Furthermore, as I understand the spending habits of the rich, it's far more about their net wealth rather then annual income liabilities. So increasing taxes won't have the same impact upon their marginal propensity to consume as say changes in the stock market. While the rich do make up something like 37% of the domestic consumer market (massive to say the least), the impact of taxes verse changes in wealth upon their spending becomes a real issue in times like these.
You basically just went the long way in explaining that the rich have higher marginal propensity to save then the middle class and thus expanding the discretionary spending of the middle class ensures greater money velocity in the economy. I don't disagree.While the rich can sit on it.. which is exactly what they are doing.
What makes you think they aren't? Obama in the stimulus enacted a verbatim Bush tax incentive for increasing private sector spending via bonus depreciation. And he's now pushing an amped up Bush R&D credit to get more spending. As for employment related credits, it's questionable. Generally, businesses are not hiring because the added cost of a worker does not exceed their potential profit. To incentivize hiring, we'd need a credit that would reduce the cost substantially and thereby increase potential profit. But we'd need to ensure this credit existed for some time. That's bloody expensive.I don't see why creating tax incentives for increased spending in the private sector are not on the table.. IE: If you expand your employment base in your business then you get X % in tax breaks. Ether way the employer is going to be out the money so why not invest it in their assets?
I think this depends on the type of tax and the level of change.I once heard an economist explain that tax cuts do have a one time positive effect then after that has passed they donít really have any benefit.
Probably that happens to a degree with all cuts, but moving from high rates to reasonable does likely cause more workers to work more. Which should increase revenue. The question is what rate does that occur at? Like all Pareto Efficiency Frontiers, the Laffer Curve is just speculation.But the suggestion was, if I remember correctly, that the economy normalises in following years and all you have as a result is less tax revenue. This would explain to some degree how economies with much higher taxation can still be very robust.
That's without question. But you should realize that the big spending does result in lots of commercial products. It is amusing to realize that the strongest anti-Socialist/Anti-government involvement people are the biggest backers of military spending yet the military is functionally a quasi-command economy industrial arm of the US government. Lots of people have no idea that their beliefs are inherently contradictory.I see a huge albatross hanging on the US government deficit spending in military spending. The increase in spending on the military is quite nearly viewable as the equivalent of being one big social spending project.
Not sure about that. We get alot of stuff from military spending. Prosthetic right now are expanding into real viable, useful and advance replacement parts. Well beyond what existed even 5 years ago. And that's military funded. When that eventually moves to the civilian market, the value will be immense. There is social benefit to military spending. But I agree that the cost is high.cutting spending on this will just hurt with little to no social benefits derived at all. The US government is spending the same sorts of resources if not more in some cases as a socialist nation but without the positive social benefits.(gdp costs of healthcare is a primary example) Military spending should be cut and cut hard.
Potentially. Many flat tax ideas have exemptions for the poor to reduce the regressive nature. The biggest problem with flat tax is that it would be done by Congress who will make it anything but simple.Clearly a flat tax would increase the percentage of tax paid on the lower income brackets and put a damper on consumption.
Now that would be a worthy project of a grad student in economics.If you could strip away the data to see just how much small private business expanded their enterprises as a direct result of tax breaks for incomes over 250k I do not think you will see much economic benefit or expansion of tax base if any at all comparatively speaking.
"If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu