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- thenekkidtruth, on 11/18/2008, -22/+115If you give millions to billionaires, they buy homes on the Thai Riviera, invest in China's Hang Seng Index, and build factories in Guang Dong Province. Give that same money to average Americans and they buy American hamburger, American diapers, and even American beef.
The choice is clear: trickle-up economy. - jeffiek, on 11/18/2008, -4/+59"High marginal tax rates correlate with economic growth."
Correlation != Causality
This is a huge problem with almost all economic theories. Life is so complex that it is virtually impossible to eliminate confounders and, more importantly, reverse causality.
This part - "High taxes create an incentive to reinvest profits into long-term growth." - makes some sense. The higher the taxes, the greater the incentive not to pay them. DUH. But totally misses the point that the decision making process of investment as been distorted. Taking money out of a marginal business and putting it into a better business has been discouraged. It also places the tax burden on those that work for a living since the business owners can evade taxes that the worker can't.
Applying this to digitronics comment to work being shipped to China, we find that one of the reasons that American workers are expensive is the tax they pay that Chinese workers don't have to pay. Workers demands are based on after tax dollars, they work because they want goods and services not because they want to pay bureaucrats. Reduce the size of government, reduce the tax burden, and the American worker becomes more viable. - sheeplescareme, on 11/18/2008, -25/+71complete rubbish. the author assumes that growth is both infinite and good. he does not take into account the large percent of americans who pay no taxes at all, nor does he even address the fact that taxes are such a such a small part of the big picture. taxes are not the lone driving force in the economy; spreading that falsity is what has kept so many of us divided throughout the years.
- mfc5200, on 11/18/2008, -3/+40This article is so misleading in SO many ways it is ridiculous. Let's start
1) "Tax rate increases are followed by real economic growth. Examples include Hoover in 1932, Roosevelt in 1936 and 1940, Bush the Elder in 1991 and Clinton in 1993." Hoover, had to deal with the crash of 1929 and a young Federal Reserve that had no idea what it was doing. They RAISED interest rates during a recession. Roosevelt, had a little stimulus package called World War II. He didn't have to worry about budgets, he could spend as much as he wanted.
Clinton, was president during the mid to late 90's, when computers started to become standard and the internet was taking off. Productivity rates as a result were skyrocketing. He also didn't really raise taxes... I wouldn't argue that Republicans are better for the economy than Democrats. But I wouldn't argue that higher taxes are good for an economy.
2) Governments don't keep the money they collect; they spend it. It goes right back in. It just takes a different route. It goes to different places.
Of course they spend it, but what do they spend it on? Know any government employees? $30/hour wages, full benefits, etc, for answering a phone all day?
http://www.google.com.mx/url?sa=t&source=web&ct=re ...
Pentagon can't account for $2.3 trillion? When government spending is high, the pickings are bigger for corporations looking for a handout.
http://www.opensecrets.org/lobbyists/
This creates inefficiencies. $700 billion dollar bailout for the banks? Why not. $3 trillion dollar Iraq War? Bring it on. $300 billion dollar farm subsidy programs? $50 billion to keep mismanaged auto companies in existence? Hell yea. Does the average person see anything CLOSE in the value of benefits every year they receive from Washington versus the amount of money they either directly/indirectly send there? Of course not. If this was a smaller country like Denmark, the Netherlands, I would say ok, you can keep track of that money and do good with it. But when the budget it over $3 trillion dollars per year, you know there is going to be an insane amount of corruption/lobbying/deal making to get a hold of that money.
Also, working against his entire argument is the fact that the wealthiest countries (exception Norway, which has a ton of oil/capita) all have low tax rates
https://www.cia.gov/library/publications/the-world ...
You can go on and on with this article and but much negate a point in every single paragraph. - Plotinus, on 11/18/2008, -5/+34what you're referring to there has a name in economics. It's the "marginal propensity to consume". Give millions to rich people and they save it, invest it (usually abroad) but spend relatively little of it. Give the same millions to poor people and they spend every single penny of it, mostly locally.
Trickle down economics is, and always was, absolute bollocks. - phosphodyson, on 11/18/2008, -8/+36This article is utter BS and is revisionist history at its worst. It is because Ronald Reagan cut taxes that resulted in the unprecedented growth during the mid to late 80s. Also, if you take a look at Margaret Thatcher's effort to cut taxes and increase privatization in the U.K. during this period you'd also see that there was unprecedented growth. Indeed, busts do happen, that's the unfortunate nature of a market economy. However, without Reagan cutting taxes we would not have had the long boom after the early 90s recession. Also, may I point out that Kennedy cut taxes by quite a bit also during his administration, resulting in a long boom for the U.S. economy during the 60s. Finally, it's been pointed out time and time again that high taxes lead to much lower compliance, so that moderate to low taxes result in much higher income to the government as a whole.
Taxes need to be reasonable, not too high, and not too low. We need to balance the needs of individuals with that of the society as a whole. We also need a government that will reign in spending. This means not fighting wars that last a decade (like we did in Vietnam and we are doing in Iraq). - digitronix, on 11/18/2008, -14/+39Okay, so where exactly did the industrial base for the United States go if our economy was so "improved" by higher taxes? Oh, wait. I know-- IT MOVED TO CHINA.
- mikers722, on 11/18/2008, -17/+37Very cool. I'm interested to see more studies about this.
- NinaOdell, on 11/18/2008, -13/+33I not too terribly surprised. I'm no expert, but it looks to me like the countries with the highest tax rates don't seem to be having as many problems right now...
I just dugg an article that list the US as having by far the most billionaires in the world (I think it was called the Best of Everything Part 2, if you want to search for it). Could it be it's because we have such a (relatively) low tax rate for rich folks? - arlok789, on 11/18/2008, -18/+38I have an econ degree.
This author is a moron. The fact of the matter is capitalism has flaws but it is the best system we have.
Higher taxes just drive the rich people away. Outsourcing is a GOOD thing. Who wants ***** factory jobs anyway?
Since none of you will listen to me, why don't you listen to Milton Friedman, you know, the Nobel Prize winning economist that used free markets to save Chile from a dictator.
http://video.google.com/videoplay?docid=6813529239 ... - digitronix, on 11/18/2008, -14/+33People who believe this garbage are being naive. First off, the US doesn't have high productivity. It is a net DEBTOR nation. Second, who really believes that the government, by taking money from people and companies then wasting it, is really creating productivity?
Please educate yourself.
http://www.youtube.com/watch?v=6G3Qefbt0n4 - inactive, on 11/18/2008, -7/+26So is the USA supposed to compete with no-human-rights China?
What happened under Bush when he lowered taxes on the rich?
Halliburton moved their headquarters to Dubai to avoid taxes.... - 15charmaxwtf, on 11/18/2008, -7/+24So transferring wealth from the productive sector to the government sector is good for the economy, this is a preposterous joke.
http://en.wikipedia.org/wiki/Economic_calculation_ ... - eco57, on 11/18/2008, -8/+22Then perhaps you'll remember Carter inherited much of that mess (OPEC cutbacks and inflation) from Nixon.
- shazbotter, on 11/18/2008, -1/+14While I'm not as paranoid as the far right that taxes will cripple an economy, I am also extremely skeptical of this article. I think the author is mixing up correlation with causation ("High marginal tax rates correlate with economic growth"). I think it is safe to say that when the economy is good, the government has more room to increase taxes. So it would be easy to see how high taxes would be correlated with a good economy. Obviously I have no evidence, but I'm just pointing out what I think is a loophole in this article's argument.
- spyd3rweb, on 11/18/2008, -2/+14Competing with slave labor is impossible unless you are employing slaves, or if you want to lower the standard of living down to absolute *****. Tariffs and protectionist policies should be used to level the playing field. However, people have been brainwashed by the globalists to think protecting America and American industry is bad.
- Nerys, on 11/18/2008, -1/+13Its an oxymoron a chicken or egg illusion.
the ECONOMY is not higher when taxes are higher.
TAXES are higher when the economy is higher. Slightly different but OH SO CRITICAL difference.
The Taxes follow the economic trend NOT the other way around. Even when the taxes appear to lead the economy this is FALSE. they do this either by coincidence OR in anticipation or a rise in economy.
never "BECAUSE" the taxes are higher. Its not possible for an INCREASE in cost to improve an economy. Thats illogical in extreme. - Tiak, on 11/18/2008, -5/+17"large percent of americans that pay no tax at all"... So... You mean, children?... I don't see why they should matter.
There are some people that are poor enough that after deductions and credits, all of their federal income tax is offset... Mind you, most of these taxpayers are living on below $20,000 a year, and just about all of them that actually work do pay into social security and medicare... So you're pretty much referring strictly to people who do not work.
Of these people that do not work, how many of them pay no sales tax, no gas tax, and no property tax?... Not a very large percentage. - siszam, on 11/18/2008, -8/+20Countries with higher taxes tend to provide basic rights like higher education, health care and childcare to their citizens. Imagine living in a country where one illness doesn't bankrupt you and leave your family homeless when you die. Providing for the common welfare of the people is in our constitution but it has been pushed aside for greed. I'll be glad when American catches up to the rest of the civilized world.
- dagnome1984, on 11/18/2008, -0/+11The key is sound monetary policy. Without that you could change the tax base (higher or lower rates) a million times and still end up with a depression.
- JeffHenderson, on 11/18/2008, -1/+12The alleged growth in GDP in WWII is extremely misleading. GDP = Consumption + Investment + Government Expenditures + (Exports - Imports). Government expenditures ballooned in WWII as private consumption and investment fell. Productive efforts were diverted from producing things consumers wanted to producing battleships, guns, tanks etc. Adding up the prices of butter, cars, and other consumers goods is easy because prices represent the price agreed upon by buyer and seller. The "price" of a battleship in WWII is something completely different because the buyer and seller are the same entity, the government. Think about it this way: If I had an apple tree in my back yard and then I decided to "sell" the apple to myself for $1,000,000, does it really make sense to say I added $1,000,000 to the GDP? No. Prices are meaningless if the buyer and seller are the same person. In wartime, governments take advantage of this accounting loophole to make it seem like the economy is prospering, when in fact the people are much poorer. Read this article for more on the WWII growth myth (http://www.independent.org/newsroom/article.asp?id ...
To truly grasp how wrong this type of thinking is, you have to ask what is the purpose of an economy? The answer is that the purpose is to satisfy the wants and needs of consumers. Please please do yourself a favor and read Economics in One Lesson by Henry Hazlitt. - toastmin, on 11/18/2008, -3/+13Technically, the greatest period of growth in American History occurred between 1830 to 1860 before there was an income tax and the Federal Reserve had been temporarily abolished.
Historically, is has not been higher taxes that has promoted growth. Responsibility does. Stability in the currency promotes cash savings versus short term investments that are prevalent in a debt based economy. When the currency is unstable, it is moved to commodities (oil)or whatever industry is booming (housing, internet,etc) These investments increase the cost of living (Gas) while only perpetuating a bust later. The piss-poor seventies were a product of the Vietnam era of massive growth in Government spending. The early 2000s were a product of the dot-com bust. Presidents and banking institutions rarely live out the disasters they cause. (Greenspan)
So to sum this up, tax increases versus growth does not occur in a vacuum and it's effects are not immediate. Even when untaxed millionaires spend money on houses overseas, the construction workers, the Realtor, and others contribute to their local economies which in turn contribute to the world economy. The construction worker buys an Xbox for his son, the Realtor might invest in a social media start up in the states. In the hands of Government, the tax dollars vary in the effect on the standard of living but for better or worse go to whom the statesmen feel will best keep them in power. - Kerrigore, on 11/18/2008, -1/+11I'm not sure what you were trying to say, but I think you missed his point: the people who are making the least are the ones most likely to put the money gained/saved from tax cuts back into the American economy in a beneficial way, whereas the people who are making the most are the most likely to spend it wastefully, save it, or spend it in other countries.
- JonnyLatte, on 11/18/2008, -9/+19
"If you want to just donate more of your own paycheck to help stimulate the economy, go ahead, no one's stopping you.."
I completely agree. - johnleemk, on 11/18/2008, -0/+10The story seems plausible, but I'm skeptical of the model. When you take home more money, there is an income effect, and a substitution effect. You earn more per hour, so you might work more (the income effect). But if you earn more per hour, you don't have to work as hard to make the same amount of money as before (the substitution effect). And of course, when your take home pay goes down, the reverse happens.
The article assumes that even with higher taxes, the substitution effect will dominate the income effect, and make people more inclined to work and make up their lost income rather than just work less since they're effectively getting paid less anyway. So the model presented seems iffy to me, if only because the author doesn't present any evidence that the substitution effect will necessarily dominate. The empirical evidence presented is largely useless; correlation does not imply causation, and you could almost as plausibly argue that the growth occurring under high taxes were merely lagging effects of previous low-tax policies.
I think more important than the tax rate is how the tax system is structured. The American tax system is incredibly messy and opaque. There are a billion loopholes, and the way the whole system works just doesn't make any sense. The Reagan "tax cuts" in all likelihood had more impact through their simplification of the tax code rather than their actual reduction of effective tax rates. Fixing the pointless complication of the current system and raising taxes would probably be more efficient than cutting taxes while maintaining the insane mess.
Oh, and the jumping around of the comment box is ***** annoying. No wonder serious and well-written commentary is so hard to find on Digg. - NinaOdell, on 11/18/2008, -8/+18I hate to disagree, but there's always President Carter...maybe I'm a little older than you...
- aereaus, on 11/18/2008, -3/+13buddypriefert is the idiot.
I'm an American living with my Danish wife in Denmark. Denmark is currently tied with Switzerland as the #1 country on the world happiness index. Why? Socially Responsible Democracy. Denmark has high income and sales taxes. The average person pays 40% income and everyone pays 25% sales tax. But since this is added and taken away you never see it. Minimum wage in DK is about 20 dollars (US) per hour, so 12 bucks after taxes. What you get for your money is...
Free universal healthcare for all.
Free education for you and your kids up to PHD level (if ya cut the mustard)
Old age pension, set at 75% of your average lifetime yearly income.
On top of this a clean environment, no nuclear power, we use wind generation and garbage burning (no landfills). A full national recycling program (again no landfills).
And this results in a nation that has less then .5% unemployment. We in fact have to import Germans and Poles to fill jobs.
When I lived and worked in the States, I paid out more then 40% of my income when I combined...
Federal and State Income Tax + Social Security + Medical Insurance + Sales Tax + Saving for my kids college.
I think back, that at the time, about 60% of my bi-monthly check went out. So here in DK I'm saving 20%
Republicans and Libertarians are brainwashed idiots! I laugh at you! HAHAHAHAHA!
I hope Obama, H. Clinton and the Democrat controlled Congress moves the US towards a brighter future for the American people. - EntangledPhysx, on 11/18/2008, -2/+11I think it is time, indeed.
- mfc5200, on 11/18/2008, -0/+9That's what I said about this article, and then explained my reasoning with a few paragraphs...You just disagree, and don't explain why.
- m0llusk, on 11/18/2008, -2/+11This is a really interesting argument that I can't recall having seen before. Higher taxes as an incentive for productivity could be critical. Productivity and productivity growth are the core of the economy, and that is where America has continued to be ahead of most other countries. Most pro-business economics is against taxation and recommends it only for generally beneficial infrastructure and research projects.
- EntangledPhysx, on 11/18/2008, -2/+11But I thought their system was so perfect?
- Nerys, on 11/18/2008, -2/+11Me thinks its time to ELIMINATE 90% of taxation and reduce government to 1/1000th what it is now. Reduce it to a bare minimum framework AS ITS SUPPOSED TO BE.
- darkciti2, on 11/18/2008, -0/+9No. His logic is sound to me.
Yes if you buy a designer dress made in Italy or Monaco there is a high likelihood that some of the material was made here in the US (like cotton, our #1 export to China), but most of the money from a designer dress made in Italy or Monaco goes to the designer as profit. His margins are spent locally to him in his native country on materials and business loans.
Also, extremely wealthy entrepreneurs travel more when the US dollar is strong. The US currency exchange rate affects them much more because they spend hundreds of times as much abroad as compared to the the average US traveler. Tourism is a major industry for many nations and when our dollar is strong, their local economy is strong. - JGuez, on 11/18/2008, -5/+14Reagan's lowering of the taxes for the rich only did create 9.5 million jobs in one term, but let's forget that I guess....
- bryanedds, on 11/18/2008, -2/+10Correlation != causation.
Someone needs to learn basic logic, then basic economics - http://jim.com/econ/chap01p1.html - gwolf, on 11/18/2008, -7/+15Let's see, If I take a dollar out of my company and put it in the bank I have 50 cents in the bank after taxes, but If I invest it back into my company I get a buck and a quarter. I think I will actually have to run my company well If I expect to make money. I sure miss W.
- cnot3, on 11/18/2008, -0/+8In competitive markets, taxation always results in loss of efficiency and production, however, in monopolistic situations, it can improve general welfare by pushing the monopolist closer to competitive output. Taxes are always bad when the government doesn't invest the revenue gained back into the American economy. Giving it to Israel or wasting it in Iraq doesn't help anyone.
- bobt39, on 11/18/2008, -4/+12Even if this were true, which its not, it still avoids the fact that income tax is forced labor and forcible theft by the government.
- DarthVox, on 11/18/2008, -5/+13The EU IS in a recession you know...
- rangerludd, on 11/18/2008, -1/+8growth for the sake of growth is the ideology of the cancer cell.
However, if higher tax rates encourage longer-term planning and create disincentive for profit-squeezing, it might be a good thing. I'm more curious about creating tax structures and incentives that make concrete distinctions between real productivity, and the kinds of economic models (Hedge funds, lawyering, etc.) that essentially skim or suck the money from 'real' work. - geoffg, on 11/18/2008, -6/+13Capital gains taxes increasing from 15% to 30% = more people buying stocks and bonds and thus increasing the flow of capital into the marketplace... right? I love leftist logic...every day is opposite day!
- mithrasinvictus, on 11/18/2008, -0/+7In that hypothetical situation, the investor is already inclined to spend his money outside the US, what makes you think he won't invest those new profits there as well since it turned out so well for him to begin with?
- WebmastuhB, on 11/18/2008, -8/+15This article is utter crap.
- kashk5, on 11/18/2008, -2/+9Let me introduce you to the Sixteenth Amendment
- danj484, on 11/18/2008, -0/+7I'll give you all of my money to cite that quote.
- inactive, on 11/18/2008, -11/+18It has been working very well in Europe.
Unfortunately for some reason the ideology component in this mix is making discussion impossible in the loonie US. - karmajunkie, on 11/18/2008, -1/+7How does the GAO sit with you? 57% of all US corporations paid no federal taxes for at least one year between 1998 and 2005.
http://www.reuters.com/article/newsOne/idUSN124946 ... - bryanedds, on 11/18/2008, -1/+7You can employ a thousand people to dig holes and another thousand to fill them back in, but what have you actually produced? Nothing. While it increases the living standard of the hole diggers and hole fillers, it deteriorates the living standard of everyone who has to pay for it - that is, everyone else.
- nazzareno, on 11/18/2008, -4/+10First of all, I would like to question the linked website's credibility (meaning they have none).
Second of all, cutting taxes can also prove to be healthy to an economy. I don't feel the need the list resources, as I'm sure we're all familiar with google.com
Market volatility is just that. If you feel like you can deal with it, then do so. If not than don't. -
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