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The logic of tax cuts on the rich.

Posted: Sat Sep 01, 2018 10:39 am
by VG_Addict
Can someone tell me the logic in thinking that reducing taxes on the rich, who make up a significant portion of the country’s money will stimulate the economy?

Re: The logic of tax cuts on the rich.

Posted: Sat Sep 01, 2018 11:47 am
by I am nobody
The usual idea is that, since the rich don't need that money immediately, they'll invest it in their own or someone else's business and the resulting productivity increases (assuming the business is well managed) will trickle down to everyone else. It's also an appealing form of stimulus for hardcore small-government types since reducing the tax base also forces the government to shrink (in theory) - a similarly expensive stimulus to the poor would presumably come from increased spending rather than tax cuts (since they don't pay much income tax to begin with), so it would also increase the size of the government. And no matter how much you believe in either of the above, it presumably helps at least a little that many of the people voting for the cuts and their major donors would be direct beneficiaries.

That said, cutting income taxes to increase business investment/productivity is a very roundabout way of doing things - there's no guarantee that anyone will do anything at all with the extra money, let alone invest it in productive companies. It'd make more sense to implement that as an investment credit rather than a no-strings-attached tax cut.

Re: The logic of tax cuts on the rich.

Posted: Mon Nov 26, 2018 2:07 pm
by KTiger_44
It's a way to get funding from corporations when you're running for president, nothing else.
Cut the taxes for the rich and for big companies, and they'll use it for themselves or invest in cheaper countries.
I've got family in France, where the latest governments attempted to do this. They reduced taxes for rich people and on big companies, the former bought houses, cars and yachts abroad or used the money to straight out move away and the latter just showered the shareholders with money and/or created jobs... in Romania, Turkey or Bangladesh.
The head of the CEO's union bragged about bringing 1 million jobs in France in a couple years with these tax cuts, and after it was implemented, the number of unemployed people rose, with a non-negligible fraction of the working population trading stable long term jobs for part time and/or limited period contracts.

Re: The logic of tax cuts on the rich.

Posted: Mon Nov 26, 2018 7:17 pm
by Shane
What we saw with US tax cuts was a move toward the middle. Our corporate tax rate was the highest in the world and highly uncompetitive. Now it's right about average. Some of these companies have gotten hundreds of millions of dollars in breaks. In part, millions of people are getting thousands of dollars in one time payouts. Whether that will continue, probably not. So much media coverage was like peer pressure. You basically had to do it because you didn't want to be the only one who wasn't. Still, it's a very competitive environment with unemployment so low. Companies have to find some way to compete for quality workers, and this will help. If they want to do a stock buyback or invest in technology or other assets, that helps me, too, as also I am a part owner of the public company through employee stock purchase plan, albeit a very small one.

What we shouldn't see is any more Burger Kings. Buy a Canadian company and move to Canada because Canada (yeah, that Canada) is seen as a country that offers reasonable taxation.

Re: The logic of tax cuts on the rich.

Posted: Tue Nov 27, 2018 3:44 am
by I REALLY HATE POKEMON!
KTiger_44 wrote:
Mon Nov 26, 2018 2:07 pm
It's a way to get funding from corporations when you're running for president, nothing else.
Cut the taxes for the rich and for big companies, and they'll use it for themselves or invest in cheaper countries.
I've got family in France, where the latest governments attempted to do this. They reduced taxes for rich people and on big companies, the former bought houses, cars and yachts abroad or used the money to straight out move away and the latter just showered the shareholders with money and/or created jobs... in Romania, Turkey or Bangladesh.
The head of the CEO's union bragged about bringing 1 million jobs in France in a couple years with these tax cuts, and after it was implemented, the number of unemployed people rose, with a non-negligible fraction of the working population trading stable long term jobs for part time and/or limited period contracts.
Trump didn't receive funding when running for president though, and isn't he cutting taxes for them?

Re: The logic of tax cuts on the rich.

Posted: Tue Nov 27, 2018 4:41 am
by KTiger_44
I REALLY HATE POKEMON! wrote:
Tue Nov 27, 2018 3:44 am
Trump didn't receive funding when running for president though, and isn't he cutting taxes for them?
Well, does Trump even need funding for anything with his own wealth? Not to mention that the Republican party still gets help from coal, oil, gun lobbies and other sources.
But then, I'm much, much better versed in European politics than in the American scene, where tax cuts and limited government action are the norm.

Re: The logic of tax cuts on the rich.

Posted: Tue Nov 27, 2018 8:59 am
by Shane
Europe generally has very high tax burdens, though the theory is that you pay more because you get more. That's the sort of thing that DSA openly promises. They want to raise taxes on everyone. Though Europe also has its own special circumstance of unelected bureaucrats making decisions for half a continent.

Re: The logic of tax cuts on the rich.

Posted: Tue Nov 27, 2018 10:46 am
by I REALLY HATE POKEMON!
KTiger_44 wrote:
Tue Nov 27, 2018 4:41 am
I REALLY HATE POKEMON! wrote:
Tue Nov 27, 2018 3:44 am
Trump didn't receive funding when running for president though, and isn't he cutting taxes for them?
Well, does Trump even need funding for anything with his own wealth? Not to mention that the Republican party still gets help from coal, oil, gun lobbies and other sources.
But then, I'm much, much better versed in European politics than in the American scene, where tax cuts and limited government action are the norm.
No, he doesn't, but there's no reason he couldn't have used funding anyway. He didn't for a good reason, as his son put it: "Say what you will, my father can't be bought, he can't be bribed, he can't be coerced." I've never understood how politicians could be allowed to so obviously be tied around the fingers of donors, seems to me like it could result in a potential conflict of interest between duty and obligation.

Re: The logic of tax cuts on the rich.

Posted: Tue Nov 27, 2018 11:28 am
by steeze
Yeah, the whole trickle-down theory is probably the best explanation for the question originally posted. That's what I was taught in school anyway.

I think Monty Python made a good metaphor for the European tax season.
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