Reducing taxes will raise inflation, which lowers the relative value of your wealth. Increasing taxes can work as a limit on inflation, which after all is one of the two great threats to any economy (the other being unemployment).
Nice attempt at understanding econ. But the cause of inflation is not too much spendable money, but too much money chasing too few goods. If you want, we can play devils advocate on this and show you were you are wrong, and how reducing taxes on the poor is bad.
First, reducing taxes on Brad will not make him go out and spend it on hamburgers. He will invest it in his company (hire another person, buy more computers, etc.). Now I do understand that some out there (Clinton, Edwards, Obama come to mind) think he will stuff it in a mattress, but while that is a popular myth among some, it is not reality.
By investing (not spending), he is creating more goods, so the amount of goods being chased by the dollars go up at the same time the number of dollars go up.
But what happens when you reduce taxes (those imaginary things since it has already been shown that the bottom 40% of earners pay no taxes - and there is not 40% poor in any developed nation)? Why they spend it! They pump it back into the economy chasing those flat screen TVs! So the worst thing Congress can do is reduce taxes on the poor as THAT will cause inflation!
But the reality is neither cause inflation. Why? Because the money spent by the individuals is not new money, just redirected money. The government was spending it before, now people are. Indeed, it is less inflationary, since the government does not invest, and hence all that money was being spent before, while now some of it is being invested, and thus increasing the capacity of the economy.
Now some may argue (correctly) that the money the government spends goes to companies that then invest the extra money. This is true. But that is a secondary effect of the money. And is also true of the money that Brad invested (it goes to people or companies who invest some of it as well). So the secondary effect of the money spent by both the government and individuals is the same. It is just the initial effect that remains. And that is, private citizens create wealth, government creates inflation.
Sorry this is so long. Hope you enjoyed it.
