51-50. Looks like there’s going to be a serious cut in dividend and capital gains taxes after all. I really thought it might get significantly changed in the senate.
Yay! I can keep more of my own money!
:D
I can’t believe you dug this thread out of the bottom of the pile just to say that. :)
I can’t believe they are going to keep dropping taxes. It just doesn’t make sense. Can you imagine telling your spouse: “Honey, I know we have extra expenses coming up, what with buying a new car and a new home and all. But I have decided to drop my hours at work and make less money. Still, I feel like it will be good for my morale. And at least my boss will get to spend more money now.”
It would just be odd. And trickle down economics confuses me.
Spoofy, I hope you are wealthy. If not, don’t expect to be keeping much more than you did before.
And with most of the sunset clauses timed to set in an election year, the extensions of these clauses will cost hundreds of billions more.
Any idea how much health insurance that money would have bought?
Troy
If you have access to Salon.com, an article from yesterday give a good breakdown of what the $300+ billion could have bought including healthcare.
-DavidCPA
Editted to remove the reference Arianna Huffington as she did not write the article. Hey, I could work for the NY Times :D
Just like when they stretch out military procurement procedures to save money over the next few years, even though it doubles the eventual cost of the program. If the politico isn’t in office then, it’s not his problem. If the politico is still in office, well, hey, it’s just part of the deficit at that point and nobody’s going to call him on it.
But one of the ideas with a tax cut is that it can increase revenue. It’s more like saying “Honey, I know we’re behind on some bills and can’t afford some stuff we really could use, so I’m going to drop my independent contracting rates and hope I can get some more business.” Or businesses that try to raise money generally do it by lowering prices.
Obviously, there is no certainty about exactly what tax rate will maximize revenue (just as raising it to 100% would eliminate all revenue, so would dropping it to 0%), but it’s mischaracterizing it to suggest that it will necessarily decrease revenue.
Another major idea behind tax cuts is that the money will be better spent by its earners than the government (so it’s OK if it results in smaller tax revenues). Again, that’s debatable, but there are certainly lots of examples of extremely unproductive government programs to support the idea.
I’m not nearly wealthy, but I’ll definitely be keeping more money because of this. I have 2 kids, that’s $800 right there. And I don’t know if “marriage penalty” changes are included, but most changes to that I’ve seen will benefit me too.
This is the essence of trickle down/supply side and it rests on the assumption that more money in people’s pockets means they will spend it.
But the current economic slump has been driven by people not spending what they have, and it’s not clear that consumer confidence will be improved by another grand in the pocket. Most of that money will go to finance debt, i.e., money already spent.
And as Warren Buffet pointed out in his editorial, it is fear of investing that is keeping businesses and tycoons cautious, not lack of assets to invest. He actually buys a lot of the supply side stuff, but argues that if you are going to cut taxes that this particular package is especially bad for stimulating the economy since it is targeted at people with lots of disposable income. Payroll taxes aren’t touched so the average taxpayer is not getting a really good deal here.
Troy
It is amazing to me that democrats are so scared of Bush that they let him get away with this.
It’s trickle-down economics at its worst! Warren Buffet and Alan Greenspan were against it for the love of god.
And nobody had the balls to point out that the last Bush tax cut, the one where we all got $300 checks in the mail, hasn’t helped at all.
Sure, raise deficits to spend against homeland security. I agree with that, but these payouts to the rich are bullshit. Bush is so overconfident that he’s not even bothering to hide the fact that he’s catering only to the wealthy.
I hope I’m wealthy too. Then I can give more at Church!
:D
“Obviously, there is no certainty about exactly what tax rate will maximize revenue (just as raising it to 100% would eliminate all revenue, so would dropping it to 0%), but it’s mischaracterizing it to suggest that it will necessarily decrease revenue.”
In what sort of special world does reducing a 38% tax rate raise revenue? Apparently the Laffer Curve is more of a straight line.
Yeah. This tax cut sucks. Now all the rich people are going to go spend their own money on expensive yachts and polo. Not to mention all the old men who will use the money to hire retarded busboys!
That money rightfully belongs to a billion dollar Army Corps of Engineers flood-plain project for the Mojave desert!
:twisted:
Warren Buffet and Alan Greenspan were against it for the love of god.
I’ve seen this a couple places, Buffet and some other investment magnate’s opposition made Reuters headlines. When did megarich guys become authorities on your finances? Most of the people honking their horns over this would say the exact same things if Warren Buffet came out in support of the plan. It’s not like he got rich by looking out for you.
The peak of the Laffer curve isn’t the 50 percent mark, Jason, if that’s what you’re intimating. That’s a matter for economists to bicker over, it’s not a set figure. It’s entirely conceivable for 38% to be above the optimum.
See, the problem is, the flood-plain projects, non-working weapons, and pet projects of powerful senators never get cut. It’s generally the useful programs that the government provides that go first.
(BTW, did you know our wonderful government has already decided to lay off up to 40% of the airport screening force it hired just a year ago? Cool! I guess Al Queada is no longer a threat!)
Or maybe–and I don’t mean to shock you–someone realized the government had created a program that was bigger than it needed to be.
The peak of the Laffer curve isn’t the 50 percent mark, Jason, if that’s what you’re intimating. That’s a matter for economists to bicker over, it’s not a set figure. It’s entirely conceivable for 38% to be above the optimum.[/quote]
Find me a real economist that says 38% is on the income-decreasing side of the Laffer curve and I’ll retract the statement. They don’t exist.
Reagan’s cuts didn’t raise revenue, and they came from a higher starting point.
I was under the impression that trickle down/supply side meant that the wealthy would invest their money, not spend it on goods and services. More money invested in banks, CD’s, stocks, bonds, etc. means an increase in the money supply. As supply goes up, demand goes down. Like everything else, the cost of money (interest) is tied to the demand vs. the supply. Higer the supply, lower the cost. As interest rates are lowered, investments that used to be unattractive suddenly yield a worthwhile rate of return. So, new businesses and manufacturing facilities open up. As these businesses open, people become employed and demand for goods goes up. As demand for goods goes up, so do prices and the supply. This is what makes the economy grow. Hopefully the economy grows at such a rate that the increase in government revenue due to growth more than offsets the decrease in percentage of GDP that the government takes in.
Warren Buffett is partially right. Investors are scared of the stock market right now. Some of that fear is due to uncertainty of the future due to terrorism and war. Some is due to the Enron/Arthur Anderson scandals. The investment community is not swimming in its money Scrooge McDuck style, they’re sticking it in lower-performing markets instead. This is, in part, what is driving interest rates to all-time lows. Sure, the Fed has a large part to play, but it is mostly due to all this money looking for a place to be until this whole uncertainty thing blows over.
Oh, and about those Clinton-era surpluses. IIRC, when he signed his big law, the word was that we were going to balance the budget by 2005. He stumbled onto those surpluses. But that’s another half-informed diatribe that I will get into later.
Martin Anderson? Noble Laureate Robert Mundell? Colin Clark and Keynes himself both said taxes shouldn’t go above 25% because of the law of diminishing returns, which is all the Laffer Curve models. They might have been wrong, but they are legitimate economic authorities.
Reagan’s cuts didn’t raise revenue, and they came from a higher starting point.
It isn’t 1981. Don’t confuse this with support for the Bush plan, but the argument “Reagan’s cuts led to deficits, therefore X” is too simplistic to apply to a different economy 20 years down the line.
Oh, and about those Clinton-era surpluses. IIRC, when he signed his big law, the word was that we were going to balance the budget by 2005. He stumbled onto those surpluses. But that’s another half-informed diatribe that I will get into later.
That is very true. Clinton just happened to be in office in the middle of a huge economic boom.
Yet, even though Clinton had all this money to play with in the budget, he didn’t run out and spend it. He balanced the budget and paid down the national debt. Any Accounting 101 student can tell you that it’s better to pay down your debt than it is to spend your new found boon.
Then Bush gets into office. He cuts taxes to eliminate the surplus. OK, I can understand that idea. Give the money back to the people, let them strengthen the economy even more. Decent idea. Would rather have seen the national debt lowered, but I can’t argue with a tax cut when times are good. But his tax cuts and increased spending blew all of the projected budget windfalls. Then the economy slows down, revenue falls, a couple of wars start, and the money situation dries up.
If Clinton’s orginal plan had stayed on its course when Bush hit office, the budget would be looking better. But here we are, now 2 tax cuts deep with further increased spending. The shotfall is the highest in history, beating out even Reagan’s spending.
When I hear that the government is going that far into debt, it sure as heck doesn’t increase my consumer confidence. It makes me feel like we’re in the middle of a recession, which makes me want to keep my money sitting in a safe savings account making my piddly 2.5% interest.