sure -- it depends on your philosophy... you can set up a tax code to target potentially job rich sectors... which seems like putting way too much pressure on central planners to know what they are doing and create effective legislation... or you can set up a general tax code which allows the capital to go where it is most useful.
regarding our housing market... stablity will come about when the housing pool matches up with the income of the buying pool at market rates... right now all this govt intervention and low rates... is distorting the market for half a decade ... and this will go on longer. had we just let the market collapse to where it should have been we would have cleared out the stupid decision makers and homeowners... replaced them with stronger hands and we would be in a real recovery... not one induced by ridiculously low rates... which bare no relation to real risk and what real investors would seek. the market is being screwed with by the Fed with the help of FHA... this is not a real market. no useful conclusions can be drawn... other than that if you reduce housing payments by 30 percent you will find buyers... but we already knew that.
My comments were based on the assumption that allowing a complete housing crash would be unacceptable. Thus, if there is going to be intervention, I believe that my proposal would have the best immediate and long lasting effect.
Our tax code is already setup to target certain sectors. I would suggest something completely different if I could, but I thought we were debating in favor of a change in taxation that would have an immediate effect on job creation and economic growth. It is hard for me to buy into the argument that we are dramatically overtaxed at current levels. I would love to see less spending followed by lower tax, but I can't realistically see marginally lower income tax rates doing much to stimulate the economy during the next 12-24 months. For most taxpayers that would mean a decrease from about 13% effective rate to around 11%. Hardly a dramatic boost, IMO.
No one knows where the peak of the Laffer curve lies. Epic's point was that we are no where near the peak. He is correct of course. No one has yet demonstrated convincingly that lowering tax rates increases revenues. All of the competent studies show the opposite. And there are quite a few. This is consistent with being on the rising arm of the Laffer curve. What has been shown convincingly is that increasing government spending raises revenues some months later (quite a bit later), but spending increases, in excess of revenue increases, results in deficits which are paid for via that portion of inflation that results from monetization, or in some equally undesirable way, or preferably via return on investment, depending on how money is spent. What the government spends on becomes a key issue. Deficits don't have to, but they generally have resulted in increased inflation some months later (quite a bit later). The U.S. has been living on increasing credit. However we may be reaching the point where businesses and households are reluctant to take on more debt, and there is currently debate on whether the government should take on more debt. When businesses and households leverage down, the government leverages up to take up the slack, otherwise recessions result or are worsened. Presently about one fourth of U.S. GDP is attributable to government spending. If the government were to suddenly reduce spending significantly it is certain to tip the country back into recession or depression and increase unemployment. The best of the bad options available is for the government to go on spending as it is, or even increase spending, but change spending priorities away from unproductive spending toward long range investment. Because of economic distortion presently existing in the U.S. economy, modest increases in tax rates at the upper end will be helpful, whereas tax increases in the lower brackets will be harmful. Eventual reduction in living standards is unavoidable whenever, for long periods, non-productive spending exceeds productivity. Distortions result from imbalances between wealth and productivity. The U.S. economy is currently suffering from these distortions. These can be reduced over time with enlightened government policy and wise management of the economy, but politically this will likely be very difficult to do. There is presently a small vocal minority of U.S. citizens that have become so disillusioned with the U.S. plutocracy that they have become champions of irrationality bordering on anarchy. They call attention to economic distortions and an overly intrusive government , which is useful, but are disruptive of the political process which is counterproductive.
yet... after Bush Reagan Kennedy and Mellon tax cuts we saw revenues go up. you want to attribute that rise in revenues to increased spending... and you do not wish to attribute it to the tax cut. well we have a new study. its called the post obama study... we see a massive increase in spending and no new high in tax revenues. so massive spending did not work as well this time . did it. its time to accept what Keynes actually teaches... the way to fix a recession is to cut taxes and grow out of it.
And you think it's plausible that the Obama regime will make this change in spending priorities? He's had 3 1/2 years.
Keep in mind that each of those circumstances was preceded by much higher rates than our current climate. Kennedy cut the top marginal rate from 90% down to 70% and he called for a corporate tax cut from 52% to 48%. Mellan from 73% down to 24% Reagan cut the top rate from 50% to 28%. Even Bush cut from 40%. Given all the deductions and the current lower rates, there isn't a whole lot to be gained by cutting further. It is absurd to think that the Laffer Curve is linear. As we cut rates further there will be less marginal benefit. Further cuts would only really be justified if we were well past the peak of the Laffer Curve. My contention, and it is supported by a fair amount of research, is that the peak of the curve is different for various types of tax. Theorized to be around 25% for capital gains and estate tax as they are fairly easily avoided. If I'm gonna have to pay tax I just won't sell the asset. Around 10% for consumption taxes because they result in large black markets and reduced consumption. Around 40-50% for income tax. It is not easily avoided and it is very easily tracked and collected. Income is the main source of revenue for the masses, meaning they are not easily discouraged from trying to increase it.
Thanks for posting this information. I was under the (false) impression that the GOP team on here is aware of the basics involved in these discussions. But, apparently not. Having lived through all those era's, I made a wrong assumption that others did also, or at least read up on topics before babbling on about them. Thanks again.
ok we have gotten to the nitty gritty. your experts theorize that we are passed the area in the curve where it is useful to cut more. other expert say cut taxes like we have in the past. why not go with worked in the past? I say pay off the debt with one print and cut personal income taxes to zero... since much of our taxes go to servicing the debt. you will unleash and economic giant for decades to come. if we cap spending I guarantee we will come into balance through a combo of growth and inflation.