aceventura3

Bush's unfair tax cuts for the wealthiest Americans, or so they say, has actually increased the tax burden on the highest income earners. The latest reports show that not only have the total tax revenues collected by the federal government gone up, but so has the percentage of taxes paid by the top wage earners in the country. The next time you hear Obama talk about his tax plan of rolling back Bush's tax cuts on the "rich" and lowering taxes for everyone else, perhaps people will start to ask him some pointed questions rather than fainting.

As usual, this comes from one of my favorite publications, the WSJ. The data was in an editorial - but if you doubt the data, feel free to go to the original source.

Their Fair Share - WSJ.com



Also, keep in mind the point in the last paragraph I included. "New wealth" is income based, people going from nothing to being "rich" have high incomes and pay high taxes. These are the people really carrying the burden. "Old wealth" is asset based, people (I.e. - Kennedy's) can manipulate their capital to minimize their tax burden and can basically pay what they want, like Warren Buffet. In effect, Obama and Democrats have tax policies that protect "old wealth" and make it more difficult for people starting with nothing to accumulate wealth. Perhaps this in part explains why existing rich people and people with no interest in accumulating wealth are generally Democrats.

Given the latest data when are we going to start to see a shift in the empty rhetoric from Democrats on this important issue?

__________________
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"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Mojo_PeiPei

You'll never see a change in rhetoric from the Dem's, it's how they pander to their base. Much akin to the guff republicans catch for their hawkish "us vs. them" mentality, one of the tenets of the democratic party is pushing this notion of class warfare.

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Rekna

Stats based on percentages can be very misleading. I didn't check any of the opinion pieces numbers but his argument is a bit silly.... At the end he says if you tax them at a higher percentage they will just use more loopholes to avoid the taxes. However, they are going to use these loopholes anyway....

If you were ever wondering who is better for the economy check out this blog:

The Liscio Report: Presidential economics: Do parties matter?

GDP:


Employment:


Unemployment:


CPI:


Fiscal shift:



Stock:


Inequality:


Dems are better for employment, GDP, stock market, inequality exchange, unemployment, and inflation. Republicans have bonds.

If you need more proof then explain why we are going into a recession with Bush in power for the last 8 years. His policies have almost destroyed our economy and may still yet. It is going to take a long time to climb out of the hole he dug us into.

Mojo_PeiPei

It seems to me that graph is a little misleading when you note that the top three are CLinton, whose economy grew behind a republican congress but failed miserably helping lead to our current situation with the dot com crash; then you got Truman who inherited an economy that came out of a different and had the whole war thing working for it, same for Dwight. Kennedy and Johnson seem straight enough, I just think it's worthy of noting in a thread about tax distribution that LBJ is a strong reason for this mess with his "great society".

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Willravel

There's a flip side to this, Ace. If those below the median contribute so little, why would anyone have a problem with them getting a bit of a tax cut?

jorgelito

I suggest a simple flat tax for all would be the best solution and end all these petty arguments.

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girldetective

A flat tax?! Really?! Now who would that benefit, and how would that be fair?

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Baraka_Guru

You're going to need to suggest widespread government spending cuts as well. I suggest starting with the military.

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jorgelito

Sure, a little fat trimming never hurt anyone. I think it would be good for us too. An audit is in order too. The accounting needs to be....accountable. Military spending is a big piece. Reducing spending is only one element. Smarter, fiscally responsible spending would be better.

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dc_dux

Most flat tax proposals I have seen are inherently regressive and would not only require significant spending offsets, but significant exemptions for the lowest wage earners in order to come anywhere close to approaching "fairness."

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Baraka_Guru

Unless the flat rate is high, you're going to need to cut by slashing and burning to make up for the major redistribution of tax collection. Set it too high and you make your poor even poorer.

And you do realize that most countries that currently use the flat-tax system are former Soviet and socialist republics, right? (Including two of the "-stans".) I haven't checked recently, but the last I've heard, a lot of them aren't doing so hot (still).

I guess what I'm trying to get at is that flat-tax systems are (were) often employed in communist-type systems. In former communist states, they still work because there isn't as much of a disparity between rich and poor.

It wouldn't really work in free-market industrialized nations.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

jorgelito

Hong Kong has a flat tax system. Flat tax is ideal because everyone only pays a percentage. 5-10% sounds about right to me.

I actually think we do need to "slash and burn" as it were. Time to go on a diet. That deficit needs to start going down. It hurts at first but we will be better for it in the long run. We will have to learn to budget better, not spend so freely, and not waste. We need to hold our politicians accountable and responsible. More taxes only hurts us.

I can't tolerate anymore taxes. I am being squeezed to death here. When over 33% of my income goes to taxes, plus all the sales taxes etc, it really is too much.

__________________
"The race is not always to the swift, nor battle to the strong, but
to the one that endures to the end."

"Demand more from yourself, more than anyone else could ever ask!"

- My recruiter

Baraka_Guru

Hong Kong's personal taxes go as high as 15%, and as much as 90% of its GDP is in services. Hardly a test market for the U.S.

Though I cannot argue against sound fiscal policy.

But I don't see the U.S. having such any time soon.

__________________
Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot

dc_dux

jorgelito...there is really not that much discretionary, non-defense spending to cut...certainly not enough to make a big difference....and it would take a flat tax of far more than 5-10% and/or a significant increase in state and local taxes.

The most recent proposal was Huckabee's "fair tax" which eliminated the federal income tax and replaced it with an effective 30% national sales tax. The fallacies are laid out here.

The deficit was not only reduced in the late 90s...we had several years of budget surpluses....based on a simple "pay as you go" principle that was abandoned in 2001.
-----Added 21/7/2008 at 11 : 34 : 41-----
9/11 and the tech bubble burst contributed to the exploding deficit and national debt..but by most objective measures, so did Bush's tax cuts and war funding.

__________________
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ASU2003

I would like to see how many Americans would be for a 60%-70% flat tax in order to fund every program (including national healthcare). How about a flat tax of 15% on workers income (up to any amount), but 60%-70% on investment profits and 40% on business profits, and 90% for an estate tax...

The flat tax people are fine with it at 15% or 20% for everything if they are making lots of money, but we would still have a national debt and financial problems in a few years with SS and Medicare. Which they don't seem to care about.

jorgelito

Actually Baraka, it is now at 16% or so. The 5-10% I quoted is the ideal I would like to see. I don't see why it couldn't work in the US. C'mon people, let's not be so pessimistic here. Positive attitudes all around now
-----Added 22/7/2008 at 12 : 56 : 04-----
I agree. I remember the healthy surpluses we had back in the 90s. I remember thinking we should have paid down the deficit. I can't recall but I think George used it for a tax refund (which isn't necessarily a horrible idea in of itself).

But the airline bailout and war funding really killed it. To me it's more than just numbers of positive and negative. There's waste there to be sure. Egregious waste I bet. Tightening the belt is a good start and having each gov't agency held fiscally responsible and accountable would be good too. There's too much shenanigans involved in the bidding and contracting process. I would like to see that rectified. And seriously, no more pork.

__________________
"The race is not always to the swift, nor battle to the strong, but
to the one that endures to the end."

"Demand more from yourself, more than anyone else could ever ask!"

- My recruiter

Rekna

Odd, please check the link I had above for more images. I posted a bunch more but they aren't appearing. Is there a limit of 1 image per post or something?


(FIXED). Please check out the photos above. I fixed the links and all of them are there now.

The image links I was using seem to break the board. I'll report it as a bug.

aceventura3

This is not correct. Think about your behavior. If your marginal tax rate was 100%, how much effort would you put into tax avoidance? Or, would you simply not putting any effort into making an additional dollar? Either way taxes collected from you might be less than if your marginal tax rate was 50%, 25%, 10%, at a lower rate you may put little or no effort into avoiding taxes or you may work X times harder to make X times more dollars which would be taxed.
-----Added 22/7/2008 at 11 : 12 : 19-----
I have no objection to people getting tax cuts. My preference is to not tax the fruits a man labor at all. I think we should tax consumption. Tax the rich guy who has his corporation buy a $10 million dollar jet that he uses for business and can be used as a corporate tax deductible expense. Don't tax the savings account interest income from a disabled blue collar guy who save his entire life and now needs the money to live.
-----Added 22/7/2008 at 11 : 15 : 38-----
Tax policy is not petty. It impacts every person, and the future of this nation. If we don't fix Medicare and social security tax related issues our nation will be "bankrupt" (or currency will be made almost worthless). Either the Dems have it right, or they don't. Given their rhetoric on the subject isn't it fair to point out discrepancies?
-----Added 22/7/2008 at 11 : 19 : 33-----
There is another thread I suggest looking at: You can't soak the rich. Our current system protects the existing "rich", retired, and the "poor", but the burden is squarely on middle class upwardly mobile wage earners. Our current system is also putting a bigger and bigger burden on our children.
-----Added 22/7/2008 at 11 : 27 : 27-----
No system is perfect and has flaws. Our current system allows a man like Warren Buffet to increase his net worth by $10 billion in a year and pay no tax on it (and he will pay no tax on it upon his death), but as he says his secretary pays a higher percent of her income than he does. Buffet does not live the lifestyle of a typical billionaire but his tax avoidance strategies are typical. In my view the first step in developing a "fair" system is to agree on the underlying principles. do we want to tax work, savings and investment or do we want to tax consumption or the goods and services actually used by people?

__________________
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"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
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hannukah harry

i hear this used a lot... but how many rich people do you know who are actually doing their own taxes? i doubt many. if you're paying someone to do your taxes, you want them to squeeze every last cent they can, make it so you pay as little as possible.


so what you're saying is we should get rid of loopholes allowing investments and capital gains to avoid taxation? if we don't fix the loopholes that the wealth holders use, then lowering the tax rate for lower income earners doesn't really do much to change the problem. get rid of loopholes that favor the rich, then drop the taxes for the poor and middle class. but you'd be acting foolishly to cut your income without knowing it's replaced (when you're already spending more than you actually make).

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aceventura3

There is the cost of tax planning and then there is the cost of tax avoidance execution. Again, what would you do? If your tax burden is projected to be $100 how much effort do you put into your tax situation? If your tax burden is projected to be $1,000,000 how much effort do you put into your tax situation? In the first situation, you would not even go to your local H&R Block office. In the second, you hire an "A" team of tax and financial professionals, there is a cost to that and therefore a break even point. Then they recommend you do certain things, I.e. set up trusts, corporations, re-title assets, invest in tax efficient instruments, etc, etc., there is a cost to that, setting another break even point. Then there are the opportunity costs. If you invest in tax free municipals, that means you are not investing in corporate bonds, are you giving up some potential ROI for tax free income efficiency? So, you have to constantly look at the trade-offs and the points where it is cost effective to do something and when it is not.

Even look at the current housing crisis. If a person earned enough income to be in, let's say a 30% marginal tax bracket, and they could buy a home, no money down, with a payment of 1,000 per month (assume it was all deductible for simplicity), but it cost $850 to rent the same home, what did most people do? They bought the home and after taxes the cost was $700 all other things being equal. The tax code modified behavior. The tax code caused people to take risks or do things in home ownership that they may have ordinarily avoided. Is this the purpose of our tax code?

Minimizing current taxes paid may not always be the way people will go, but the point is that "rich" people have options, others do not have. However, if taxation was based on consumption, then everyone would have options, the playing field would be even, the tax code would be "fair" in my opinion.


I say it is unfair to tax investments and capital gains. First you earn money, it is taxed ( the gov takes their share first). Then you save or invest, after your personal expenses. Then you earn interest or dividend income, it is taxed. If you have a capital gain it is taxed. You die, and you may face more taxes. However, if you spend all your money, go into debt you have no further tax obligation. People wonder why the national savings rate is negative??? But, on the other hand people with asset based wealth, will earn income, then deduct expenses and pay tax on what is left over. The "loop holes" are really a "loop hole". Taxation based on income (income earners carry the burden), versus people with asset based wealth, or "rich" people who manage their tax burden, paying what they want.

Fairness to me says if you spend like a millionaire get taxed like one, regardless of how you get the money to spend.


The only way to close the "loop holes", as you perhaps see them, is to simplify the tax code. The reason the tax code is so complicated is because Washington wants to serve special interests and modify behavior. The real goal simply should be to make sure everyone pays their "fair" share.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Willravel

What about those who spend overseas or who don't spend at all? The last time I was out of the country, I spent thousands of dollars. Baring an emergency, I never plan to have my bank account dip below my yearly salary. If I ever get to the salary I desire (between $125k and $250k) that means a lot of untaxed money.

I can appreciate where you're coming from, but maybe I should ask you this: why just tax what we spend? Shouldn't everyone pay their fare share? Why not, then, just tax income?

Rekna

ace your examples are so extrem that they are irrelevant. No one is taxed at 100% and the gap in taxing of a single person between bush tax cuts and non-tax cuts is not $100 and $1,000,000.

Your argument seems to be don't tax the rich because they will just avoid the tax anyway.... which is very bad logic. Should we do the same about drugs? prostitution? election tampering? Terrorism?

How does this sound, don't make terrorism illegal because the terrorists will do terrorism anyway.....

aceventura3

On the other side of the coin people who visit here will pay a tax on what they consume.

The money you save in a bank, in normal circumstances will be recirculated back into the economy. Given fractional reserves, a portion of your savings will be lent to others to buy homes, start business and grow the economy. The money spent will be taxed.

I think in some ways we already have systems to tax based on usage. For example people pay a fee to use national parks. People pay a federal gas tax for roads. Theoretically social security taxes are based on a return of that person's contributions. What I find unfair for example, is why should the guy who does not go to college have some of his tax money go to subsidize the education of people who do? I know the argument "every one benefits" but the reality is that not only is that subsidized college student getting the subsidy, they get a higher real life time income and will probably be a snob to the guy who gets his hand dirty for a living. What a deal.
-----Added 22/7/2008 at 04 : 38 : 07-----
Sorry if you don't see the concepts. I don't think the examples are extreme. Just, this year. People qualified for stimulus checks, however many of these people were at an income level where they did not need to ordinarily file a income tax return, however for the stimulus check they needed to for 2007. These people normally put no effort into tax planning, but this year they had to. I helped my 90 year old aunt fill out a tax form for this very purpose.

In 2004 President Bush paid about $227,000 in taxes. I think it safe to say that there are people who could face a $1,000,000 tax burden. What do you think Alex Rodriguez's potential tax burden is?

Also, if you have access to tax prep software, run some examples. You will find that there are points in our current tax code where an additional dollar earned could result in a addition dollar in taxes, especially through the loss of tax credits and factoring in FICA/state/local taxes.

You miss the point. I say the best way to tax the rich is to do it based on what they spend. Our current system certainly taxes people with high incomes, but there are people with large amounts of wealth that go untaxed relatively speaking. I simply don't think that is fair. The question I ask is why do super wealthy people support such a convoluted tax system? Have you ever given that any thought, if so, why do you think they do?


Drug usage for adults should not be illegal. And taxed.
Prostitution involving consenting adults should not be illegal. And taxed
Election tampering should be a felony.
Terrorism should be in a special class of criminal offenses. When a person commits a crime with the intent to terrorize a community or a nation they should never see another free day - in my opinion.

{added}

I just looked it up - Tiger Woods made $127,902,706 in income last year. $1,000,000 would be 0.78% of his income.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
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Rekna

and he would have only paid $100 in taxes under the dems?

aceventura3

No.

But I used this example in the thread - You Can't Soak the Rich, post #28.

Tiger Wood's generates income, that is taxed. Warren Buffet generates wealth, that is not taxed. Tiger Wood's wealth is currently income based. Warren Buffet's wealth is asset based. At some point Tiger Wood's will stop accumulating wealth based on income and start accumulating wealth based on assets, when he makes the transition his lifestyle won't change but his tax burden will. Actually, I bet the odds are that Tiger Wood's has already structured some of the income from endorsement deals in such a manner that greatly reduces his reportable taxable income from those deals.

Are you saying that you don't see the problem with our current system of taxation? The real impact of Bush's tax cuts is that "rich" people have less of an incentive to employ tax avoidance strategies given the lower marginal rates, do you still believe that rolling back Bush's tax cuts will actually cause rich people to pay more if it is not in their financial interests to do it?

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Rekna

But he gives lots of money to Charities. In my view giving money to a charity is pretty much equivalent to being taxed, just you are picking what you want done with your money. His business still gets taxed. Also how does he avoid the estate tax? Maybe I don't understand that tax well enough but when he dies all of his assets will be transfered to his beneficiaries and each of them will be taxed for the value of those assets no?

aceventura3

Sounding like a Republican.


His plan is to give his money to charities. He can do this through trusts without paying taxes upon his death. If Buffet thought giving money to the government was the best use of his wealth, I think he would do that.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

dc_dux

ace...revenues from personal income taxes have decreased as a result of the Bush tax cuts of 01 and 03 that were heavily weighed to the top rates....very few credible economists dispute that fact.

Here is a fact check:
Beyond that, I have seen nothing to support your contention that the top wage earners would not pay more if the 01 and 03 tax cuts sunset in 2010 as was planned and agreed to in both bills by Bush and the Republicans in Congress.

How quickly some forget (McCain for one) that both bills were enacted as short term economic stimulus packages...not permanent changes to the tax code.

__________________
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aceventura3

I looked at your link, here is a chart from it:



And here is a quote from the link you provided:

There is no doubt that tax policy has an impact on economic behavior. There are many other factors that have an impact on economic behavior. When an economist or anyone attempts to tell us the impact of tax policy, they have to make certain assumptions, just as Viard does here (on one level he has to make assumptions on the timing of the impact of the tax cuts and to the degree the recession had an impact on taxes collected) . If you would like we can look at some of the fact check items you list in more detail looking at the assumptions and understanding the real findings. I have no problem with that approach. The reality is taxes collected are up, the percentages paid by the top wage earners are up and we have empirical information on how people would behave given certain tax conditions. So, on it face, I think my position is correct until proven wrong. To do that we need to do a detailed analysis.

Also, I am not really clear on the issue you are responding to. My main point here is that regardless of what many have said, the Bush tax cuts for the "rich" has not resulted
in them paying less. The data you give seem to be regarding the "supply side" argument.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

dc_dux

ace....the CBO, the Congressional Joint Committee on Taxation, Bush's Council of Economic Advisers all report that the Bush tax cuts resulted in less revenue...they cant "prove" but attribute it primarily to the fact the cuts were heavily weighed towards the "rich" and the "rich" payed less than they would otherwise have paid. (ie what they paid pre-2001).
-----Added 23/7/2008 at 12 : 50 : 44-----
The bonus of the "fact check" is that it also debunks the supply side myth.

__________________
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aceventura3

I did a GOOGLE search using "CBO tax cuts less revenue". Here is the third item that came up:

Washington Wire - WSJ.com : CBO: Tax Cuts' Impact Has Faded

This individual seems to say that the impact of the cuts has worn off and the supply side impact small at best. He then says the cuts added to the deficit and gives a range of an increase of $3 billion to a loss of $14 billion dollars depending on the assumptions used. He also has the position that government deficit spending has a negative impact on economic growth. Not very precise is it?

If you recall Hauser's law taxes collected are a factor of GDP growth not marginal tax rates. So, in order for the above to be correct, meaning Bush's tax cuts lead to less taxes collected, you have to make assumptions about the impact the recession had on taxes collected.

I certainly agree that a dividend tax cut will have an initial big short-term impact and then that impact would fade to a baseline level. I also agree that a rebate check would have a big short-term impact and then fade. On the other hand how does the CBO factor the increased cost of gas for the average working man (exports or money out of our economy and the pockets of Americans) with the on-going lower tax rates. Which had a bigger impact on the economy, and to what degree? We need the methodology before buying into the conclusions.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

dc_dux

ace...I am still trying to understand a core issue that you stated above (and in other threads)
Can you point to any data or any evdience that "rich" people are using tax avoidance strategies less now than pre-2001? or, if the rates revert to the previous level in 2010 as envisioned in the law, that they will pay less than they did when those rates were in effect pre-2001?

IMO, your argument on this issue is baseless unless you have something factual to suggest otherwise.

__________________
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loquitur

dc-dux, don't you think the flat curve showing the percentage of taxes actually paid irrespective of nominal tax rates is evidence that people tend to pay at low rates and strategize to avoid payment at high rates? The graph was posted in this forum a little while ago, and you and others turned mental somersaults to avoid drawing the obvious conclusion.

dc_dux

nope...I didnt find that compelling at all.

You and ace are gonna have to do better than that with data or factual evidence that those in the top bracket are using "tax avoidance strategies" less now than pre-2001....or conversely, that they would ulitize such stratgies more than at present, if/when the rates are rolled back in 2010 as currently required by law.
-----Added 23/7/2008 at 05 : 23 : 28-----
I guess you guys dont accept the report from the Joint Committee on Taxation cited in the fact check above:

The Joint Committee on Taxation estimated that the 2001 tax legislation (the Economic Growth and Tax Relief Reconciliation Act) would cause government revenues to be 107.7 billion less than they would have been in the absence of the legislation in 2004, 107.4 billion less in 2005 and 135.2 billion less in 2006. The committee's estimates for the effect of the Jobs and Growth Tax Relief Reconciliation Act of 2003 were that it would reduce otherwise projected revenues by 148.7 billion in 2004, 82.2 billion in 2005 and 20.7 billion in 2006. The JCT makes its comparisons against the Congressional Budget Office's receipts baselines.

My position remains that a tax cut focused on the middle class and working poor rather than the top wage earners would not only cost less but would also benefit far more people.

If you buy into the supply side argument, then we will obviously continue to disagree.

__________________
"The perfect is the enemy of the good."
~ Voltaire

aceventura3

Before I put any additional effort into your question, I need to ask you a question to see if we are even in the same ballpark.

Do you think federal tax policy impacts the behavior of tax payers, if so how?
-----Added 24/7/2008 at 10 : 52 : 15-----
DC,

The above is like having some people sit around a table and look into a crystal ball trying to speculate what might have been. I think before doing that look at real data.

The real data says taxes collected are up. The real data shows we were in a recession and may be in one right now, either way GDP growth was slow or negative prior to the tax cuts and now GDP growth is slow or negative. Historically this would indicate taxes collected would go down, they have not. The data also shows "rich" people are paying a higher percentage of taxes collected. You could argue that Bush's tax cuts put us in our current economic status, but no reasonable person is suggesting that.

So, you are correct I do not accept the report that you cite. I know the normal reaction is that if scholarly types in Washington say something we are all supposed to accept it without question, but I am not normal in that way. Heck, the scholarly types in Washington don't even know what our real CPI is.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

aceventura3

Is Obama's carrot to small business and indication that on some level even he acknowledges supply side economics can have a stimulative affect on the economy?

Obama's Small Business Conundrum - Forbes.com

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Derwood

Obama promised to help small businesses in his campaign. Why act surprised?

guy44

No.

Long Answer:

A) Supply side economics never, ever meant offering tax breaks to small businesses. It meant increasing overall supply through incentives to produce, usually achieved by lowering taxes. Right now, we don't live in a world with a supply deficit - we live in a world with almost no demand. What Obama's talking about now has literally nothing to do with supply side economics, it has to do with employment.

B) Tax expenditures are extremely commonplace. That Obama is offering some to small businesses - after he campaigned on a platform of helping small businesses - has nothing to do with the supply side economics.

C) We're in the midst of a serious recession. One of the worst results is that unemployment hovers at above 10%. Furthermore, poor unemployment numbers will kill Democrats at the ballot box. So Obama is proposing a large number of measures to increase employment. Some of these measures include tax breaks to small businesses with the hope that they will use their extra expected savings to expand (and thus hire new employees), or not fire current employees because of the poor economy, or even just not close down.

I question how effective these measures will be (studies on the multiplier effects of various stimulative proposals have shown that tax expenditures are amongst the least effective) but I am hard-pressed to see how one can view Obama's actions as supply side. I think you might be misinterpreting the term to mean any government action taken on the corporate sector that involves cutting taxes. But it really doesn't. Especially in a world with minimal demand.

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aceventura3

I am not surprised that tax cuts to the "rich" will have a stimulative effect on the economy, I am just surprised by the silence from the left. If a republican administration offered any type of tax cut or incentive to what they consider the "rich" they would have pitched a fit. At the end of the day it appears all the "stimulus" in the areas of bailouts and public works projects is not doing what the administration intended. What we are going to find is that the people who create jobs are the people who create wealth, or the "rich".

---------- Post added at 04:29 PM ---------- Previous post was at 04:05 PM ----------

Offering tax breaks to small business does fit under the broad definition of supply side economics in my understanding of the concept. Ideally, tax breaks or tax cuts would not be targeted to a segment of the economy but be broad based. And, I see it more as the elimination of disincentives rather than giving incentives by the government.

When we look at different components of the economy we find some supply surpluses and some supply deficits. For example, for small business owners with growth plans there is currently a shortage of capital for investment. Tax cuts or incentives will increase the available supply of capital. Over the course of the recession business has been reducing available inventories to free capital and to regain pricing strength. we have also seen productivity gains. On a forward looking basis we are closer to supply shortages and the need to ramp up production than the back looking indicators suggest. The incentive to earn more will trigger continued health growth. So if the economy is at or near bottom we do not want to see equilibrium at theses levels especially with unemployment at 10%

Perhaps not in his mind. The problem is in his targeted plan rather than a broad based approach. The creation of a relatively complex plan lends itself to the system being gamed, lessening the impact. Reagan's approach or Bush's approach was better. Tax simplification and braod based tax rate cuts.

Time will tell regarding Obama's plan.

When you say "world with limited demand", I disagree. When we look at different ways to measure domestic or global demand we find that consumption is close to historic levels. What has happened is that there was a period of negative growth. simplistically if we give demand a base of 100, and it grows to 200, then goes down to 190, we still had growth of 90 and demand near record levels. What we need is to reverse the negative trend and to see what economist expect as healthy growth rates. It is all relative.

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dippin

returning to the original point, they are called "tax cuts for the rich" because, well, they benefited mostly the rich. The reason the share of taxes paid by the top earners increases is because they are really the only ones who saw increases in income:





basically, this past decade only the incomes of the 20 percent richest households increased, measured either by wage or by household income.