Next Idea to Fix the Economy

Discussion in 'Economics' started by shbhanda, Aug 26, 2010.

  1. shbhanda


    What would happen with a corporate tax rate and individual income tax rate that fluctuated with the market cycle?

    When GDP slows substantially perhaps the government could appropriately drop capital gains, income tax, and corporate taxes. So right now we might be looking at 10, 20, and 20 respectively, or something intelligent along those lines.

    Obviously, government income per payer would drop, but it seems that growing the tax base or keeping it big is usually more profitable than taxing it a lot.
  2. Dropping the tax rates would really be beneficial to encourage consumption and business activity. This will drop the government's tax revenue but at the same it will increase employment and GDP. The deficit can be balanced when the economy is back on track.
  3. How about unions bargain in good faith and after a market cycle of producing a million widgets for 2-5 years and demand tapers off, the union takes a cut in benes and pay till business improves?
  4. The ONLY thing that can bring jobs back to the USA....

    Slash tax rates all around, downsize government, reduce transfer and social payments to all, including unions.

    Only then will foreign companies want to come to America to do business and create jobs for our unemployed.

    Nothing less will work.

    However, there isn't the political will to do this right now. We'll have to go into bankruptcy as a nation before this notion is accepted. :mad: :mad:
  5. Ed Breen

    Ed Breen

    You have to understand that not all tax cuts promote production. The point of a pro growth tax cut that is that it creates an incentive that impacts the entrepreneurial view of the promotes current behavior change to accept more risk because it encourages a more positive expectation about future prospects to possess after tax profit. Only this kind tax cut makes the contextual change that results in job creating expansive capital investments by the private sector. A key point is that the meaningful projects encourage are moderate and long term in nature and the profit anticipated is over many years.

    If you understand this, you must come to the conclusion that payroll vacations, short term changes in capital gains rates or other demand management strategies are not likely to change long term future profit expectations that encourage risk. These are really just Keynesian demand strategies that are the same as throwing money out of helicopters. The rational entrepreneur faced with a short term cash flow efficiency is to save the money and it does not change the longer term actually harms the longer view because the producers know they will be called upon to pay for these excesses with future tax increases.

    The taxes cuts that can promote growth must be focused on marginal income to promote increased work and more importantly on return on capital. Flat taxes remove the disincentive to work in the higher marginal (most productive) tax rates. Lower capital gains taxes remove the penalty of paying tax on inflation and make capital more available for risk takers, while making the incentive of an after tax possessory profit more attractive. The other ridiculous tax is the corporate tax structure that double taxes dividends...there should be a Zero corporate tax and dividends should be taxed at the regular income rate...once. This would attract capital from all over the world to the U.S. and it would encourage corporate profit distributed as dividends to shareholders who then pay tax.

    These incentives will of course result in an immediate decline in tax revenue (less than projected) but they will attract inward investment and create growth that expands the tax base in the long run.

    Subsidies to hire workers, temporary tax credits, flexible gdp related tax adjustments and holidays have not incentive force. They only serve to increase deficits with no sustainable growth incentives and promise higher future taxes.
  6. Some people still refuse to get it. Greenspan, Stockman and many others have stated that tax cuts NEVER, UNDER ANY CIRCUMSTANCES, PAY FOR THEMSELVES. Here is the calculation why: Say the rate after a $500B tax cut is 25%. So, the tax cut will need to generate $2T in new tax taxable economic activity to pay for itself. I say it is impossible that a 500B investment spread evenly over the economy will produce 2T in taxable economic activity. The Fed and gov't have invested way more than 500B in the economy and tax revenue is flat. So, any tax cut, no matter how you spin it or try to make it more pallatable, will not pay for itself with the economic activity generated. Tax cuts only do one thing: ADD TO OUR COUNTRY's DEBT.
  7. Here is OBAMA's next policy to "Help" the US ECONOMY.

    "The Obama administration plans to step up enforcement of trade laws against nations, such as China and Vietnam, that help subsidize companies exporting cheap goods to the U.S." more bright idea, Tariff war which we can not win! Fuck'n Brilliant!

    Corporate Tax rates to be cut will do nothing if we try an all out tariff war with Asia.

    We can not compete on wages, raw material (As they buy in far more bulk that the US.) The argument that US CONSUMER is needed for ASIA and INDIA to continue their growth is false.

    The US consumer is not spending, period! Hence the Earings and forward guidence of WALLMART and other discount Stores.

    The Global Market has plenty of Consumers...from around the world that will supplement the US slowdown in Consumption.

    IDIOTS in DC. I say bring the Trade War. I'm position with my company, I all ready tap into the Global Market, less goods being imported will not effect my business or my level of income.

    But it will destroy more jobs, it will not help the growth in the US economy and instead of about 1% or less GDP growth for the US, we will go negitive.

    Welcome to OBAMANATION!
  8. pspr


  9. Ed Breen

    Ed Breen

    Endsong, there is disharmony in your tune. There is only one way to pay debt...with income. In a macro economic sense income is growth. If you don't grow, you don't pay debt. The issue with taxation is how to maximize revenue without hurting growth...the rest of the social planning is misguided crap that does infinitely more harm than good. Your reference to govenment spending not producing growth is just as dense as confusing pro growth tax cuts with keynesian tax cuts. Contrary to Obamas remarkably stupid comment, something like...'that's the point, all spending is the same', all spending is not the same any more than all tax cuts are. You can use debt rationally if you spend it in a way that produces assets that can be used to pay it back. Debt is only a problem when the cost of the debt service is higher than the growth produced by the investment of the debt...that is true for business as well as sovereigns. Now, when our government borrows $1T and spends it on a $20 per week Keynesian payroll rollback, and then spends the rest funding State deficit spending on public sector service employee salaries...there is no asset created that can pay the debt back...that kind of spending never could have produced growth...all it could do and did do was prop up the consumption metric gdp for a couple of quarters, unti it runs out...that's not growth of course...but the debt remains...and unless the debt will default it will be paid back from the private sector's future growth...but it not only wastes itself by producing no future revenue, it actually discourages private sector investment because the producers know their taxes will go up becuase of it.

    If you don't grow you die...if your economy dosn't grow then it can' t pay back any debts...if you raise taxes you won't get much revenue in the near term and you will get less revenue in the long term...becuase you won't have any growth. So, what is that song you were singing...sounded like a death rattle.
  10. You mean the way W brought all those jobs back when he cut taxes?
    #10     Aug 26, 2010