Can lowering taxes actually stimulate growth?

[Secure Da Bag]

For those of you who are tax-growth (ie: lower tax = more growth) people, I'd like to hear from you. Help me understand how this works. Or at least how this is supposed to work. Because being on the more liberal side, I'd like to have Universal Basic Income, Universal Healthcare, and Very cheap college (still debating whether college should be free). Which means that taxes would have to either be raised or a lot of credits, deductions, loopholes, and breaks will have to be closed or outright removed. So I'd like to hear the other side on this, so at least I can be better informed.


SIDENOTE:

I would have liked the Republicans to pass the individual tax rates as,

00%: $0 - 10000
05%: 10001 - 42000
10%: 42001 - 60000
15%: 60001 - 100000
20%: 100001 - 250000
25%: 250001 - 450000
30%: 450001 - 1000000
35%: 1000001 -

And Corporate Tax Rate as 25%

And they both be permanent. I believe that would be an actual tax cut for all individuals. I'd also expect more loopholes, breaks, and deductions either closed or removed.

 

[the cac mamba]

this goes against the narrative :jayfdup:

 

[TLR Is Mental Poison]

The past decade shows this to not be true. Taxes are at record lows and growth is tepid. Granted we are coming out of the worst recession ever but the fact still remains.

 

[Domingo Halliburton]

Basically the argument boils down to you would have more money in your pocket to spend if they cut your taxes.

 

[mbewane]

One of the arguments for it is that less taxes means that you have more money in your pockets, and thus spend. That's what supposedly "boosts the economy". But that's assuming that people with more money will spend it more, which is a reach : in an uncertain economy (everyone is saying how much "the economy is bad", "crisis", etc...) people will tend to save that extra money for a rainy day. Even more so when they are rich : the more money you have, the less (relatively to your wealth) do you spend : you might invest (which can benefit you and that specific company you're investing in, but does it benefit "the economy" as a whole? Not necessarily if people don't have the funds to buy what you're selling), but more likely in this "modern" economy you go on the trade market, where there's even less taxes and money is basically detached from the real economy. So that supposed "extra money" doesn't really benefit the economy, or at least not as much as it supposedly would.

A tax cut can be benefitial if it affects the middle-class : they might less feel the need to save (since they already have a steady income ) so they might go out and indeed spend a little bit more. But usually you tend to get back to your "standard" spending habits. Poor people will most likely save, and ironically enough rich people might too (or spend less, relatively to their overall wealth), because they basically already have all that they need.

 

[Domingo Halliburton]

One of the arguments for it is that less taxes means that you have more money in your pockets, and thus spend. That's what supposedly "boosts the economy". But that's assuming that people with more money will spend it more, which is a reach : in an uncertain economy (everyone is saying how much "the economy is bad", "crisis", etc...) people will tend to save that extra money for a rainy day. Even more so when they are rich : the more money you have, the less (relatively to your wealth) do you spend : you might invest (which can benefit you and that specific company you're investing in, but does it benefit "the economy" as a whole? Not necessarily if people don't have the funds to buy what you're selling), but more likely in this "modern" economy you go on the trade market, where there's even less taxes and money is basically detached from the real economy. So that supposed "extra money" doesn't really benefit the economy, or at least not as much as it supposedly would.

A tax cut can be benefitial if it affects the middle-class : they might less feel the need to save (since they already have a steady income ) so they might go out and indeed spend a little bit more. But usually you tend to get back to your "standard" spending habits. Poor people will most likely save, and ironically enough rich people might too (or spend less, relatively to their overall wealth), because they basically already have all that they need.

Econ 101.

 

[Domingo Halliburton]

Now that i look at it, im pretty sure in your example you're arguing for lower taxes than what we have now.

 

[Secure Da Bag]

Now that i look at it, im pretty sure in your example you're arguing for lower taxes than what we have now.

Yep.

 

[Gus Money]

Lower taxes for middle and lower class citizens maybe.

Definitely not for the wealthy. Literally decades of research shows that rich people just hoard their money. Middle and lower class people spend (because they need to).

 

[the cac mamba]

Lower taxes for middle and lower class citizens maybe.

Definitely not for the wealthy. Literally decades of research shows that rich people just hoard their money. Middle and lower class people spend (because they need to).

yeah if you make 15 dollars an hour, the average person isnt saving anything. they're spending every penny, if not more than they have

 

[Maschine_Man]

Meh, I'm good with higher taxes if it means universal healthcare, lower education costs and other social benefits.

 

[Futuristic Eskimo]

All else equal, yes, but you have to take into account context. The focus of this cut has been on corporates, which already have record amounts of cash on their balance sheets. The likely scenario of giving them more cash isn't increased investment, IMO, but increased share buyback and dividend activity.

Also, we are in the midst of an expansion and the Fed is tightening monetary policy. Accelerating the economy at this point with a tax cut is counterproductive, as it will only lead the Fed to increase its tightening pace (again, all else equal). When the inevitable recession hits, you run out of tools on the fiscal side to help smooth it out if you have already cut taxes.

Both the timing and structure of the tax cut makes no sense to me. Clearly a cash out.

 

[Dr. Acula]

Folks arguing one or the other are falling into a false dichotomy.

This is a question of relativity. The Laffer curve, even though the "creator" is a supply side republican shill, is valid.

At some point it becomes detrimental to lower taxes to a certain point that causes public services and public investment to suffer. See Kansas and Oklahoma. This is the direction current republicans wish to trend towards. In this context, its bad policy.

However, having way too high tax rates can discourage private industry from growing.

So in short: Depends.

In the US currently, tax cut for the wealthy and further cuts to education, infrastructure, and pithy tax cuts for the middle and lower classes will not stimulate growth given the underlying issues and growing wealth gap since Reagan first started this movement. Tax cuts for the middle class and lower classes would be preferred since as people have already said, they tend to spend additional monies since they usually have needs to be fulfilled. When you rich, you tend to just move a lot of money around and not spend it because all your basic needs and enough of your luxuries are taken care of. The latter does not create economic growth because it does not create a demand that can be fulfilled by a supply.

 

[NkrumahWasRight Is Wrong]

It works if everyone keeps the money flowing

If money saved goes to the sidelines and stays there then it's not good for growth

Personally id be in favor of tax cuts if the country could afford it..

 

[Mook]

nikkas who got billions ain't got enough time to spend it all they eventually just hoard it.