Where is the evidence that lower taxes stimulates the economy?
The benefit that proponents of low taxes stress is that doing so creates so much more wealth that tax revenues go up anyway. This has never worked in all recorded history. Tax cuts have never payed for themselves in terms of overall tax revenue.Tax cuts on lower income does help somewhat, because the lower someone’s income, the more likely that every dime they get flows right back into the economy.In recent U.S. politics, lower taxes has come to mean mostly cutting taxes on high income. That really doesn’t work, because:Only some wealthy people fold extra money back into investment, and those who do don’t necessarily invest domestically.The investments of one billionaire are not better than the investments of a thousand millionaires—if anything the thousand millionaires comprise a more diverse and stable investment pool. Same with the investments of one millionaire vs. ten people with $100K each.The investments of billionaires and millionaires are not innately better for the economy than government investments in research, education, and anti-poverty programs. Technological advances from NASA alone have helped spawn thousands of private companies.Low high-wealth taxes removes disincentives to demand higher salaries. It may be reasonable that the CEO make 20 times what the machinist makes—but how does over 200 times (the current avarage) make any sense?Currently, Republicans have cut taxes on their wealthy clients so much that they are artificially low—”artificially” because, as total revenue is below government costs, the government must borrow money to pay for them.
If many would agree that "trickle down" doesn't work what is the justification for the Trump tax cuts?
Everybody doesn’t agree. Economics is divided by “supply-siders” who believe that trickle down works and “progressives” who think that the Reagan Supply-Side experiment has been a miserable failure. There is a disconnect between the two groups on whether “efficiency theory” economic models or historic gdp growth evidence should be taken as a better indication of which viewpoint is better. Add to that, many universities have economic endowments that they receive in return for emphasizing the supply side approaches that make the University Donors wealthy. The news also likes to include guests who take this supply side approach with surprising frequency as well, and many of these people don’t even have the economic models.I am part of the progressive group that would say that “reliance on trickle-down” doesn’t work, but leakage from capital dollar savings into consumer spending via inflation of assets owned by the middle class can be one of the most powerful forces in economics. IMO, this is pretty much the exclusive reason we didn’t go into Great Depression II in 1989 during our downturn after Reagan stacked the odds in favor of capital accumulation.Ultimately we all live in the world that we want to live in instead of the world we that is actually there. Self honesty is one of the rarest traits in our species simply because in most cases the benefit of being optimistic outweighs the benefit of being factually accurate. Until we can settle our arguments outside of this inherent bias, or until the next New Deal looks as much like the optimistic approach as it did in 1933 we will always disagree.
How would you go about addressing the US deficit issue a little better?
I’ve got some good strategies on this:For raising taxes:Repeal Bush 2’s tax cuts, which would bring billions of dollars into the government’s coffers, with minimal economic impact. Frankly, they didn’t help the economy at all, so removing them would likely have the same effect.Change our corporate taxation. Cut rates and loopholes. Essentially, our corporate tax rate is crazy. Because it is so high, nobody wants to pay it. Most small companies suck it up and pay the high rate, since they can’t move overseas or higher hundreds of accountants to screw around until they have no taxes to pay. Companies that can afford to move overseas or higher hundreds of accountants do so, and end up paying practically no taxes. You can cut the corporate tax rate some, and end all of these stupid loopholes and evasion tactics, and end up with more revenue and more jobs.Raise the gas tax according to inflation.Impose a new tax on high-velocity stock trading.Make the capital gains tax the same as the regular tax brackets. It is income, and it should be treated as such.Limit the mortgage interest deduction so that exceedingly wealthy homeowners can’t evade taxesRaise cap on income that can be payroll taxed into Social Security.Enact the Buffett ruleFor cutting spending:Reform Social Security. Social Security was designed for a time where people retired at 65 and died at 70. Raise the retirement age (as people live longer and work longer) and means-test Social Security. Warren Buffett receives Social Security checks every month, and he doesn’t need them.Cut our military budget. We spend so much money on the world’s 2nd largest standing army that is never used. Frankly, we can maintain all our troop levels abroad (about 220,000 people), and still cut billions of dollars out of the military budget, still leaving hundreds of thousands of troops domestically.Reform Medicare. Means test it, raise the age, the same principles as Social Security reform.