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Thread: Cutting taxes on the rich

  1. #1

    Default Cutting taxes on the rich

    I'm curious is cutting taxes on the rich actually creates jobs. I understand the theory of it, but does it work in practice? Obviously no taxes would be ideal, but short of that, is this how you create jobs?
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    Master Skeptic Brian4Liberty's Avatar
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    The question itself is not specific enough. What kind of taxes are you cutting? What is "rich"? What is the starting and ending tax rate?

    Too many variables to test this hypothesis in the real world even if you have the specifics.

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  4. #3

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    Let's take the Bush tax cuts, as an example.
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    Quote Originally Posted by jllundqu View Post
    god damn vipers, all of them.

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    Any , Any , tax cut creates the possibilty that some of that money, goes back into the economy, gets invested where it can be borrowed by the ordinary , to create with , or is used to expand a business that the ordinary may benefit from . Any , Any tax hike, does exactly , the opposite.

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    Taxes are like leaches, a couple three, a few, may be painful & annoying,multiples, can suck the life from the host.

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    Quote Originally Posted by ShaneEnochs View Post
    Let's take the Bush tax cuts, as an example.
    You may get to see that quickly, when the "newest" recession starts when it stops .

  8. #7

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    At the very least I would imagine that a tax cut on the wealthy would give them more money to accumulate capital for further expansions. The jobs might not be there immediately, but they will be in 5, 10 years, or so.
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  9. #8

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    Rich people do not keep their money in their mattresses. They have it invested in the economy. In other businesses. In their own businesses.
    If you rob their wealth to feed the government, that's more money taken out of the economy. Fewer jobs.

    People invest where they think they can get the most return. It sends proper signals to the market. Government screws up the signals and wealth is misallocated.

    I've been trying to break this down in the simplest form possible.
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  10. #9

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    Quote Originally Posted by ShaneEnochs View Post
    I'm curious is cutting taxes on the rich actually creates jobs. I understand the theory of it, but does it work in practice? Obviously no taxes would be ideal, but short of that, is this how you create jobs?
    Would you rather smart rich people decide where to put money, or a bunch of stupid polititians who end up making problems worse?

  11. #10

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    Quote Originally Posted by CaptUSA View Post
    Rich people do not keep their money in their mattresses. They have it invested in the economy. In other businesses. In their own businesses.
    If you rob their wealth to feed the government, that's more money taken out of the economy. Fewer jobs.

    People invest where they think they can get the most return. It sends proper signals to the market. Government screws up the signals and wealth is misallocated.

    I've been trying to break this down in the simplest form possible.
    Excellent point. Well said.

  12. #11

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    When I was in business, taxes were a huge concern for what I did with my money. They were a cost of doing business, and something that was always considered when I would purchase a business, hire employees, make investments, etc. I had a very simply strategy with business - if I put money into the market, I wanted to get more out than I put in. Pretty basic. So if I had more money to invest, because of lower tax rates, I would spend that money which in turn would generate more money for me. It was a snowball effect.

    Additionally, my prices were set by market conditions of course, but taxes went into that price as well. If the taxes went up, my costs went up and then so did my prices. If the market conditions would get to a point where I could no longer make the level of profit that I wanted to make off of a particular business, I would shut it down.

  13. #12

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    The Bush tax cuts affect a lot more than just the rich.

    http://www.paywizard.org/main/salary.../bush-tax-cuts

    Tax Brackets - The 10% tax bracket will expire, reverting to 15%, which would apply to all incomes below $34,550. The 25% rate would rise to 28%, the 28% rate to 31%, 33% to 36% and the 35% bracket would go up to 39.6%.
    “Our illegal population alone exceeds the all the Irish, Jewish and British immigrants who came. Each year, we catch more people breaking in at the border than all the Swedes and Norwegians who came to America in 200 years. Half a million illegal aliens succeed in breaking in every year, more than all the Greeks or Poles who came legally from the Revolution to 1960..” - Patrick J. Buchanan

  14. #13

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    we can look at the bush tax cuts and look at the way things are now . they don't work , i am a strong beliver in the mult/velocity effect of money as it moves through the economy , give more money to the avg/poor american and they will spend it all , give the rich ( i think over 1 million $$ income ) more money and they will spend very little of it , they will buy more stock/bonds ( or put it in swiss/clayman islands banks ).

    the rich have about everything they need where as the avg american has enough trouble buying-- food--clothes--paying property taxes--electric bills , as warren buffet said one time give him more money and he would buy nothing , give his secertary more money and she would spend it all.

    everyone hates taxes as washington will always spend it all , my thoughts on taxes are simple , everyone pays no fed income tax on the 1st $40,000 then pays 20% on everything over 40k , no deductions on anything . no one could bitch as everyone gets gets the same 40k w/o tax.

    no one ( getting a pay check ) would have to fill out a tax form as the 20% would be taken out automatic after the 40k is reached .

    we would see the economy grow like crazy.

  15. #14

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    Its interesting that rich people will work to find ways to have their money untaxed when the rates are high, but when the are lower, it might be in their best financial interest to just pay them. In this sense, and its certainly not talked about as much as the other, lower tax rates actually create more tax revenue for the government on an individual basis too.

    If you are interested in "Trickle Down" theory, please read this Sowell essay. Its about a 20 minute read and well worth it (imo).

    No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter's monumental 1,260-page History of Economic Analysis. Yet this non-existent theory has become the object of denunciations from the pages of the New York Times and the Washington Post to the political arena. It has been attacked by Professor Paul Krugman of Princeton and Professor Peter Corning of Stanford, among others, and similar attacks have been repeated as far away as India. It is a classic example of arguing against a caricature instead of confronting the argument actually made."
    http://www.scribd.com/doc/105544135/...-Thomas-Sowell

  16. #15

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    Tax policy is just a small part of the job environment. Of course in a healthy, productive economy cutting taxes on business owners would allow them more money to put into expansion and they would hire more people.

    In this current economy, profits do not come from customers. They come from government subsidies and contracts. In this economy if you aren't getting money from the government you are struggling. That means you can give them all of the money they want, there is no incentive to expand. Their customers are the government, and that is expanding rapidly enough for them.

    If you slash tax rates and cut off the corporate welfare, and then addressed monetary policy, you could again have real economic growth and companies hiring. That won't happen now though. They will have to change the way they calculate the unemployment rate again to get the number back to where it used to be.

  17. #16

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    Quote Originally Posted by ILUVRP View Post
    we can look at the bush tax cuts and look at the way things are now . they don't work , i am a strong beliver in the mult/velocity effect of money as it moves through the economy , give more money to the avg/poor american and they will spend it all , give the rich ( i think over 1 million $$ income ) more money and they will spend very little of it , they will buy more stock/bonds ( or put it in swiss/clayman islands banks ).

    the rich have about everything they need where as the avg american has enough trouble buying-- food--clothes--paying property taxes--electric bills , as warren buffet said one time give him more money and he would buy nothing , give his secertary more money and she would spend it all.

    everyone hates taxes as washington will always spend it all , my thoughts on taxes are simple , everyone pays no fed income tax on the 1st $40,000 then pays 20% on everything over 40k , no deductions on anything . no one could bitch as everyone gets gets the same 40k w/o tax.

    no one ( getting a pay check ) would have to fill out a tax form as the 20% would be taken out automatic after the 40k is reached .

    we would see the economy grow like crazy.
    Lots of points in here.
    First, you can't look at the Bush tax cuts in a vaccuum. A lot of other things happened too. They were as successful as they could be given the circumstances. They did work, but not enough to stave off the rest of the idiocy.
    Second, if the rich invest in stocks, that's money other businesses are using to create jobs. That's a good thing.
    Third, we can look at the incentives to invest overseas or store money in off-shore accounts. This is a real issue. We need to make investing here more attractive, higher rates on investments won't help that cause one bit!
    Finally, I like your 20/40 plan. At least to start. Of course, it would starve government which I would love! I agree the economy would grow. Maybe then we could get to a 10/40 plan... Then a 10/80 plan... Then finally a 0/100 plan!
    "And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works." - Bastiat

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  18. #17

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    i don't think the wealthy are investing overseas , i think they are sheltering a part of their wealth ( which i would also do in case tshtf here if i were rich ).

    as far as the rich investing in stocks , they are trying to get the max return they can and i see nothing wrong with that , i would add that the stock market is very close to a all time high and the idea of job creation is not working , i do have a problem with people making money by trading paper and paying 15% tax on it , where as someone digging a ditch pays over 20% fed tax.

    one thing everyone should remember is that business pays no tax , the taxes are built into the price of the product/service. the people buying the product or service are the real tax payers , business is just the middle man .

  19. #18

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    Quote Originally Posted by ILUVRP View Post
    i don't think the wealthy are investing overseas , i think they are sheltering a part of their wealth ( which i would also do in case tshtf here if i were rich ).
    How would you define sheltering?

    Personally, I don't have any money overseas, never did either. Everything I have right now is in real estate, cash, silver & gold, TIPS, bonds, and then some more "exotic" investments (art & classic cars). Of course, being in retirement I want my money (at least the majority of it) to be as liquid as possible in the event of a major health issue. Prior to retirement I had a lot more of my money tied up into the businesses that I owned.

  20. #19

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    Quote Originally Posted by ILUVRP View Post
    i don't think the wealthy are investing overseas , i think they are sheltering a part of their wealth ( which i would also do in case tshtf here if i were rich ).

    as far as the rich investing in stocks , they are trying to get the max return they can and i see nothing wrong with that , i would add that the stock market is very close to a all time high and the idea of job creation is not working , i do have a problem with people making money by trading paper and paying 15% tax on it , where as someone digging a ditch pays over 20% fed tax.

    one thing everyone should remember is that business pays no tax , the taxes are built into the price of the product/service. the people buying the product or service are the real tax payers , business is just the middle man .
    The implication here is that paying taxes is the goal of economic growth. It isn't. The goal of economic growth is for the people to have more wealth. Taxes should be at the lowest level possible, consistent with the protection of persons and property.
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  21. #20

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    Quote Originally Posted by Acala View Post
    The implication here is that paying taxes is the goal of economic growth. It isn't. The goal of economic growth is for the people to have more wealth. Taxes should be at the lowest level possible, consistent with the protection of persons and property.

    can't disagree with that like i stated above on my 1st post , the thing is everyone knows we will always be taxed , we must make the best of it and everyone has to share the burden equally , there should not be a set of rules for different levels of incomes and business , like i said anyone that thinks exxon/shell/wallymart/mcdonalds pays taxes are not looking at the real world, there are times thru their special write offs they don't even give our tax money to the feds , they keep it as profit.

  22. #21
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    If the goal is jobs, we need to look at what will encourage an employer to add more people. First, let's give a tax cut to wealthy people. What will they likely do with it? They probably have pretty much all the stuff they need so will probably save or invest it. That means more money available to be lent out. If you are a business, will you hire more people becasue there is more money available to borrow? Unless you already want or need to borrow, that will not enter your calculation to decide to hire or not hire more people.

    What is more important? Demand for what you are producing. If you are having no problems making as many goods as you can currently sell, you won't be adding more workers. Unless you think you can sell more goods than you currently do. More money going into saving and investments is not going to change the demand for your goods and services (unless you are selling financial services).

    Now lets give the same dollar worth of tax cuts to lower income people. They have more pent up demand and are more likely to go out and spend most of that money instead of saving it. This DOES increase the demand for goods and services. As companies see demand for what they produce rising, they will eventually hire more people (after first trying to get more out of current workers). This is creating more jobs.

    Thus, if the goal is using tax cuts to increase jobs, give the money to those at lower incomes will be more effective than giving the same dollar value of tax cuts to the wealthy. In the case of the Bush tax cuts, most of the benefits went to those at higher income levels so it was not very effective as an economic stimulus and ended up adding to the budget deficit (since they were not offset by comparable reductions in spending which instead was increased to fight two wars).
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  23. #22

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    Quote Originally Posted by ILUVRP View Post
    can't disagree with that like i stated above on my 1st post , the thing is everyone knows we will always be taxed , we must make the best of it and everyone has to share the burden equally , there should not be a set of rules for different levels of incomes and business , like i said anyone that thinks exxon/shell/wallymart/mcdonalds pays taxes are not looking at the real world, there are times thru their special write offs they don't even give our tax money to the feds , they keep it as profit.
    Job number one is to reduce government to its proper, extremely limited, role. Then, and only then, we can look to see if any tax beyond a small, uniform tariff is needed and, if so, talk about how to apply it. Trying to adjust taxes for fairness when 99% of government revenue is being misspent is just a means of distracting and factionalizing the public. Your argument is motivated by envy.

    I am no fan of the government-created corporate business form, but that is not within the scope of this thread.
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  24. #23

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    Quote Originally Posted by Zippyjuan View Post
    If the goal is jobs, we need to look at what will encourage an employer to add more people. First, let's give a tax cut to wealthy people. What will they likely do with it? They probably have pretty much all the stuff they need so will probably save or invest it. That means more money available to be lent out. If you are a business, will you hire more people becasue there is more money available to borrow? Unless you already want or need to borrow, that will not enter your calculation to decide to hire or not hire more people.

    What is more important? Demand for what you are producing. If you are having no problems making as many goods as you can currently sell, you won't be adding more workers. Unless you think you can sell more goods than you currently do. More money going into saving and investments is not going to change the demand for your goods and services (unless you are selling financial services).

    Now lets give the same dollar worth of tax cuts to lower income people. They have more pent up demand and are more likely to go out and spend most of that money instead of saving it. This DOES increase the demand for goods and services. As companies see demand for what they produce rising, they will eventually hire more people (after first trying to get more out of current workers). This is creating more jobs.

    Thus, if the goal is using tax cuts to increase jobs, give the money to those at lower incomes will be more effective than giving the same dollar value of tax cuts to the wealthy. In the case of the Bush tax cuts, most of the benefits went to those at higher income levels so it was not very effective as an economic stimulus and ended up adding to the budget deficit (since they were not offset by comparable reductions in spending which instead was increased to fight two wars).
    A nice statement of the Keynesian theory that consumption drives economic growth. The alternative Austrian view is that accumulation of capital drives economic growth. Guess which theory has brought us to our current situation?
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    Certain tax cuts would do more than others.

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    Quote Originally Posted by Zippyjuan View Post
    If the goal is jobs, we need to look at what will encourage an employer to add more people.
    But that's not the goal, the goal is production and innovation. The private sector has also been distorted by malinvestment, caused by government policies. More jobs in the service sector is not going to help the economy, we need more jobs in manufacturing and technology.

  27. #26

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    " Your argument is motivated by envy. "

    i am not envyious of anyone or business , i do get tired of someone pi$$ing on me and telling me its raining.

    i agree with the zippy post.

    as far as goverment spending , when is the last time you have heard a elected person in washington refuse his/her( or their staff ) raise or benny / goverment insurance.

    zippyjuan is 100% correct.

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    Quote Originally Posted by Acala View Post
    A nice statement of the Keynesian theory that consumption drives economic growth. The alternative Austrian view is that accumulation of capital drives economic growth. Guess which theory has brought us to our current situation?
    Pretend you are an employer. Which is more likely to get you to expand your business and hire more people? More money for others to invest or more people buying from you? These (employers) are the ones making the decisions to hire or not hire. What will motivate them more?
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  29. #28

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    Quote Originally Posted by Zippyjuan View Post
    If the goal is jobs, we need to look at what will encourage an employer to add more people. First, let's give a tax cut to wealthy people. What will they likely do with it? They probably have pretty much all the stuff they need so will probably save or invest it. That means more money available to be lent out. If you are a business, will you hire more people becasue there is more money available to borrow? Unless you already want or need to borrow, that will not enter your calculation to decide to hire or not hire more people.

    What is more important? Demand for what you are producing. If you are having no problems making as many goods as you can currently sell, you won't be adding more workers. Unless you think you can sell more goods than you currently do. More money going into saving and investments is not going to change the demand for your goods and services (unless you are selling financial services).

    Now lets give the same dollar worth of tax cuts to lower income people. They have more pent up demand and are more likely to go out and spend most of that money instead of saving it. This DOES increase the demand for goods and services. As companies see demand for what they produce rising, they will eventually hire more people (after first trying to get more out of current workers). This is creating more jobs.

    Thus, if the goal is using tax cuts to increase jobs, give the money to those at lower incomes will be more effective than giving the same dollar value of tax cuts to the wealthy. In the case of the Bush tax cuts, most of the benefits went to those at higher income levels so it was not very effective as an economic stimulus and ended up adding to the budget deficit (since they were not offset by comparable reductions in spending which instead was increased to fight two wars).
    Whoa, do you really believe this?!!!

    So I guess if you don't have a job, and thus have no income, an income tax break is going to give you a job?! What?

    The best way to get demand up is to have more people employed. There is NOT a lack of demand that's driving this recession, Keynes. Wants are unlimited. Pent up demand?! Lol! Companies are not afraid to hire because they're worried about selling off their pent up inventory first. They don't want to hire because they can't afford it. The price of labor (with all the new regulations and unknowns) is too high.

    You can't direct capital and think it's going to go where you want. The market directs capital in the most efficient manner. All you need to do is to take off the reins. It doesn't matter which side of the bucket you put the water in.
    Last edited by CaptUSA; 11-01-2012 at 12:31 PM.
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  30. #29

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    Quote Originally Posted by ILUVRP View Post
    " Your argument is motivated by envy. "

    i am not envyious of anyone or business , i do get tired of someone pi$$ing on me and telling me its raining.

    i agree with the zippy post.

    as far as goverment spending , when is the last time you have heard a elected person in washington refuse his/her( or their staff ) raise or benny / goverment insurance.

    zippyjuan is 100% correct.
    Um . . .what? I don't understand what you are saying.
    The proper concern of society is the preservation of individual freedom; the proper concern of the individual is the harmony of society.

    "Who would be free, themselves must strike the blow." - Byron

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  31. #30
    Master Skeptic Brian4Liberty's Avatar
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    The subject was cutting taxes on the rich. If we want to limit the discussion to the current environment and situation, and the proposals of cutting Capital Gains taxes to zero, and expanding the tax base at the same time (i.e. tax the poor), then it probably won't help the economy at all (or create jobs).

    "Foreign aid is taking money from the poor people of a rich country, and giving it to the rich people of a poor country." - Ron Paul
    "Beware the Military-Industrial-Financial-Corporate-Media-Government Complex." - B4L update of General Dwight D. Eisenhower
    "Debt is the drug, Wall St. Banksters are the dealers, and politicians are the addicts." - B4L
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