Winterclaw opened this issue on Oct 09, 2008 · 105 posts
Winterclaw posted Thu, 09 October 2008 at 6:00 PM
Stepson, from what I've been hearing recently raising or lowering taxes generally don't help federal revenuse that much. Going back to 1950 or so, no matter what the tax rate, the revenues have usually hovered between 16-20% of the GDP. So if you want to increase how much the government is making, the least political way to do it is to have a large GDP growth.
Another thing is, it is unlikely they'd raise taxes on you directly. What would happen is corperate and capital gains taxes would be increased (which is kind of silly considering how much some sectors of the economy need to increase their capital right now). Then the big businesses who don't want to see their profits go down will pass as much of the taxes on to you the consumer.
For example you'd probably be familar with, they could hypothetically raise gas taxes on the corperate level. Then the oil CEOs would charge more money for gas. Then it would cost more not only to fill your gas tank but the gas tank of everything you buy and has to be shipped as well. Then all those costs would go up. Then you'd spend less and drive less because prices are shooting back all over. However because you are doing that, the corperations who sell you gas and goods will make less money and in return pay less taxes. Thus tax reciepts tend to stabilize in that 16-20% range.
I'm not sure it will work, but you could in theory cut all federal taxes on income and business down to 1%... which is what we were promised when the constitution was amended to allow for an income tax, and still get the same results if you keep them at the current rates or higher. In theory because you suddenly had 32%-49% of your income back with all those direct and hidden taxes gone, you'd be able to save more and spend more. Those savings would boost businesses' profits and allow them to invest more, produce more, and create more jobs and wealth. As an added beneift, with all that extra money you could either put your kids into private schools, save for college, or be a stay at home parent because one spouse isn't needed to work to just pay off the taxes and home school the children. Any of these would benefit how much education our society has and with all those educated kids going out into the workforce, they'll do more productive and valuable work which would contribute to the GPD and offset the reduced taxes.
Now I'm not saying we can cut taxes to 1% because there is probably a pratical limit to how far that range works, but in general the principle should work. Now you might have to do it with a few strings attached like requiring businesses who take the lower taxes to pass the savings on to the consumer dollar for dollar, but I don't think it'd take too much for it to work.
WARK!
Thus Spoketh Winterclaw: a blog about a Winterclaw who speaks from time to time.
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