Taxes made easy for Democrats

Inside the propoganda

Here's how tax cuts work, simplified for those of you that believe Republicans "favor the rich".

The governent needs $100, so they tax Joe, Sue and Brad.
Joe is poor, so he pays $10.
Sue is middle class, so she pays $25.
Brad is rich, so he pays $65.

The government has $100. Time passes, and for whatever reason the government needs citizens to invest money into the economy. For the sake of this example we'll give everyone a 20% tax cut (I'm a generous blogger). Now this is where the Democratic spin starts.

Joe is still poor, but only has to pay $8. He saves $2.
Sue is still middle class, but only has to pay $20. She saves $5.
Brad is still rich, but only pays $52. He saves $13.

$13? Brad got a bigger tax cut according to the Democrats! Whoever gave that tax cut MUST favor the rich, because now Brad is saving more on taxes than Joe has ever even paid! At least thats what they want you to believe.

The truth is, everyone received a fair cut, equal to what they contributed. Brad, the Rich guy, is actually paying almost twice what Sue and Joe pay combined and is still bearing the heaviest tax burden. Don't be fooled by Democratic propoganda! Tax equality for everyone! Vote Republican!

The best part is that Brad owns his own Sub Chapter S corp, and takes his $13 to hire Sue and Joe to work for him. Inspired by Brads success, Joe and Sue better themselves and eventually create offshoot companies that compliments Brads ever growing corporation. Everyone ends off better, with Sue, Joe and Brad sipping cocktails by the swimming pool, thankful they all voted Republican.

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Actually, the question isn't whether it's fair. The question is what effect it has.

Republicans argue that tax cuts are good for the economy, and therefore good for everybody, no matter what. But a tax cut for Joe and Sue has a different effect on the economy than a tax cut for Brad. Joe and Sue will likely spend their tax cuts, therefore giving an almost guaranteed short-term benefit to the economy. Brad will likely save, or invest, his tax cut, therefore giving a less guaranteed a long-term benefit to the economy (less guaranteed because it's possible he'll make a bad investment).

When Democrats complain about tax cuts tilted toward the rich, what they're really pointing out is that it costs a lot of money to give rich people a 20% tax cut, and there isn't as immediate or reliable a return benefit to the economy.

It might be worth the gamble that Brad will make good investments and help build the economy of the future if we have a lot of money laying around to give to Brad. But in a time when we already have huge budget deficits, it just doesn't make sense to diminish the quality of life (i.e. public education, social security, homeland security, etc.) of all the Joes and Sues out there so that Brad can get a big fat tax cut that won't necessarily make anyone's life better in the near future.

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Doesn't investing help create more businesses, improve current businesses, and create more jobs?

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Once again we have a problem with propoganda.

Who is to say that Brad wont invest his money back into the economy? Most people classified as rich are small business owners filing under a personal status, not the heirs to Ketchup fortunes. These small business owners are the very people that drive the US economy by hiring others, buying in bulk and really investing in the use of international transportation. It seems like class warfare to me to say that the person who has more money wont invest in the economy, but will instead save it, while Joe and Sue are too stupid to save or invest.

Democrats have got to stop making such sweeping assumptions about the rich and the poor, and instead treat people fairly.

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I'm not saying I know what one individual Brad or Sue or Joe will do. I'm saying we can predict what they're likely to do. Someone who already has a disposable income is less to change his or her spending habits when he or she gets a tax cut than someone who has no disposible income. I know people who pay their bills based on which collection agency is currently giving them trouble. If they get a tax cut, they are likely to use it to pay one of those bills. Or to buy something they need but couldn't afford. That's not class warfare. It's common sense.

And like I said, Brad will invest his money back into the economy, most likely through stocks, bonds, CDs, etc. I'm not denying that has an impact on businesses and jobs. But theimpact is both more long-term and spread more thinly than the impact of a tax cut for the middle class. That's why they call it "trickle down economics," because it takes a long time to benefit anyone at the bottom, and they don't get much benefit when it does. Tax cuts for the middle class, on the other hand, are like a straight shot of adrenaline to the heart of the economy. Which is why they're both more beneficial in a recession as well as more meaningful to ordinary people.

The problem with the Republicans when it comes to tax cuts is that they claim tax cuts provide all these benefits (which are speculative at best) without giving a second thought to the cost. What's the cost of tax cuts if they cause the deficits to soar? What's the cost if they mean we can't put more troops in Iraq? What's the cost if they mean we can't pay for social security ten or twenty years from now? Which is more benficial to our economy, a gamble on tax cuts or actual investment in our education, infrastructure and security?

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The problem with the Republicans when it comes to tax cuts is that they claim tax cuts provide all these benefits (which are speculative at best) without giving a second thought to the cost.

No, that is where you are dead wrong. Tax cuts are not costs! Taxes are costs! Tax cuts are merely a reduction in the costs! Or SAVINGS.

And your statement of speculative shows a decided lack of historical perspective and knowledge. In the last 45 years, after each of the largest 3 tax cuts, tax revenues have increased! Why? Because of the multiplier effect of money (i.e. a dollar I spend actually gets respent 6 or 7 times within a year).

Finally, whether good or bad, the fact that Brad is investing his money instead of buying bubble gum, means someone just got a job who did not have one before. All Sue and Joe did was make sure that someone who had a job kept it, and got paid. So EVERYONE benefits from tax cuts.

Dead Zombie sure was right about some people's failure to understand even when put into simplified terms.

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In the last 45 years, after each of the largest 3 tax cuts, tax revenues have increased! Why? Because of the multiplier effect of money (i.e. a dollar I spend actually gets respent 6 or 7 times within a year).

Actually, when Ronald Reagan passed the first big supply-side tax cut in the 1980's, the economy was in a recession. After that tax cut was passed, the economy rebounded. Republicans hailed the tax cut as a huge success. But economists compared the rebound of that economy to previous rebounds after recessions (without tax cuts) and they found that Reagan's rebound was no stronger. The economy of the early eighties didn't rebound from recession any faster with tax cuts than earlier economies had rebounded without tax cuts. And in fact, by the late 1980's, the deficits were so bad that Republicans actually raised taxes.

Then, in the 1990's, Clinton raised taxes further, in order to balance the budget, and Republicans everywhere warned of economic collapse. But what happened? The economy boomed. Which isn't necessarily to say that Clinton's tax hike helped the economy. But it certainly didn't hurt it. And a balanced budget has a more reliable effect on the economy than tax cuts do.

When people first started talking about tax cuts to help the economy in the 1970's, Geroge Bush Sr. called that policy, "Voodoo economics." It's an apt term. There's never been any evidence to suggest that tax cuts have the extraordinary econonmic benefits Republicans claim they do. In fact, there's quite a lot of evidence that they have no reliable effect. It's a faith based inititive. So if we have to choose between tax cuts that have no reliable benefit and tax-funded investments that are much more likely to produce a positive outcome, I think it's obvious that tax cuts are the more reckless of the two choices.

Unless of course you want to abolish government services like public education, social security, and medicare (which a lot of radical Republicans think would be great). In that case, tax cuts are quite effective.

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Then, in the 1990's, Clinton raised taxes further, in order to balance the budget, and Republicans everywhere warned of economic collapse. But what happened? The economy boomed. Which isn't necessarily to say that Clinton's tax hike helped the economy. But it certainly didn't hurt it. And a balanced budget has a more reliable effect on the economy than tax cuts do.

Take away the Y2K fueled boom and your boom becomes a whimper.

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