How a tax cut works
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  1. #1
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    How a tax cut works

    A tax cut works like this-

    1) The tax cut is sent out
    2) people get to keep more of their money
    3) People have more money, so they swpend more money
    4) Businesses have more sales, profits go up
    5) The businesses are able to hire more workers
    6) There is less enemployment, and more people paying taxes
    7) There is just as much tax revenue as there was only a few years ago
    8) Everyone is except liberals are happy

    This is why Bush's tax cut worked, and it is the reason the economy is on the upswing. No Democrat could give that to us.

  2. #2
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    I feel enlightened, Mormon...

    1) The tax cut is sent out
    2) States and communities get less revenues
    3) States and communities pass costs on to you
    4) Businesses have more sales, profits do not go up since state and community taxes are raised.
    5) Business do not hire more workers, since the cost is way higher than the profit.
    6) There is more tax revenue than there was only a few years ago, since states and communities all have to raise taxes to make up for the tax cut.
    7) Nobody is happy, except the conservative right-wingers who fail to see the bigger picture.

  3. #3
    Senior Member OverdueSpy's Avatar
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    Originally posted here by Negative
    I feel enlightened, Mormon...

    1) The tax cut is sent out
    2) States and communities get less revenues
    3) States and communities pass costs on to you
    4) Businesses have more sales, profits do not go up since state and community taxes are raised.
    5) Business do not hire more workers, since the cost is way higher than the profit.
    6) There is more tax revenue than there was only a few years ago, since states and communities all have to raise taxes to make up for the tax cut.
    7) Nobody is happy, except the conservative right-wingers who fail to see the bigger picture.
    I don't get it Negative. Starting with point #2.

    #2. Bush's tax cut affected Federal taxes not State taxes. The State would continue to collect it's taxes from it's residents, and pass some of it on to the communities. Are you trying to say that the Federal government supports communities?

    #3. Why would a cost be passed on to me? See #2

    #4. Why do taxes need to be raised if more sales taxes are being accrued and sent to the State coffers?

    #5. If businesses do not create jobs, then we would not be concerned with the unemployment rate because everyone would be self employed dependent upon his own skills. Also why is the unemployment rate going down if businesses are not creating jobs? I doubt that a significant majority of the jobs created last year are due to self employed individuals that do not hire any other employees to help run the business.

    #6. See #4

    #7. I guess that your point is that if you are not a Right Wing Conservative, then you are a nobody. Ok I'll by that.
    The mentally handicaped are persecuted in this great country, and I say rightfully so! These people are NUTS!!!!

  4. #4
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    My reply was as simplified as TheMormon's post, OverdueSpy...

    About the tax cut and states:
    The tax cut was proposed as an economic stimulus. The package gives limited aid to states, though. State revenues have gone way down thanks to the recession. The demand for services has gone up, though.

    If I'm correct, the tax cut package includes $20 billion in state aid (over the next 2 years) - compare that amount to the state deficits, and you know what's wrong with that amount.

    Almost all states are required by constitution to balance their budgets... ouch.
    They have only two options: cutting down spending, or raising taxes. Cutting down spending would mean laying off public sector workers (which leads to a decrease in services), or raising taxes. Most states get their revenues from sales/property taxes.

    So, not only do middle- and low-income families get lesser tax cuts than the higher-income families, they'll also be screwed by the raised sales- & property-taxes.

    The states are affected in another way as well: people will pull money out of the bond market (they'll switch to dividend-paying stocks as they'll become much more attractive), which will lead to higher interest rates, and higher borrowing costs for state and local governments.

    The tax cut will benefit the rich, no doubt about it. But rich people tend to save, not spend, additional money they receive. Companies will not hire more employees if there is no demand for their products. The demand for the products has to come from middle- and low-classers. Too bad they won't see much benefits.

    And about my #7: What I was trying to say is exactly what I wrote: Those conservative right-wingers who fail to see the bigger picture, are happy.

    I'm not saying that all right-wingers fail to see the bigger picture; that would've required an extra comma between "right-wingers" and "who"

  5. #5
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    Neg, Neg, Neg...... <shaking head>

    With your list in mind could you please explain how the two tax _cuts_ that affected the most people in the last 20+ years immediately preceded the two biggest periods of growth in the last 20 years, (The Reagan tax cut 20 years ago and the Bush Jr. tax cut of 2 years ago both were shortly followed by the biggest quarterly growth figures during the entire period).

    If you'd like to go the other way, can you explain how Clinton took over a growing economy and raised taxes resulting in a downturn in the economy that his own party were touting as a recession by the time he left office.

    Here's a suggestion: Play Sim City and raise the taxes..... watch everything leave, (residents, commerce and industry)..... Then lower the taxes back to the original level and watch everything return..... It's modelled on real life you know.......
    Don\'t SYN us.... We\'ll SYN you.....
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  6. #6
    AO Antique pwaring's Avatar
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    No no no, the way it works is:

    1. An election (presidential in the states, general election in the UK) is 12 months round the corner
    2. A tax cut is announced with a huge blaze of publicity
    3. The middle-classes are kept happy and vote for the current government to stay in power
    4. The current government wins the election
    5. Taxes suddenly jump back to their previous levels

    Tax cuts are always announced (or promised) leading up to an election, because they're popular policies at that time and the government is trying to get re-elected (or the opposition is trying to get elected). However, mention tax cuts half-way through your term in office and you'll suddenly be accused of making cuts to public services.

    BTW, I'm a right wing Conservative (with a capital 'C', as in the political party - there is a difference between conservative and Conservative) and I don't necessarily support tax cuts all the time.

    With regards to The Mormon's point on people spending more money, that is not necessarily true. Once a certain point is reached (which of course may be different for different people) people decide to work less hours because their wages are higher, so they still earn the same amount.

    Tax cuts only work to a certain extent, after which they cease to be effective and can even have the opposite effect. Also, there will always be some unemployment no matter how much you cut taxes.

    Edit: If I recall correctly, the last time I checked the US government's budget (when I was doing economics) it was in deficit to the tune of something like $500 million, which is about half of the UKs annual GDP. So tax cuts don't always mean prosperity in the long run.
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  7. #7
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    Tiger >
    I'm glad you bring up the Reagan tax cut
    In 1982 (first year after the tax cuts), the economy shrank with 2.2% (the worst since the Great Depression).
    Reagan's first deficit was $128 billion. His second was $208 billion. When Bush I took over, it was at $290 billion...
    Next: national debt. Carter left Reagan with $994 billion in national debt. By the time Bush left office, it had gone up to $4.3 trillion. It took 200 years for the national debt to reach $1 trillion. In the next 12 years, it quadrupled.

    That's the effect of a tax cut.

    Einstein once said that insanity is doing the same thing over and over again, but expecting different results.

    So, we've had Reagan and his tax cut, and the disastrous consequences. We've had Bush I who was left with that nice legacy. Next: Clinton.
    Clinton must have listened to Einstein, and raised taxes on the wealthy. The result: between 1992 and 2000, 18 million new jobs were created (the highest level ever). Inflation dropped to 2.5% per year (4.7% average for the previous 12 years). Real interest rates dropped (by over 40%), economy grew by 4% (2.8% over the previous 12 years).
    And more important: the giant deficit was actually turned into a surplus. Those surpluses where then used to pay down the national debt.

    And look what option Bush is taking. The same scenario is playing again: 2.7 million jobs were lost since Bush took office (worst since the Great Depression... sounds familiar?).
    Next: the deficit: Clinton left Bush with a $127 billion surplus. Bush managed to turn that into a $158 billion deficit in his first year ($400 billion in his second).

    We've seen it all before, Tiger. And the facts are there to support it. Too bad Bush won't listen to Einstein.

    Edit: Pwaring: 500 billion, not million
    And the national debt is at $7,012,281,097,621 right now. That's 7 trillion

  8. #8
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    Next: the deficit: Clinton left Bush with a $127 billion surplus. Bush managed to turn that into a $158 billion deficit in his first year ($400 billion in his second).

    Good point, but you failed to mention that Clinton also left Bush with a recession (early stages, but still one non the less). http://money.cnn.com/2002/08/07/news...y/bush_cheney/

    Also, we have experienced 9/11 and have gone to war twice (both of which the majority of Americans supported/still support). Not to mention all the extra/added costs of Homeland Security. The Government is now spending much more on different programs that didn't exist before 9/11. And before anyone says it (I don't like the mars plan either). This all adds up over time.

    Who is crazy enough to think that 9/11, coupled with two wars and a handful of corporate scandels to boot wouldn't produce deficits?

  9. #9
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    Neg:

    And you conveniently forget to mention the numerous bleeding heart liberal, special interest, left wing crazy's social programs that cause the spending that cause the National Debt. get rid of them and we would have a surplus like you've never seen. OTOH, Bush is spending like a liberal more every day so I don't see that happening.........

    It took 200 years for the national debt to reach $1 trillion. In the next 12 years, it quadrupled
    Love the way you "twist" figures. It took millions of years to get the world population to 2 billion and about 50 years to almost triple it.

    Source

    2.7 million jobs were lost since Bush took office (worst since the Great Depression... sounds familiar?).
    You did it again without a source....... At the very beginning of the depression, (1929), there were about 400,000 unemployed yet at it's peak, (1933), it was closer to 32 million...... Nice little side comment with nothing to back it up and factually inaccurate to boot.... Source (beware of the GAIN d/l).
    Don\'t SYN us.... We\'ll SYN you.....
    \"A nation that draws too broad a difference between its scholars and its warriors will have its thinking done by cowards, and its fighting done by fools.\" - Thucydides

  10. #10
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    The point I was trying to get at is that a tax cut helps the economy, and therefore it helps everyone. The employers save more money which eventually leads to higher wages, which are taxed so even though the gov. gets a lower percentage, they still get a lot, and we get to keep more of our money!!!

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