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Old 01-29-2005, 09:45 AM   #24 (permalink)
jimbob
Crazy
 
Location: Liverpool UK
Would cutting sales tax instead of giving refunds to the rich make more sense in an economy coming to the end of a consumer-led boom, as the US was at the end of the Clinton era? Less sales tax means cheaper goods and more sales without cutting revenue to the producers/importers, which translates to higher incomes for those that would otherwise have benefitted greatly from tax cuts, but the people at the lower end of the income scale would also benefit. And it's a virtuous circle - as those at the top see their incomes rise they pay more tax so sales tax can be cut further. Trickle-down does work but it's far less efficient in the short term than inducing higher demand, either by state-funded efforts to create employment, rightly described by Yakk as 'welfare', or by the fiscal means I suggested.

I have to admit though, while it's easy to imagine how increasing demand produces economic growth in an island economy it's less clear once imports/exports are considered. The same goes for tax cuts though - if your economy isn't doing too well then who's to say the tax refunds won't just be invested abroad?

Slightly off topic, but here's an interesting short discussion of the benefits of a more equal society (Sweden - high personal tax, low business tax versus the UK - low tax for high earners, contracting public sector):
http://www.monbiot.com/archives/2005...-and-it-works/
Sweden has higher GDP per capita, is more competetive and creative, is more literate and offers better prospects for people born to humble origins. Perhaps Mr Bush should think outside the box if he wants an America where everybody is better off instead of where a few people become incredibly rich.
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