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There have been multiple threads on this concept. Some have argued for no taxes, some have argued for heavily taxing high earners, and some have even argued for taxes based on government spending they believe necessary.
The state of the national debt is startling; we are approaching WWII levels of government debt as a % of GDP. The deficit, given the recent recession, has eclipsed 10% of GDP. State and local municipalities have been teetering in the red.
The recent midterm win by the GOP has rendered the possibility of another stimulus to highly unlikely. Even though i firmly believe a greater fiscal stimulus, one that was composed entirely of infrastructure spending, would be the most effective way in dealing with high unemployment, it's indefinitely off the table.
So let's talk tax cuts. Not the tax cuts popularized by Bush 42 (which yielded little if any positive economic results), but tax cuts that have the greatest potential to effect jobs in a positive fashion.
When a small business owner wants to give someone a job, they do so under the premise that a new employee will increase production in some facet of their operations. A small business would only be inclined to "increase production" if they are experiencing production shortages given their current workforce and physical capital alignment. Small business owners do not hire additional employees based on the taxation of their personal income. To believe anything in this regard is similar to believing in Santa Claus, The Tooth Fairy, etc....
The recent recession was caused by a demand shock that persists to this day. This demand shock did not magically appear when Obama was elected, enacted stimulus, or enacted his health care reform. Insufficient demand has a direct relationship on labor markets. Therefore, it would seem obvious that in order to decrease unemployment, we have to increase demand.
Does continuing a lower tax policy increase demand? I don't see how you can assume such a notion. Would lowering income taxes spur demand? Maybe, but only for those who are currently at zero to negative savings rates.
What will spur demand is a sudden 0% tax holiday on corporate income taxes (from January 2011 -January 2012 minimum). Such a fiscal policy severely diminish the need for corporations to "Dutch Sandwich" their overseas profits into Caribbean banking institutions, and bring that money home. These profits would then be used to increase capital, pay dividends to shareholders, or invest in US assets. Such a tax holiday would cost the federal government between $65 and $75 billion in tax revenue.
Comments?
I agree with all of that up to the point where you suggest a tax holiday for corporations. I am actually totally against the corporate income tax, but I don't know that a year or two of waving that tax will "spur demand". I take it that you are assuming that any savings in taxes by companies will result in that savings being reinvested into the companies (expansion) or being payed to shareholders or invested in other US assets. Maybe, maybe not, the current trend is simply for US companies to hold on to whatever cash they have. You mentioned that small businesses don't expand just because they have money, that they expand because they have more demand than they have production capability - it works the same way with big business. No big corporation is going to expand just because the find out that they have saved $X in taxes, they are only going to expand if their sales increase, and tax cuts for corporations are in no significant way going to increase the sales of corporations - why would it?
Yea, lots end corporate taxes, and end the capital gains discount tax rate, and just simply our tax code and charge the same tax rate on all income regardless of source. It's the fair thing to do, its the simple thing to do, and it will reduce cheating and loopholes. But none of that has anything to do with improving our economy.
Personally, I think that reducing corporate tax rates is long overdue. I know a lot of people that do not like this idea because corporations are evil and all but the fact is they control where a lot of jobs are created throughout the world. We need to make it more worth their while to keep jobs domestically instead of outsourcing them. Lowering the corporate tax rate is a much needed proposal. Also, when you consider that income from corporate taxes adds up to less than 20% of total tax revenues in a good year and less than 10% of total tax revenues in a bad year, it may be a good thing to cut costs to a point that makes this initiative possible.
I am arguing that overseas profits remain overseas due to the current 35% rate. A way to bring them home would be to eliminate the need for "dutch sandwich" or "double irish" tax schemes used by many US based multinational corporations.
The problem is, nobody wants to be seen helping big corporations out. It is a politically unfriendly move on both the left and right. So instead, they will argue about payroll tax cuts/hikes, while missing the forest for the trees.
Some background information.
in fact, tax incentives should be provided for those companies who grow jobs HERE, period.
I don't think that our government should be giving tax incentives to anyone. Thats the same as subsidizing particular activities. Worthwile endevors make money, and money making endevors will always find plenty of investors to make them happen. If a particular activity needs to be taxpayer subsidized to make it feasable, then we probably dont need that activity. All I ask for is that we eleminate tax schemes that tend to lead to double taxation, and tax all sources of income at the same rate.
I agree with all of that up to the point where you suggest a tax holiday for corporations. I am actually totally against the corporate income tax, but I don't know that a year or two of waving that tax will "spur demand". I take it that you are assuming that any savings in taxes by companies will result in that savings being reinvested into the companies (expansion) or being payed to shareholders or invested in other US assets. Maybe, maybe not, the current trend is simply for US companies to hold on to whatever cash they have. You mentioned that small businesses don't expand just because they have money, that they expand because they have more demand than they have production capability - it works the same way with big business. No big corporation is going to expand just because the find out that they have saved $X in taxes, they are only going to expand if their sales increase, and tax cuts for corporations are in no significant way going to increase the sales of corporations - why would it?
Yea, lots end corporate taxes, and end the capital gains discount tax rate, and just simply our tax code and charge the same tax rate on all income regardless of source. It's the fair thing to do, its the simple thing to do, and it will reduce cheating and loopholes. But none of that has anything to do with improving our economy.
we are a consumer driven economy with a substantially reduced consumer capacity
offering low wage federal employment ... so that the underemployed workers will seek to obtain higher wage jobs as the economy strengthens ... is the approach i would see as revitalizing the demand side of the equation
we should quickly move to implement Bowles' suggestions
I don't know anything bout "Bowles' suggestions" and I am not sure that I am following what you are suggestiong about "offering low wage federal employment". Are you suggesting that the gov should create jobs for the unemployed rather than to pay unemployment? That actually makes sense to me, it wouldn't cost much more than giving away unemployment checks and there is certainly no end to work that needs to be done, even if it is just cleaning up parks or fixing our deteriorating transportation infrastructure.
apologies. Erskine Bowles (my former boss) is the co-chair of the deficit commission
FDR implemented a federal works program intended to put money into the economy. we see the results of that process even today, such as when we drive the blue ridge parkway. Obama should resurrect similar programs today. look around. there is plenty of work which needs to be done
how would imposing additional barriers to business formation/expansion help improve our economic condition?I would like a reduction of tax breaks, but a lower percentage of overall tax rates for businesses.
Also, what if we reduce corporate income taxes, but create a progressive system of licensing for businesses to operate?
how would imposing additional barriers to business formation/expansion help improve our economic condition?
Because we'd be reducing corporate income taxes, which corporations try to scam out of just as much as people try to scam out of personal income taxes.
ok, i was not certain whether your move to make licensing costs more progressive was intended to enact or remove barriers to business formation
as with those who seek to lower taxes, i must ask what specific reductions in licensing requirements would be taken to achieve your objective
my limited experience indicates there are not substantial barriers which deserve to be ended
The recent recession was caused by a demand shock that persists to this day. This demand shock did not magically appear when Obama was elected, enacted stimulus, or enacted his health care reform. Insufficient demand has a direct relationship on labor markets. Therefore, it would seem obvious that in order to decrease unemployment, we have to increase demand.
Let's see, supply was going up and prices were as well? Why again were we surprised that the bubble burst and prices fell?
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