Loose: Tax cuts are bad for the wealthy

[loosecannon]

The very wealthy don't spend their increased money. An economy would be far better off to cut the income tax rates for the less well off and increase the tax rates for the very wealthy. The objective of tax is to get money for the government to function. It doesn't matter where the money comes from, the government just needs the money. Now if the very wealthy pay more it means there's more left for the less well-off to spend and they do spend it. In a consumer-driven economy such as in the US having more spending moves the economy along nicely.

This is spot on. John Maynard Keynes was the economist who identified demand as the driving force in economies, not investment capital.

And most of what we call "investment capital" anymore is any thing but. It is money spent in non productive closed loops that are outside of the production demand cycle and do nothing but drain the economy.

[diuretic]

Thanks for this post and the foregoing, I had reached the limit of my knowledge and I was trying to work out things of which I have no direct knowledge, just a faint memory of a couple of classes some years ago. It's good to learn.

[Mr. P]

This is spot on. John Maynard Keynes was the economist who identified demand as the driving force in economies, not investment capital.

....

Yea, yea. What came first, the chicken or the egg?

[diuretic]

No idea what you mean.

[loosecannon]

Yea, yea. What came first, the chicken or the egg?

Demand came first. Supply followed it.

"if you build a better mousetrap the world will beat a path to your door" implies that the demand already exists if you can fill it.

But supply is not equivelant to capital input which is the source of most of the misunderstandings about economic cycles.

It is not necesary for new money to be invested into new business for growth to occur. Most of the growth is fueled by profits which is why taxing corps can be counter productive.

[Mr. P]

Demand came first. Supply followed it.

"if you build a better mousetrap the world will beat a path to your door" implies that the demand already exists if you can fill it.

But supply is not equivelant to capital input which is the source of most of the misunderstandings about economic cycles.

It is not necesary for new money to be invested into new business for growth to occur. Most of the growth is fueled by profits which is why taxing corps can be counter productive.

I'd say a need came first and it was filled, creating demand.

Sometimes it does, a bank loan for example if the company wants to use the profit for operations but use the loan for improvements. The loan comes from banks which are investors.

[loosecannon]

I'd say a need came first and it was filled, creating demand.

Need is the same as demand. When it is filled demand is satisfied.

demand is the quantity of a product that a consumer or buyer would be willing and able to buy at any given price in a given period

[Mr. P]

Need is the same as demand. When it is filled demand is satisfied.

demand is the quantity of a product that a consumer or buyer would be willing and able to buy at any given price in a given period

Demand is nothing more than need for a solution, IMO. It doesn't mean that one mousetrap will prevail or satisfy demand over another solution for the same need, therefore demand is not satisfied. Ahhhh competition.

[Hobbit]

Well really? You do realize that if CA was a nation it would be the worlds fifth largest economy right?

Whatever CA is doing, must be working.

It won't be for long if the economies of Texas and Nevada keep growing at the rate that they are. In any case, maybe California was a bad example. Look at Taxachussetts.

As for the rest of your stuff, I'd like to see a link on how stock market investments never actually result in investment, and if required reserves are as low as 1% right now, then that's all the more money being sent out to grow the economy.

As for what diuretic said about how stupid it would be to use income tax for class warfare, think about what you're saying? When the income tax was originally introduced, it was passed by class warfare, as those in favor of it campaigned in poor areas, telling those people that they'd only tax the rich and then use to money to help these poor people. Then there's the politicians today. Listen to the speeches. Most Democrats, especially those with poor neighborhoods in their districts, have high taxes on the rich with subsidies to the poor as one of their major platforms. That's class warfare.

[diuretic]

It is not necesary for new money to be invested into new business for growth to occur.

I don't understand that statement, can you explain it a bit more for me please?

As for taxing corporations - which is another issue of course - why should they not pay tax?

[Hobbit]

I don't understand that statement, can you explain it a bit more for me please?

As for taxing corporations - which is another issue of course - why should they not pay tax?

They don't pay tax anyway. They collect tax. Only wealth can be taxed. Corporations do not accumulate wealth. Any wealth they get that doesn't go right out the door in expansion is paid to workers and shareholders. You can't short shareholders, as that's the fastest way to watch your business burn, so any corporate income tax is instead paid for by either wage decreases or price increases. Corporations don't pay corporate income tax. You do.

It is, in fact, one of the most brilliant scams the government has come up with. How else would you ever get hordes of rabid people demanding to be taxed more?

[loosecannon]

As for the rest of your stuff, I'd like to see a link on how stock market investments never actually result in investment

Google wiki stock market or any simplified assesment of the stock market.

When a company sells a stock they get that money generated from the sale. ONCE.

The stock certificate is then immortal and is independently bought and sold over and over without another penny ever going to the corporation it represents a share of.

Let's just pretend that Ford motor company issued stock in 1924 at a price of $1/share.

That $1 went to Ford and then for the next 83 years that share was bought and sold 400 times.

The price of that share after splits may have grown to $350 today. So where did that $350 come from? Where did it go?

Well the first dollar went to Ford to invest in new plants.

The other $349 were slowly sucked out of the pockets of the shareholders who were buying and selling that stock privately.

[loosecannon]

They don't pay tax anyway. They collect tax. Only wealth can be taxed. Corporations do not accumulate wealth. Any wealth they get that doesn't go right out the door in expansion is paid to workers and shareholders. You can't short shareholders, as that's the fastest way to watch your business burn, so any corporate income tax is instead paid for by either wage decreases or price increases. Corporations don't pay corporate income tax. You do.

It is, in fact, one of the most brilliant scams the government has come up with. How else would you ever get hordes of rabid people demanding to be taxed more?

wealth isn't taxed while you are alive, income is. And corps do pay corporate income tax.

And corps do accumulate wealth.

[loosecannon]

I don't understand that statement, can you explain it a bit more for me please?

As for taxing corporations - which is another issue of course - why should they not pay tax?

I didn't say they should not pay tax. I said it is not always productive to tax them.

Corporations that are established make profits. They can divide those profits amongst their shareholders as dividends OR they can reinvest in themselves.

If they are reinvesting in them selves then they are the capital engine that fuels their own growth independent of more capitalist investment.

[Mr. P]

wealth isn't taxed while you are alive, income is. And corps do pay corporate income tax.

And corps do accumulate wealth.

Not really. Sure they fork over money for tax, but it's not out of their pocket. It's collected in the price of the product they sell.