HappySqurriel on 28 January 2012
| kanageddaamen said: The solution is simple. Stop having unfunded tax cuts. There is a republican strategy (which works VERY well) called "strategic deficits." The idea is basically: Cut taxes, claiming that it will spur the economy, and putting an "expiration date" on them The tax cuts will not do what they is claimed they will (increase GDP thereby increasing tax revenue) but instead they will create a huge budget deficit Use that budget deficit to claim a budget crisis and leverage spending cuts to shrink the government (except defense of course) When the tax cuts reach their expiration, claim that letting them expire is raising taxes, and that they should be made permanent This is EXACTLY what is going on now and has been going on since 1980 when Reagan took office. Look at the national debt figures. The one exception was during the Clinton era when there were moderate tax increases to ensure a balanced budget. So the solution is easy. Since wealth individual tax cuts DON'T create jobs, nor do they increase GDP, we let the Bush era tax cuts expire, as they should have, and kick up tax receipts. Give a federal tax CREDIT for all individuals' state taxes spent (up to $2000), encouraging middle class spending, the driving force of the economy, and job creation. Create a 0% tax bracket for capital gains on investments held 20+ years (retirement funds and the like) Have a 15% bracket on capital gains on investments of 10-20 years and have all other capital gains taxed as income. Cut waste from the defense budget and close many overseas bases. place income requirements on medicare Once the budget is balanced, and the debt has largely been repaid, use a surplus to fund tax cuts. here is also an aside as to why cutting wealthy individuals/corporate taxes does not create jobs: The SOLE job of a corporation is to make money for its shareholders. Every action it undertakes MUST be to this end, otherwise the corporation is not doing its job and management of that corporation should be changed. Therefore, a corporation will ONLY create a job if it contributes to the net profits of the corporation. If a job will not increase profits, the corporation MUST NOT create that job. On the flip side, if a job WILL increase profits (regardless of how much those profits are taxed, or the degree to which the job will increase profits) the corporation MUST create the job (with priority set to the jobs that will create the most profit) Therefore, job creation is driven by gross profits, not net profits, and the tax rate (as long as it is not 100%) should not impede the hiring of employees. It is the corporations responsibility to find capital, either by borrowing, from cash on the books, or from new investors, to make all of the profit driving hires. So when does a job create profit for the company? Simple, if the company is not meeting demand for the product, jobs that will increase supply will increase profits. If a company is not meeting demand, there is much more limited opportunity for job creation, limited to only jobs that MAY spur demand (marketing and such, which is usually from outside firms any way) So, the only way to increase jobs is to increase gross profits (which are unaffected by tax rates) and the surest way to increase gross profit driving jobs is to spur demand. In this way, they government should adopt policies that focus foremost on increasing the size and spending and investment power of the middle class, as well as making sure lending is accessible to corporations that need it. Increasing the spending and investment power of the upper class does not drive demand in the same way the middle class does, nor does increasing corporate net profits increase hiring. |
The problem with that "theory" is that it is not based in reality:
Tax revenues have remained fairly consistent regardless of tax rates, while spending has steadily climbed. The high deficits are a result of irresponsible spending and cannot be resolved by increasing taxes because, as we have seen over several decades, increasing tax rates will not result in increased tax revenue.
