The Historical Lessons of Lower Tax Rates

There's been some discussion of tax rates vs. job creation. Here's a piece on the subject.

There's a tipping point beyond which taxes inhibit economic growth and job creation. In a time where the admin is seeking a pass to borrow more and raise taxes, yet resists reduction in govt spending, this article gives some perspective on the subject.

* special thanks to flounder for contributing to this thread

 

Lol, Heritage.

The economy was booming in the 50s; and as you noted, tax rates were rather high. There's little connection between the two.

 

With all the deductions available, and factoring the amount of state and local taxes, folks paid less taxes in the 50's.

Libs look at the top marginal rate, and think that is all that matters.

What we did not have in teh 50's is the loer 47% paying no federal income taxes. Of course, liberals are far larger parasites now than they were then.

 

This is something that liberals can never accept. They must have your money so they can give it to others so they become dependent.

 

There are hundreds, if not thousands, more loopholes than there are now. What are you talking about? The amount paid by the top 5% is less now, quit obviously. Meaning more of a burden is on the middle-class; which wasn't so back then. Hence their rise was possible.

 

What happens with a lower tax rate is business expands, they just do MORE BUSINESS, thus they higher more employees and wind up paying more tax overall. This is the perfect scenario of how low tax's can work. Now, if you turn around, raise spending, raise Tax you are doing the exact opposite. You are stopping growth and therefor hiring less.

It's basic, but works. The fear of the Liberal is that you give that break and there is still no growth and owners horde. For any length of time this makes no sense, if there is no growth in the business it suffers a slow death, any businessman is aware of that. Expenses climb no matter what, a business most grow to keep up with the very expenses one started with.
One thing that may encourage no growth is distrust in the Government, uncertainty,,and man we have a load of that lately.

 

During the first couple of years of Reaganomics the country experienced very high inflation and interest rates. Normally the way to lower inflation is to RAISE interest rates to ”soak up” all the extra money. That policy DECREASES economic activity. Reagan basically made a deal with the American people. He would lower their tax rates, and they should therefore produce more in a time of high inflation, and high interest rates. The deal worked as production went up during an inflationary time, something that is not supposed to happen. Let people keep more of what they earn, and they earn more. All the tax brackets are a joke. Eventually people spend their time trying to avoid the next bracket, instead of producing more wealth.

 

But the key thing is, the 1950s saw tax cuts from WWII and New Deal levels. The may key to economic growth was the fact that taxes were decreased. While levels were still high, the cuts provided more encouragement for investors, not to mention the elimination of many new deal era programs.

The burden is actually on BOTH the middle and upper class. Taxpayers are in the same boat, because 50% of Americans take in more welfare benefits than they pay in taxes! Over 25% of Americans don't pay any income taxes at all! They only take from our welfare system, thus causing a drain on the system. You may think that the 5% richest can afford to pay more, so that they're somehow a burden, but you forget the millions of americans that dont pay taxes at all and get freebies. If you wanna talk about burdens, do it about these people, not the private entrepreneurs that help power our market economy.

Its only the democratic politicians who gave out the freebies in the first place that claim the rich are burdening the middle class. They do this so they can get more tax money to increase the dependency of the poor upon government. (and buy votes)

 

The tax base should be the top 40%, so America should raise the bar even higher. There are sales taxes, there are payroll taxes. Everyone pays taxes.

Income taxes aren't corporate taxes, stop confusing the two.

 

Exactly. I and others have made this profound point before. The Dem party has perpetuated it's power for many decades by pandering for votes.

Freebies for votes.

And we're paying for it now with debt and taxes that are among the factors preventing a recovery.

 

Yes, but i'm referring to income taxes. When people debate tax brackets, its usually about income taxes. The corporate taxes are a no brainer because if american levels are higher than nearby countries then companies will move elsewhere (its sort of like how many Pennsylvanian companies have headquarters in Delaware because of lower state tax rates).

Payroll taxes don't count because congress doesnt control it directly. the Social security payroll tax is partly controlled by a formula in the entitlement program itself. Additionally, if we tax employers for simply hiring and paying their workers, it will reduce incentives to invest in the economy.

A high sales tax (such as the VAT in Europe) won't benefit because it will reduce the amount of money consumers have left to spend. The tax may not be a lot with each daily purchase, but buying a TV for $1000 will see $60 lost in taxes (with a 6% tax, the rate some states use). If you increase this, EVERYONE (poor, middle class, rich) will all be hurt, and our consumer industry will suffer due to decrease in available consumer money.

When we look at only income taxes (the only subject up for debate when we talk about "highest tax brackets"), you have failed to refute my arguments on how the poor actually cause the burden in the system.

 

Because they don't. They're the primary consumers in the US economy. FYI, the US economy is a consumer-driven one.

 

You are missing the entire point I believe, in all those instances those business's wound up paying more money ''overall'' in tax's because they made more. As long as they are making large profits you can then raise the tax's with little negative effect.
Catch there is no other way that works as well, what do we do next time? do you think for a moment the Liberals will want to spend less? They will just repeat the same thing and then want the Rich to pay that too, sooner or later they will start moving out, it inevitable. We have to learn to spend less, there is no other way.

 

This has nothing to do with business; these are personal income taxes we're talking about.

Taxing the top 2% at what they used to be taxed as the rest of the nation is making sacrifices is only fair and beneficial for the economy.

 

What are you talking about????

The poor have the LEAST AVAILABLE SPENDING MONEY OUT OF ALL OF THE SOCIOECONOMIC CLASSES BECAUSE THEY EARN THE LEAST. Thats why they're CALLED POOR! Thus, because they have less money, they contribute less to our consumer economy. Its actually the rich and the middle classthat have more money, buy more cars, TVs, houses, furniture, toys, snacks, computers, etc. that actually contribute the most to our consumer economy.

Once again, the poor do burden us because much of the tax money paid by hard working middle class and the upper class go towards welfare payments and other freebies like medicaid for the poor. They take in from the government more than they pay out. Thus, they place an unsustainable burden on the entire system. Its simple arithmetic. All im saying is that don't go around spreading misinformation like that.

 

Tell me how the rest of the nation is making sacrifices? Obama (and the republicans) have pledged to keep tax cuts for everyone earning under 250k a year. Entitlements have NOT been cut. Government spending has been barely been touched. I see no major sacrifices that the rest of america has made that the rich have not taken. Give me some examples.

 

Trying to talk economics with the moocher class is one giant exercise in stupidity. To them, its all about someone else's money being used for the benefit of the moocher.

 

The poor have much higher propensities to consume. They're more economically efficient in a consumer economy per dollar. The middle-class and rich do not match them, don't come close.

A social class cannot be measured on their tax input and cost to the government. Such is elementary thinking that ignores social economics and the market. Economics isn't based on basic arithmetic.

Not so ironically, you're just spewing philosophy. Unfortunately, econometrics and calculus have proved it incorrect.

 

Not when the money they have was given to them, they do not produce.

 

Spending has been cut; and proposals are for more than 2%.

You don't want to play this game; I pay much more in taxes than you do.

 

It's hard to explain this concept when you look at it like this; because basic 'street' economics doesn't work in anything.

Monetary velocity is important, and the rate and amount that is a part of one's disposable income is equally important.

 

It's like they are addicts, we see no improvement from them at all. They get so delusional they even try to explain how their food stamps IS HELPING US! LOL..

This is their contribution to our society, their Job,,,food stamps....
Then Catch calls them...consumers...


They consume alright,,,like Locusts.....

 

Worst of all, their biggest asset is stupidity. Forget taxing cigarettes. Lets tax stupidity. Shift the taxes back to the liberals.

 

But the middle class and the rich spend in a way that is sustainable over the long-term. If we got less people dependent on the government, then their spending would be sustainable, removing the drain on the government.

The inherent problem here is that with the high labor costs (see min wage, union negotiation costs, etc) associated with doing business in America, jobs have gone elsewhere. With the departure of these jobs came the arrival of disecouraged workers (not seeking employment) dependent on welfare. While the government may fund their spending, this is not a preferable situation. If we reduced barriers to employment, many of these people might have JOBS! The advantage here is that with jobs, many low class americans wont need welfare, and their spending habits can be financially sustainable in the long run.

Besides, taxing the rich will encourage them to shield income from the taxes by investing in non-taxable long-term bonds. This will reduce efficiency of taxation by the IRS.

I asked for examples. Like specific, examples. Instead, you've simply repeated your claim. Give me some spending cuts and tell me how they impacted lower-class and middle class americans.

If you live in greece like you're profile states, then thats because of your government's financial irresponsibilty. It delved too much money into welfare and entitlement programs with long-term obligations that the debt became overwhelming. Unlike the US, Greece has no way at all to avoid disaster because of its sluggish economy and how late they started to act. Its a classic example of how funding the lower class through welfare can cause financial disaster.

 

Of course it's hard to explain.......most things ridiculous are... Catch,,we give them the money. That's like having a Bum son and he says...
''Dad I saved you money today,,,I was going to go bowling and ask you for ten bucks, but I decided to stay home and watch TV.'' ..

THEIR DISPOSABLE INCOME IS OURS!!!