Should taxes be raised at the end of this year?

[SpaceCadet]

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This question is directed at Vell, mainly, but anyone else is of course welcome to weigh in also.

This is a point that I just want to get clear on.  I'm pretty sure that I remember Vell, at some point in the past, saying that it makes no sense to stop the government spending while the economy is in need of stimulation.  I also think, but I'm not sure, that he also said taxes should not be raised during such a time.  If that is true, should the Bush tax cuts be allowed to expire at the end of the year?  

I also have an additional question I've been wondering about.  When the government does stimulus spending, there is an argument to be made that the government is simply removing money from the economy, only to inject it back into the economy, with a corresponding loss due to adminstration costs, fraud, inefficiencies, etc.  So does it really do any good, or is it a valid operation to remove funds from one part of the economy and reintroduce those funds into another part of the economy?  In order to get around this problem, is it necessary for stimulus to be performed through deficit spending, so that money is not being removed from the economy, but borrowed from future growth instead?

[Pepsi]

Yes, certainly the Bush tax cuts need to be rescinded.   Tax cuts geared to the middle class will result in more of a boost to the economy; the Bush tax cuts did little to stimulate the economy and were the main reason the deficit exploded during the Bush years

this from the Wash Post:

[IM2]

So does it really do any good, or is it a valid operation to remove funds from one part of the economy and reintroduce those funds into another part of the economy?

Yes. Money circulates through a healthy economy like this all the time. One group simply cannot hold all the money. This is what creates problems.

[Velleity]

This question is directed at Vell, mainly, but anyone else is of course welcome to weigh in also.

This is a point that I just want to get clear on.  I'm pretty sure that I remember Vell, at some point in the past, saying that it makes no sense to stop the government spending while the economy is in need of stimulation.  I also think, but I'm not sure, that he also said taxes should not be raised during such a time.  If that is true, should the Bush tax cuts be allowed to expire at the end of the year?  

I also have an additional question I've been wondering about.  When the government does stimulus spending, there is an argument to be made that the government is simply removing money from the economy, only to inject it back into the economy, with a corresponding loss due to adminstration costs, fraud, inefficiencies, etc.  So does it really do any good, or is it a valid operation to remove funds from one part of the economy and reintroduce those funds into another part of the economy?  In order to get around this problem, is it necessary for stimulus to be performed through deficit spending, so that money is not being removed from the economy, but borrowed from future growth instead?

You have two different questions here: 1) economics; and 2) politics.

It is true that fiscal policy used to stimulate demand includes both government spending and taxes. To stimulate the economy you can increase government spending and you can cut taxes.

No doubt that allowing Bush's tax cuts (if you can call them that) to expire would be a policy that would contract the economy and that isn't desirable. It means less employment.

However tax cuts for the rich might just be the absolute worst way to stimulate the economy. These things have been bench marked and the data is out there if you're so inclined.

Of course the tax cuts also increase the debt and that does have a negative effect in the long run. IMHO it would be better to increase taxes on the wealthy and then spend money on things like helping the middle class and helping the unemployed.

From a political standpoint the Republicans passed the law that sunsets the taxes. If you're a Democrat and you know that taxes on the rich are going to have to be raised, why wouldn't you just let the tax cuts sunset and then blame it on the Republicans? After all Republicans enacted the tax cuts through reconciliation. Why shouldn't they bear the responsibility?

[Velleity]

Yes, certainly the Bush tax cuts need to be rescinded.   Tax cuts geared to the middle class will result in more of a boost to the economy; the Bush tax cuts did little to stimulate the economy and were the main reason the deficit exploded during the Bush years

The tax cuts and military spending.

You're absolutely right. It's not a coincidence that the middle class has lost a lot of ground and that the rich have enjoyed unprecedented prosperity over the past 30 years.

If you enact policies that grossly favor the rich, guess what?

[Observer]

Yes, certainly the Bush tax cuts need to be rescinded.   Tax cuts geared to the middle class will result in more of a boost to the economy; the Bush tax cuts did little to stimulate the economy and were the main reason the deficit exploded during the Bush years

That is a lie.

I could give you the benefit of the doubt and assume you made that statement out of ignorance, but we both know that isn't the case.

[Velleity]

That is a lie.

 

Now you launch into your tired objectivist crap about how tax revenue doesn't belong to the government.

[johnhp]

Why are you opposed to following the law SpaceCadet?

[SpaceCadet]

Why are you opposed to following the law SpaceCadet?

Excuse me?

[SpaceCadet]

So, it is agreed that tax cuts do tend to contract the economy.  But we're not too worried about that at this time because these particular tax cuts mostly favor the wealthy and they can afford it, and the economy is growing (albeit weakly) so it's likely not to do too much damage to the economy?

Meanwhile, the corresponding spending for stimulus is likely to do more good for the economy than the damage that letting the tax cuts expire will do?

This question has not been answered yet:  Should stimulus spending ideally be paid for with higher taxes?  Does it make sense to do that, or should stimulus spending be borrowed from future growth, in order to prevent removal of capital from the present economy?

One other question:  How do you cut federal taxes without favoring the wealthy, since they have most of the income?

[dagon]

One other question:  How do you cut federal taxes without favoring the wealthy, since they have most of the income?

aren't people taxed as a percentage of their income?  all that is being proposed is allowing the taxes on the top 2% of earners to return to where they were under clinton's presidency,  and the middle class will get a much needed break. i guess i don't see your question as this seems obvious.


peace

[Pepsi]

So, it is agreed that tax cuts do tend to contract the economy.  But we're not too worried about that at this time because these particular tax cuts mostly favor the wealthy and they can afford it, and the economy is growing (albeit weakly) so it's likely not to do too much damage to the economy?

agreed

Meanwhile, the corresponding spending for stimulus is likely to do more good for the economy than the damage that letting the tax cuts expire will do?

agreed

This question has not been answered yet:  Should stimulus spending ideally be paid for with higher taxes?  Does it make sense to do that, or should stimulus spending be borrowed from future growth, in order to prevent removal of capital from the present economy?

Generally, government stimulus is necessary when the economy is contracting.   And since we do not have a surplus; ie the government did not put away the money when times were good for when times were bad, then deficit spending is necessary.    Tax cuts should be geared toward where they have the most stimulus effect, ie to the people who are most likely to SPEND the money on goods and services they need.

One other question:  How do you cut federal taxes without favoring the wealthy, since they have most of the income?

It is called progressive taxation.  If you make $30k a year you pay 10%, if you make $300k a year you pay you pay 15%.  etc, etc

all imo

[johnhp]

Excuse me?

The tax rates you are discussing here were designed to expire.  That is the law.  Why do you not want to follow the law?

[SpaceCadet]

aren't people taxed as a percentage of their income? 

Yes, with that percentage increasing with increased income.

all that is being proposed is allowing the taxes on the top 2% of earners to return to where they were under clinton's presidency, 

That's fine.

and the middle class will get a much needed break. i guess i don't see your question as this seems obvious.

How does the middle class automatically gain a tax break simply by raising taxes on the wealthy?  Doesn't that simply keep the tax rates the same for the middle class and result in higher general tax revenue for the federal government?

[SpaceCadet]

aren't people taxed as a percentage of their income?  all that is being proposed is allowing the taxes on the top 2% of earners to return to where they were under clinton's presidency,  and the middle class will get a much needed break. i guess i don't see your question as this seems obvious.


peace

Oh, and to rephrase the question, the wealthy have the vast majority of the income.  A family of 4 with an income of $40,000/yr currently pays no federal income taxes.  So, if the wealthy have the vast majority of the income, and pay the vast majority of the income taxes, then if you wanted to reduce those taxes, how would you do so without favoring the wealthy?