As a tax, income tax is the greatest insult. Using force to penalize folks for adding value to the economy through their work has to be the greatest paradox. It’s like beating your kid because he likes to read and mow the elderly neighbor’s lawn!
This core legal illegitimacy doesn’t mean we can’t talk about the nuances of income tax. There is a lot of talk about extending the Bush tax cuts. And, not surprisingly, most of it is bull.
The biggest fallacy is that cutting taxes to the upper tiers of income creates economic expansion and benefits everyone. This is really a laugher. Allowing a group of taxpayers to keep a proportionately larger chunk of their money benefits whoever gets to keep the money relative to those who don’t. If you want to benefit everyone, allow everyone to keep their own money.
The basis of this myth is the notion that the rich own businesses and allowing them to keep their tax money will convince them to expand their businesses and create jobs for others. But the object of investing is to make a profit, right? Wouldn’t the rich, who already have money, which is why we call them the rich, expand their business now, regardless of tax rates, if investing now would bring them profit? That is what people do to become rich isn’t it, invest money and earn profit? Are the Bush tax policy advocates saying that keeping the cuts might allow the rich to invest money in enterprises that would lose money just to give poorer folks jobs?
The other mythical reason for upper end tax breaks is that the money will “trickle down” to the squalid, swarthy masses due to the generous consumption habits of the elite class. Of course, the well off consume more than the not so well off. But what do they consume?
For the most part, the wealthy consume a greater share of services and specialty consumer items. So, yes, if you want more people mowing expansive lawns and scrubbing floors in opulent houses and you think a couple of more custom yacht companies or exotic travel agencies will turn the economy around, then “trickle down” theory is for you.
What the upper end really does is purchase assets. And when they get extra money back they purchase even more assets. As we have found in the last ten years, this has some not so beneficial effects on the economy.
Economic busts are really very simple. When the cost of assets exceeds the return on those same assets, people decide it’s not worth taking economic action just to end up with less money than they started with. So they don’t. If the price of assets can’t adjust downward for some reason such as capital overinvestment and debt, then the boom becomes the bust.
And speaking of busts; any tax cut during a period of deficits not accompanied by spending cuts is not a tax cut at all but a loan, to be paid back with taxes, from the future.
Those who advocate letting the rich skate on taxes relative to the not so rich, point to three periods of upper end tax relief that stimulated the economy: the twenties, the sixties and the eighties. Here are some other things to investigate during those eras: monetary oversupply, credit expansion, government stimulus spending and economic subsidy, and asset booms and busts.
In other words, upper end tax cuts are a collaborative state effort that involves several monetary planning tools and controls and is a short lived phenomenon that always ends in the bust. And, yes, the upper income tiers are more than happy to contribute to this false cycle of voodoo economics. There are great profits to be made if you pass the bag at the right time but no long term change in economic cycles ever came about because of high end tax cuts.
The conservative claims to be anti tax. In reality, what he is, is ATIMB {anti tax in my bracket}. High wage tax rates help keep capital exactly where the conservative wants it, in the hands of the capitalist.
The liberal claims to want to help the disadvantaged. The majority of liberal programs instead disadvantage folks and let industry off the hook for actually paying a living wage. Why should a corporation worry about a worker’s health care or retirement when the government will do it and pay for it by taxing the worker’s own wage?
It’s the lower income tiers that can’t afford to consume what they need, in no small part due to taxes. Consumption equals production, that’s a fact. You want tax policy that will ensure long term prosperity? Then get your stubborn politically conserving and liberalizing heads together and do what is right: stop taxing the poor and working poor. Eliminate every semblance of an income tax or payroll tax below thirty thousand a year per individual, federal, state or local. Who could be against that?
It may not cost the federal government a dollar. Keeping all earnings below thirty thousand should take absolutely everyone who has a job off government services and subsidies. The economy would be stimulated at all levels of basic necessities, stabilizing the fundamental building blocks of economic growth. Since lower income brackets would have more disposable income for food costs, all farm subsidies {hundreds of millions of dollars a year} could be immediately ceased, although this in itself would probably lower, not raise, food costs.
Then, again, prosperity and justice are not really political priorities.