. I get so tired of people who are in the world's top 1% (based on standard of living, i.e., the U.S.' top 20% or so) feeling sorry for themselves because they're expected to share a bit of it.

Thank you for being so kind as to give a perfect example of how the left gets it wrong also. I don't know what's more pitiful, the desperate grasping of the right to shave another few basis points off the top marginal tax rates, or the left's seeming inability to accept that the wealthy could possibly be deserving of any tax relief at all and should be ashamed for even wanting what every taxpayer wants, namely a lower tax bill.

No, thank you for being so kind as to give a perfect example of how the right twists and re-frames the issue to something they can refute. The marginal tax rate for the wealthy has already been "shaved" by 50% over the last 25 years or so (not to mention the big cuts in capital gains, and now dividends). Meanwhile, the gap between the have's and the have-not's has grown into a canyon. You would hope that might be good enough for your average rich SOB, but no, he's too greedy for that. He wants more tax relief because he's only cut it in half so far, and he really wants that third mansion, and it's so hard managing his inheritance, or firing another 10,000 workers to inflate the bonus he's getting from his cronies on the board, or taking advantage of insider deals and investment scams that aren't available to your average working stiff. Boo, hoo, cry me a river.

The wealthy have never had it so good in this country. They have never had so many opportunities to profiteer so much and return so little. But it's never enough, and they always have hordes of clueless peasants to shill for them because they've deluded themselves into believing they will become wealthy some day too.