Economics 99 (Remedial)

About this “(multi) trillion dollar tax cut” thingy; First, tax cuts don’t cost anything.  Taxes cost us, but cutting taxes saves us money.

That’s not the main point though.  The main point is that cutting taxes lightens the ball-and-chain that’s around our ankles, allowing us to invest and produce more, resulting in more income, which in turn increases revenues.  Taxing any behaivor reduces the behaivor while incentivising an underground economy (black market) in that behavior.

You might think that taxing something less dynamic, like property values, might be different– that you could actually add up the property values in your district, multiply that by the amount of change in the tax rate, and know exactly the difference in revenue that will result.  Simple huh?  Well you’d be totally wrong for several reasons.  Here in North Idaho we have a whole population of refugees from other states who fled high tax rates in their states, increasing our property values and presumably reducing the values in the areas they fled.

I could barely afford to get new siding on my house and resurface my huge deck, but since it would increase the assessment value, resulting in a higher tax bill, uh, maybe it’s not so important.  Not this year.  And there is why we have a lot of what I call “Tyvek Houses”.  A Tyvek house is one that remains in un-finished condition for decades at a time.  They are ugly, and unattractive to buyers, but if you plan to live in your house you don’t care about buyers.  You care about the assessed value, because you don’t want to pay out huge sums in taxes year after year, so you don’t want it looking too nice.

You lower the tax rate, and because the punished activity (punished by taxation) becomes more affordable it becomes more common.  The result is more tax revenue.  M’kay?  Reducing rates beyond some extremely low level that we haven’t seen in over 100 years will at some point start to reduce revenues, but in that case we will not only have no use whatsoever for 95+% of what government does today, we’ll have no time nor patience for it.

I needed the first paragraph because there is a plan that could be called a multi-trillion-dollar tax cut.  Dramatically slash the income tax rate, and you get trillions more dollars flooding into the treasury.  You get trillions more dollars flooding into the country from everywhere too, essentially, because investments in the U.S. (as opposed to investments in other countries) become that much more attractive.  Capital, along with the people who own it, moves to where it can be safe and free.  Better put it’s; “free and therefore safe”.

The “expert” economists on the left understand all of this perfectly of course, as any kid who ever ran a lemonade stand would.  That proves to us that their intentions are not good.  If they know that lower taxes will result in a better economy, and that ultra low low taxes will result in a super good economy, and they oppose all tax cuts, well, you figure it out. (hint; they think that America is too big and important already)  They want you out in the streets shouting “Eat the rich” while promising to pay for everything in your life through tax revenues.  Do you see the blatant contradiction there or has your mind been taken over?

Meanwhile, the Republicans can’t quite bring themselves to explain it, because they’re afraid.  That or they have brain damage, but I don’t think it’s brain damage per se.

I say that the American people deserve to have the case made, straight up, what it is that we face, verses what it is that America was meant to be.  If the Republicans can’t bring themselves to make the case, we’ll have to take over their stupidshitty, Progressive party and fundamentally transform it from the inside.

6 thoughts on “Economics 99 (Remedial)

  1. I enjoy your writing as it espouses my view. I think the problem with Republicans is though they don’t hate the rich they like to pick winners and losers. So while there won’t be any tax the rich talk it will be this company or that industry needs a tax break or subsidy. We need to protect US companies from currency manipulators.

    An example is Romney’s position on China. Consumers have spoken and clearly want the cheaper Chinese items versus more expensive US goods (for some things). Rather than thank the Chinese government for a 20% discount on their goods we want to apply a tariff. They say that this will create jobs here but don’t explain how that is going to happen when people have less income from the increased cost of goods.

    One think I always try to point out is that capital is limited and people are always competing for it. Industries that we don’t have a competitive advantage only suck up capital that can better used in other areas. Let China’s go to producing Barbie dolls and iPads, I want to see the capital going toward curing cancer and cutting edge technologies.

  2. “First, tax cuts don’t cost anything.” That is your opinion, not widely held on the left.

    You are forgetting that the default position for Democrats is that all you produce belongs to them, and what they might let you keep is due solely to their generosity, not any necessity. Your support of the Dems might get you a better deal than a non-supporter, but don’t bet on it.

    Explaining that Dems view citizens as slaves might help folks understand their words and actions better.

  3. What you are saying is that the politicians are taxing us more so they can end up with less money to spend. Think about that for a minute. It sounds insane. But that is what is happening. The only question is why. Obviously, something more than just money and buying votes is involved.

    If you were a king and had absolute power you would want to keep the tax rates low so you could get more money in your treasury, right? It just makes sense.

    To get to the bottom of this you need to look deeper than politics, deeper than economics, deeper even than the all mighty vote; all the way into the dark recesses of the human psyche.

  4. Steve; I’ll have to look further into specifics, but back around the turn of the 20th century there was talk among the super rich of limiting the wealth accumulation ability of regular Americans. It was thought that with too much wealth comes too much power. This was among the super rich, who already their wealth and power.

    To me it’s pretty simple. When you’re the Top Dog, you want to remain the Top Dog. You see it everywhere. In sports you see the top scoring player hoping that the other contenders will screw up so they can win the gold. We saw Medieval kings make laws stating that no one could build a building higher than the palace. We’ve seen the British High Born regard rich American upstart entrepreneurs with scorn.

    America was founded to get away from such nonsense. It is only when the government gets involved in doing the same things that we have a real problem, such as we have now.

    We need to understand that the pressure will always be there for government to get involved in industry. Whenever and where ever it happens we need to understand that a crime is taking place. We can’t blame business in general, but we can certainly blame government which has limits that it is breaking.

    In a free society thee will always be the super rich, and some of them will attempt to use their wealth to influence government. It’s guaranteed. So long as government is prohibited from yielding to them, we’re OK. When it happens we need immediate, harsh punishments for the Oath Breakers. We haven’t been policing our servants and we’re paying the price for our negligence.

  5. Steve,

    I think part of the problem is that leftists (and many on the right) think that the economic pie will remain the same size or grow at a steady, predictable rate regardless of their policies. They don’t believe that people will change their work and earning habits based on government policies. In their view, you’ll work the same amount and earn the same wages whether you’re taxed at 10% or 70%. Therefore, to fill the government coffers faster, they simply need to tax more.

    It’s a self-contradictory belief because they obviously believe that targeted tax breaks or increases will change corporate behavior. They firmly believe that providing tax breaks for “green” energy will encourage growth of that industry, or adding extra taxes to coal and oil will depress those industries. But somehow they don’t make the connection between these targeted tax effects and the larger effect to the national economy when taxes are raised and lowered across the board.

  6. Steve, the income tax was instituted as Lyle says, it was a tax on wealth accumulation, slowing the rise of the new rich. In function it is similar to a large fee in investment management. Too large and not only do you not grow your nest egg, your gains will disappear after factoring in commissions and fees.

    Mikee, “Explaining that Dems view citizens as slaves might help folks understand their words and actions better,” except if you say that to rank and file Democrats you will lose their attention quicker than if you say you’re a truther, because they don’t think they view others as slaves, and they don’t understand the crucial difference between what they believe and what the people they elect believe.

    Lyle, not only laws against building taller than the palace (except for the church steeples), but what were called sumptuary laws, you could not DRESS like someone above your station, even if you had the money.

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