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Do you think tax cuts for the rich promote growth?

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iShade Administrator
iShade Administrator

If so, how? If not, what direction do you think is better?

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Thomas Tone
Thomas Tone

You're kidding, right?  Anyone still thinking that trinkle down economics was anything more than a political scam still probably believes in the Easter Bunny.  Ask the treasury secretary that left the Regan administration, David Stockman, about that concept

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Kenneth Reid, ATP, CPB, CPP, CQP, RTRP
Kenneth Reid, ATP, CPB, CPP, CQP, RTRP

Tax cuts for the rich? So that the middle and lower-income people can pay even more taxes? How does that grow the economy?

If anything, the rich (those earning more than $250,000 per year) should lose ALL itemized deductions, with the exception of out-of-pocket medical expenses in excess of $100,000 (which must be proven, and included with the tax return). Medical expenses (including insurance premiums) should be totally tax deductible for those earning less than $250,000 - without having to go over the 10% of income before qualifying as a deduction. Medical expenses hurt the elderly people in this country more than any other segment of the population, yet the elderly are required to meet the 7.5% of income test before medical expenses are allowed (and at that, only the amount that is over the 7.5% threshhold).

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Anonymous
Anonymous

Quite simply, no.  We have 30 years of history and evidence to prove it.

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Dave Anderson
Dave Anderson

This question is so "STUPID" that is doesen't deserive an answer!!!!!!!

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Ken Henry
Ken Henry

Yes, if the cuts are directed to specific items that are required for growth such as capital imrovements or expansion, increased employment, incresed employee benefit tax saving opportunities, increased tax incentives for business risk starting new businesses, increased tax incentives for savings, etc.  It's usually "the rich" that has the financial means to make these investments.  But no, if it is just across the board tax cut.

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Craig Weeks
Craig Weeks

I must be missing something.  Who, exactly, is proposing "tax cuts for the rich?"  In both debates Romney has said he is not proposing any changes that would reduce the present tax burden of the "rich."  Is Obama proposing a reduction?  Apparently not.  So, where is this coming from?

Taken in the theoretical abstract, if the government takes less of rich people's money and those same rich people want to be more rich, I would argue that reduced taxes would afford them more available liquidity to make investments in enterprises which, if they are successful, would grow.  Growth and hiring more people frequently go hand in hand.  As my grandson would say, "It's all good."

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RJ Goodman
RJ Goodman

Is anyone talking about how higher tax rates *encourage* spending? 

For example:
If it costs $100,000 to add 2 employees, and the tax rate is 15%, the net cost after taxes is $85,000. If the tax rate is 35%, the net cost is $65,000. When tax rates are higher, employers will find hiring more employees cheaper than they do when tax rates are lower.

Not to mention how much more perceived value the services of a skilled tax professional have when there are more potential taxes to avoid :-)

 

 

 

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Robert Barker
Robert Barker

Perhaps this query was sparked by an article Monday in the New York Times titled "Income Inequality May Take Toll on Growth."  The "experts" quoted in the article do not appear to have been chosen to support a particular political position, but I could be wrong.  I did not check out their credentials.

In case you don't have access to the article, it basically posits:

1.  The income inequality gap is the widest it has been since the 1930's (the top 1% of households have more annual income than the bottom 90%)

2.  Extreme income inequality SEEMS to correlate with both slower growth and deeper, prolonged recessions.

While it might seem logical that investment income going to super wealthy citizens (which we all aspire to join) would become available for debt and equity financing for business large and small as its owner re-invests, there is leakage because some of the income is invested in U.S. bonds, some in equities and debt for companies in other countries, etc.  In contrast, any additional income of citizens who live off their income is likely to be spent on goods and services pretty quickly. 

I'm sure there is a valid debate about whether this difference is only a timing difference, but that might just underscore the point in the NY Times article that income inequality dampens growth when the economy needs it most and accelerates decline when the economy needs it least. 

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Brian Huber
Brian Huber

To the extent that tax reductions add to private capital formation, the result is higher real income for everyone.  We have 200 years of observed evidence for the contribution of capital inputs to rising real income... and 10,000 years of history when capital formation was nearly nonexistent and income (as well as living conditions) were brutally stagnant.  Ignoring the economic theory behind this phenomenon with derisive terms like “trickle down,” begs for an alternative explanation of rising real income in the past two centuries after so many years of human futility.

 

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