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Decreasing taxes = higher debt - yangusbeef - 14.04.2016 12:23

The embodiment of Washington ignorance can be simply represented by their stances on taxation. Taxation, as many know, is the primary source of income for non-radical countries and states, and to that end it is a topic of high altercations. For one, many have proposed radically increasing taxation over a short period of time to try and make up the deficit. Their heart( and math), as always, is usually in the right place in such a proposal; however, the math is usually off by quite a bit. You see, people do not work that way. The more radical the increase in taxation, the more radical the people will become in a economic sense. Hypothetically, if you suddenly raise the higher bracket income for people making 300K+(Usually people who own a 6 million+ business), you will see a mass exodus of workers from that particular business. That is because these people often employ people just to support them; they over employ because they 'feel bad.' But, if their standard of living or way of life is threatened they will not hesitate in bring down the hammer, so to speak. In this perspective, despite the huge tax increases, you may see an actual _decrease_ in state income, despite the tax increases. Increasing state spending can sometimes cancel this out; however, that is often short lived, and the effects will be felt decades later. On the other hand, if you decrease taxation you may see a net gain in income for the state, and this is because the vise versa of the above will happen. Instead of a mass exodus, there will be a mass hiring, and this is because that business will have a large amount of unused revenue(please note I am only talking about rather small businesses). This, obviously, leads to humongous amount of economic growth, and in a few years you will be able to make up the losses while making the lives of your people a much higher quality(they have more money). This will also lower expenditures to some extent, as less people will be on welfare, there will be less crime, and there will be less need for subsides. Overall, my point being, it is much more lucrative in the end to lower taxes for everyone, and to bring on a flat tax rate, than to radically raise the tax rate to 'forcibly' make everyone of equal income. Trickle down economics works, but it only works when you support small business and help them increase the quality and quantity of their lucrative trade.


RE: Decreasing taxes = higher debt - Lee Lee - 14.04.2016 13:16

The sentiment of decreasing taxes leads to increased economical growth is not entirely wrong, but also alone not entirely right. You mentioned an important point: Supporting small businesses. Economic growth is but also tied to certain structures in a state, in the simplest form I am talking about infrastructure but also formal structures and bureaucratic requirements. It can sometimes be actually a better solution to raise taxes (temporarily) to use the money for building streets, supporting start up businesses, providing education and such. Sometimes it is better to decrease taxes to make hiring employees easier, to make investing/expanding more lucrative and therefor you can encourage economic growth.

If decreasing or increasing taxes is the right move depends on several factors. But I believe changes in taxation shouldn't have the primary concern of balancing out the state budget, even though a certain balance in the state budget should be a consideration still... just not the first.


RE: Decreasing taxes = higher debt - yangusbeef - 14.04.2016 13:34

Lee Lee Wrote:
The sentiment of decreasing taxes leads to increased economical growth is not entirely wrong, but also alone not entirely right. You mentioned an important point: Supporting small businesses. Economic growth is but also tied to certain structures in a state, in the simplest form I am talking about infrastructure but also formal structures and bureaucratic requirements. It can sometimes be actually a better solution to raise taxes (temporarily) to use the money for building streets, supporting start up businesses, providing education and such. Sometimes it is better to decrease taxes to make hiring employees easier, to make investing/expanding more lucrative and therefor you can encourage economic growth.

If decreasing or increasing taxes is the right move depends on several factors. But I believe changes in taxation shouldn't have the primary concern of balancing out the state budget, even though a certain balance in the state budget should be a consideration still... just not the first.


A very fair point, but businesses invest as well. The state only needs to intervene when rapid expansion is necessary, and so far I am not aware if those conditions exist in the US; it is already highly developed and a consumer economy.


RE: Decreasing taxes = higher debt - Helsworth - 14.04.2016 15:20

And it's starved for income, that's why private debt levels are so bloody huge. The establishment forces the average worker, the average household to go into debt in order to afford basic living requirements.
Let the Gov deficit & Gov debt to GDP ratios fall where they may, so long as you achieve & maintain full employment & price stability - or whatever purpose or goal you want to achieve.
Decision to cut taxes on a certain segment of the economy depends on many considerations, one of them being the marginal propensity to save. In countries in which arbitrary Gov fiscal positions are the national obsession, it is better to rely on increases in Gov spending - because of the spending multiplier effect. Because it's easier (politically) to pass a bill of 200 billion dollar more spending, than a 350 billion dollar bill in tax cuts - just to achieve the same Aggregate Demand level.


RE: Decreasing taxes = higher debt - yangusbeef - 14.04.2016 15:59

Helsworth Wrote:
And it's starved for income, that's why private debt levels are so bloody huge. The establishment forces the average worker, the average household to go into debt in order to afford basic living requirements.
Let the Gov deficit & Gov debt to GDP ratios fall where they may, so long as you achieve & maintain full employment & price stability - or whatever purpose or goal you want to achieve.
Decision to cut taxes on a certain segment of the economy depends on many considerations, one of them being the marginal propensity to save. In countries in which arbitrary Gov fiscal positions are the national obsession, it is better to rely on increases in Gov spending - because of the spending multiplier effect. Because it's easier (politically) to pass a bill of 200 billion dollar more spending, than a 350 billion dollar bill in tax cuts - just to achieve the same Aggregate Demand level.


The government doesn't force them to do anything; they brought that debt onto themselves and should face the consequences. College debt? They were too stupid to take two years of community college and then to take a progressive loan. Mortgage debt? They were too stupid and bought a house they couldn't afford if they suddenly lost their job or the market became unstable. We shan't look for what is easy, but what is best, and the best option in a consumer economy is almost always to reduce taxation and needless spending. And as I have said, the increase in aggregate demand is temporary. Eventually, taxes and spending will be raised again, but if we kept patience and merely decreased taxation there would be equal aggregate demand with _no_ national debt... None! Then we would be able to afford annulling private debt.


RE: Decreasing taxes = higher debt - Lee Lee - 14.04.2016 17:21

yangusbeef Wrote:
Eventually, taxes and spending will be raised again, but if we kept patience and merely decreased taxation there would be equal aggregate demand with _no_ national debt... None! Then we would be able to afford annulling private debt.

Bold statement. Do you have a consistent model or statistical data to back that up?


RE: Decreasing taxes = higher debt - yangusbeef - 14.04.2016 17:40

Lee Lee Wrote:

yangusbeef Wrote:
Eventually, taxes and spending will be raised again, but if we kept patience and merely decreased taxation there would be equal aggregate demand with _no_ national debt... None! Then we would be able to afford annulling private debt.

Bold statement. Do you have a consistent model or statistical data to back that up?


Well, the no national debt is assumptious, but reverse logic says that the decreased growth and income caused by increased taxes would be the opposite.

http://taxfoundation.org/article/what-evidence-taxes-and-growth
http://www.epi.org/publication/ib364-corporate-tax-rates-and-economic-growth/

The first document finds a negative correlation, while the second finds no correlation.(the first reviews income + corporate, second just corporate)


RE: Decreasing taxes = higher debt - Helsworth - 14.04.2016 19:20

Lee Lee Wrote:

yangusbeef Wrote:
Eventually, taxes and spending will be raised again, but if we kept patience and merely decreased taxation there would be equal aggregate demand with _no_ national debt... None! Then we would be able to afford annulling private debt.

Bold statement. Do you have a consistent model or statistical data to back that up?

Neah, he's good old Triniterias, trolling.

@Trini
You're missing the point, dude. When you have an income, you're able to afford debt servicing. But when private sector deleveraging kicks in, it's NOT your fault for not being able to make your debt payments. Households in aggregate deciding to spend less = fewer sales = less income = more output remaining unsold = unemployment going vertical.
The system is designed with so many incentives to make people save. Compound interest & private rent extraction being two large components of it.
http://michael-hudson.com/2007/08/why-the-miracle-of-compound-interest-leads-to-financial-crises/
Secular stagnation & inequality are one and the same thing - and are caused by high private sector debt.
http://www.notesonthenextbust.com/2015/04/rising-inequality-explained-not-using-r.html
Private sector debt which requires large & equitable increases in Government debt in order for them to be paid off without default.

If you want to return to debt peonage & feudalism, then that's another thing entirely. The Gov net fiscal position is reactive to nongovernment sector spending behavior. When Animal Spirits will seek to spend more & save less, the Gov debt & deficit will shrink in size against GDP.
People are worried about the size of the Government debt (which is nongovernment sector equity; aka financial savings) - when they should be worried about distribution of ownership of said equity. The middle class owns too little of it. The poor own virtually nothing of it. While the plutocracy owns most of it.

In short, when GDP growth doesn't show up in wage increases, it shows up in profit increases. Labor lost a lot of bargaining power under supply side policies, union-bashing, scrapping of Government buffer stocks, financial deregulation, balanced budget/austerity mantras, and the NAIRU. The NAIRU being deliberate fiscal policy (whether the public or the politicians are aware of it or not) that's designed to maintain a certain % of the population in a state of permanent & involuntary unemployment. This allows capital to "discipline" labor & put downward pressure on wages.


Last time the US paid its national debt it went into recession. All depressions in US history came on the heels of budget surpluses - including the GFC. Though it was not qualified as a depression by contemporary standards, the old textbook definition of a depression was unemployment above 10%.
There's absolutely no feasible way for the US to eliminate its national debt. The US is not Saudi Arabia, a huge net exporter of wealth & a huge net importer of aggregate demand. The US is the opposite. And the foreign sector (rest of the world) desires to be in a net surplus position against the US. The US domestic private sector can no longer sustain to be in net deficit, nor does it have any desire for it. That only leaves the US Government sector.
Also, if by national debt we're referring here only to Government interest bearing securities, then the US can get rid of it right now. All it has to do is tell the FED to debit the Gov's securities account & credit the Gov's reserve account. But the national debt takes 3 forms: cash & coins, reserve accounts at the FED (aka checking accounts, and securities accounts at the FED (aka saving accounts).


RE: Decreasing taxes = higher debt - yangusbeef - 14.04.2016 19:34

You really love to use biased sources, Mr commie. It is my fault, and it has always been my fault. To think otherwise is a dangerous thought that the society owes you. The society owes you squat. I'm seeing tons of houses being bought and sold where I live; it appears you do not know how mortgage works. Anyway, savings is an important part of the economy, and we should encourage more of it. With more savings, kids can go through college without debt very easily, and the family will be more stable financially. Inequality is caused by a plethora of sources, whether it be a poorly made family who is abusive, there not being any high paying jobs due to socialism gone wild, or a lack of education or experiance to the point where companies simply don't want to hire them; they know they will be useless leaches. And do you fucking know what's causing that income growth? A higher percentage of the population is entering the top %, while the causes I said above are causing everyone else to be left behind. Most of the population has been moving towards higher incomes, and the median income has steadily increased over the decades, but has recently stagnated due to socialism. In other words, the bottom is shrinking due to automation and socialistic policies, and the top is growing because a higher number of people are entering that top quintile of income.

Also, what he hell is a trini; is that a GB insult?


RE: Decreasing taxes = higher debt - Helsworth - 14.04.2016 19:44

Savings is important yes, but you have to have a decent income in order to be able (to afford) to save. The poor are not in that position, hence why their spending has the largest multiplier of all other income brackets. If you want the people to be able to save more, you ought to be in favor of higher fiscal deficits; which represent net financial savings for the nongovernment sector.
The US was more socialist after WW2.
A higher % of the population is going into the top % income brackets? Yeah, I guess the 0.001% are really representative of the average joe's great leap forward. Hehe
Trini is a representation of a triune entity, object, or notion. For instance: flesh, intellect, and soul. Triniteras or Triniterias (whichever you prefer) is my favorite troll. He's the one who really popped my cherry & I'll always remember.


RE: Decreasing taxes = higher debt - yangusbeef - 14.04.2016 20:51

Helsworth Wrote:
Savings is important yes, but you have to have a decent income in order to be able (to afford) to save. The poor are not in that position, hence why their spending has the largest multiplier of all other income brackets. If you want the people to be able to save more, you ought to be in favor of higher fiscal deficits; which represent net financial savings for the nongovernment sector.
The US was more socialist after WW2.
A higher % of the population is going into the top % income brackets? Yeah, I guess the 0.001% are really representative of the average joe's great leap forward. Hehe
Trini is a representation of a triune entity, object, or notion. For instance: flesh, intellect, and soul. Triniteras or Triniterias (whichever you prefer) is my favorite troll. He's the one who really popped my cherry & I'll always remember.


Hahaha! What's next, the top 0.00001%? In the socialist era, income inequality was smaller because a huge percentage of the population was poor(the largest bracket was the poorest bracket, with each bracket afterwards getting smaller and smaller. Very few were rich), and that created a bias. Nowadays, it is more equally distributed, except that a high percentage is in the top bracket(300K income +), much higher than any other bracket. During the social era, that was the opposite. The poor(lowest bracket) was the largest bracket, and that created 'equality.' Automation and innovation has allowed this to change, and we shouldn't fight it. I want to see more and more people get into that top bracket, that way we will have HUGE inequality, in which 20-30% of the population are rich while the rest are middle income. And we should grow it higher and higher. We should be working on making this country wealthier, not equally poor.

The US is way more socialist now, hence why it is performing so poorly. Hence why social democrat Barack Osama Obama has been a detriment to thei country, morally and statistically.


About 8% of the US population is in the higher brackets, apposed to less than 1% in your 'utopian era.' However, due to social democracy policies many, many, people are becoming poorer, and many more are poverty. Median income is rapidly decreasing. This was not the case under the 'failed tickle down economy.' You people are afraid of disproportionate success; you are greedy and arrogant. I would much rather have disproportionate success than everyone becoming poorer to feed a false state of equality and happiness.


RE: Decreasing taxes = higher debt - Ajay Alcos - 15.04.2016 07:12

I must say that they're are many ways to make a societies prosperous, but not all of which in a sustainable fashion. Economic prosperity is not so much to do with correlations with the public & private sector but rather upon these factors. Stability, Innovation & Circulation. It is common knowledge that "people with less" are most likely to "use more" and contrast to those who are "rich" of whom tend to use "less". Now if a wealth gap of a society grows to large; it will lead to "social strife" (which will affect stability) and less circulation (which when analysed in regard to the "velocity of capital" will lead to stagnation in the use of "purchasing power"). This has been proven & documented historically over thousands of years from Classical Rome to the GFC.



C is circulation.
S is stability.
I is innovation.

The middle factor, innovation, is affected correlatively by the other factors and also by many other external conditions - name culture & law. Freer societies obviously encourage a greater capacity for innovation compared to more arbitrarily focused societies, as the dissemination of ideas are faced with less obstacles to overcome. People whose ideas are constrained by cultural norms (as seen now in the contemporary Islamic world) or governmental interference (as one can see in Modern China (where a greater volume of innovation has and still is being imported compared to the past) are hence in a more comfortable position to nurture and apply their ingenuity. If put into retrospect, governments are better suited to maintaining stability whilst the private sector is better suited to cultivating innovation/growth.

The only thing that would ensure great volumes of "circulation" between the two is an equitable & agreeable social contract between both public & private sector which ensures better redistribution of wealth (via expenditure and taxes) in return for alleviation of obstacles (whether social, cultural, judicial or even geographical) which would affect the private sectors potential path to prosperity, namely through maintaining order & stability as well as developing the necessary infrastructure to ensure the maintenance of the private sector (e.g. educations, roads and so-on so-forth). Placing too much responsibility in the hands of the private sector, as with the public sector; upsets the social balance and the factors that come with it that ensure growth.

Hence if you tip the balance in a system more towards one side or another, it will adversely affect socio-economic growth. Therefore greatly tipping society to one particular side, whether it be totalitarianism or anarchy - will lead to utter stagnation - as the former would affect innovation whilst the latter would affect stability. The assumption that economic, political, environmental or even philosophical laws & formulas are written in stone is completely incorrect simply due to the fact the human beings are flawed and that all human knowledge is simply the summary of our own perceptions. So really the only "invisible hand" when it comes to economics is really humanity itself, as it is by our own inherent ingenuity and innovation that alone drives socio-economic growth.


RE: Decreasing taxes = higher debt - VineFynn - 19.08.2016 09:23

I guess it depends where you are on the laffer curve. And whether you're using really distortionary taxes or not.

I'm not sure that it matters if sector productivity has become divorced from household income for a given proportion of labour income. What matters is if labour productivity has become divorced from household income for a given proportion of labour income.