allow me to warp your brain: taxes STIMULATE the economy

[unblock]

increasing demand stimulates the economy. if i decide i want or need more goodies, not only is the spending on the goodies directly stimulating the economy, but in order to shore up my budget, i need to work harder to make ends meet in order to be able to afford those extra goodies. if i want a private security company to protect me, if i want to be more generous to charity, whatever it is, i need to work harder and earn more to pay for it all.

well, the government has to do the same. in the infinite wisdom of congress and the president, the government decides that the country wants or needs more goodies, be it armed forces or subsidies or help for the poor or whatever. it then levies taxes to make ends meet.

so what are taxes but the governments way of transferring the need to make ends meet from the collective to the individual? the government decided that you have a need for an army, you have a need for a fire department, you have a need for subsidizing the production of high fructose corn syrup, whatever, and the taxes it levies on you is the mechanism by which the DEMAND for these goodies falls on you.

now YOU have to work harder to make ends meet, just as if YOU had a individual need for more goodies. it's no different when you substitute your share of a collective need. in either case, you have to earn more to make ends meet.

yes, the spending on the military and everything else is directly simulating to the economy, but the fact that you are taxed and you have to pay for it is also stimulating to the economy. you have to work harder and earn more to pay for it.



of course, we're all well familiar with the argument that taxes slow down the economy, and yes, the presence of a tax makes individual markets less efficient; more money must be spend to buy less, resulting in fewer items being purchased.

but this ignores much of the way people actually earn money. it's easy to think we all just have an incentive to earn as much as possible and leave it at that. but in truth, most of us earn as much money as we reasonable can in order to get comfortable enough, at which point we say we'd rather spend our time and effort on things other than more work.

taxes make us less comfortably able to maintain the standard of living we want, and therefore push us to work harder, stimulating the economy.




tell THAT to your republican friends!

[EOTE]

1. Correction. More PROGRESSIVE taxation stimulates the economy.

Taxes on the middle class right now would be fairly devastating to the economy.

Edited for typo.

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3. well, there are many, many forms of taxation, all with different effects

i was trying to avoid getting into that level of specifics, but you're right. in order to see the effect i'm talking about, you have to tax enough to make people uncomfortable, to push them to earn more. in order to make the rich uncomfortable, you need very high taxes on them in terms of marginal rates.

poor people, on the other hand, are already uncomfortable even without taxation.

[Jackpine Radical]

2. Here's a LTTE I had published in my local paper months ago:

The notion that tax cuts for the rich will create jobs is total nonsense.

First, if reducing taxes in the top brackets is such a great employment stimulus, why didn’t it work in the years since the Republicans initiated it, in the beginning days of the Bush Administration?

Second, if prosperous business owners want to squirrel away some money where the IRS can't get it, they can always reinvest it in their businesses and claim the tax deduction. In this case, HIGHER taxes, not lower ones, would provide incentive for business growth.

Third, jobs don't just appear because the rich have a few more millions lying around. They already do. Not just millions, but hundreds of billions that they're sitting on because the economy is too weak to invest in.

Jobs appear when there is work to be done. There is work to be done when demand increases. Demand increases when the common people have something to spend. Common people have something to spend when they get either paychecks or unemployment checks.

Extending unemployment benefits will therefore ultimately increase employment by increasing demand.

Extending tax cuts for the rich will do nothing but make the rich richer while slowing down the economy and pushing up the deficit for no good reason.

[dkf]

4. Except what happens when your taxes go up and you want to make more money but you can't.

Because you are already working 60 hours a week and the job market sucks? And then they increase your medical premiums and gas keeps going up.

Then you get squeezed and you can't pay your bills or you have to eat tuna for lunch and Mac cheese for dinner every day.

[unblock]

5. hey, whaccha got against mac & cheese for dinner? :)

my personal favorite meal, lol.
hey, i'm a man of simple tastes....



yes, agreed, overtaxation is painful. i'll stick to my guns and say that it does increase demand -- your desire to get a higher paying job is increased, and some people in that boat will find a way to do so. but yes, you're right, some people will also just get crushed, and then at best you're just redirecting demand from private desires to public desires.

the ideal (in terms of stimulating demand) is to tax people in each income bracket up to, but not beyond, the point at which they feel uncomfortable enough to do something about it, and no further. and then, of course, you have to do everything else to make sure the economy is functioning enough to provide opportunities to earn more, meaning education & job training programs, a strong labor market, etc.

one of the many problems we're having right now is that the powers that be have created an environment where those with the means to hire more and pay more aren't properly motivated to do so. they are not taxed enough, they have easy access to cheap labor in other countries, they are pressured to produce profit instead of jobs, and there's more money in buying and selling companies than there is in hiring and earning it.

i'd say tax levels for the poor and much of the middle class are about right these days, but taxes on the rich are ridiculously low. such a simple solution to so many problems, and such a good indicator of the problems with the way power works these days that increasing taxes on the rich is a political non-starter.

[dkf]

6. Do you really want rich people to be motivated to make more money?

They aren't always ethical you know.

[unblock]

7. lol, i had no idea :)

well, there's also a public demand for strong regulation, oversight, and law enforcement.
and again, we see how often that happens....