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Cutting Taxes is Not a Solution

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October 20, 2011 – Comments (17)

In a post titled 'Raising Taxes is not a Solution', Pencils2 writes

Why on earth would we give more money to politicians who have proven themselves incapable of balancing the budget? - Pencils2

Because cutting taxes hasn't been any solution, we keep having to do it over and over again as each additional tax cut does not trickle down to most Americans, but rather goes to lining the pockets of a smaller and smaller group we now borrow from in order to get the same lifestyles and services we used to be able to afford before we gave tax collections and union representation away.

or

Because a majority of citizens authorised the spending first, and then foolish supply side economic experts promised us we could cut taxes and pay the bills for the spending we had asked for. It did not work. It turned out that the taxes we stopped collecting became borrowing and interest payments to the same people we were no longer collecting taxes from. It is long past time to revisit that failed decision.

And I do not care if you call yourself a Communist, Socialist, Democrat, Republican, Green Party, Tea Party, or Libertarian if you are promoting that "cut taxes and solve problems" idea. I do not care if you are calling it trickle down, supply side, privatisation or "the path to freedom". It is a complete and utter failure, and it has never, anywhere in the world lived up to the promises of its advocates, only the self interest of the already rich.

Only progressive tax structures have had any measure of success at keeping those promises for a majority, and even then you have to pay attention to spending and remember that a much wider distribution of our countrys wealth than we have today is the best tool for preventing favoritism and government corruption.

If you wanted to start the free market equality race to the top after twenty five years of purely socialist wealth distribution so everyone is at the same starting line, thats one thing. But to start it now after what you call the last 15 years of corrupt government favoritism is like advocating for rewarding the corruption then, by advocating for the thieves to keep now what they stole then.

The free market political platform: "Deregulation let us steal, cutting taxes lets us keep it".

"Oh and by the way, we can also help invest your SSI contributions too, for a small fee of course, that will in no way will seem like skimming 12-15% off your investment dollars into our fee structure before they ever earn a penny for you, or charging you again to restructure them into an income producing annuity later on".

Scew that, and good luck with your political campaign.

Perhaps it would be best to raise taxes enough to actually fund the services we authorised and pay down the debt rather than having a tax structure that rewards lending by susidising corporate borrowing with tax deductions, or subsidising home loans with interest tax deductions, or rewarding capital gains income on the lending with lower tax burdens than actually working to make those investments a success.

Best wishes,

Steven

 

17 Comments – Post Your Own

#1) On October 20, 2011 at 1:15 PM, dbtheonly (< 20) wrote:

Steve,

 It's not an economic issue. It's a political one. And it's not as much a matter of cutting taxes, as cutting the underlying Government. There is disagreement on exactly how much Government to cut, but the issue is the same.

Privatizing SSI is what we referred to as the "Wall Street Relief Act of 2006". You nailed it with the fees made. I'd point out that results are not guaranteed and betting on stocks is by no means always successful. And that uncertainity is the very opposite of what SSI is about.

You & I are going to disagree about the utility of a tax deduction for a primary home mortgage interest. Ah well.

Best Wishes Back at You.

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#2) On October 20, 2011 at 1:45 PM, 4everlost (29.37) wrote:

devoish wrote: "...goes to lining the pockets of a smaller and smaller group..." which is exactly the problem.  The reason it keeps going to a smaller and smaller group is crony capitalism and it's been happening for decades.  Recently it has become much worse.  The government takes money from the private sector and via the deals they have with the aforementioned smaller and smaller group  chunks of those funds end up in the pockets of the elite.  This means that the answer will not come from taking more money from the private sector in the form of higher taxes.

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#3) On October 20, 2011 at 1:52 PM, devoish (98.63) wrote:

dbtheonly,

I screwed up. The marketing department of the finacial industry is referring to privatising ssi as personalising ssi now, like it is something different.

As far as the mortgage interest deduction goes it is really just a handout to the lenders. It supports mortgage interest by not collecting taxpayer dollars from borrowers so they can pay a lender more. Other taxpayers have to step in and fund the difference, or accept cut services or Government borrowing. If it was ended on new loans tomorrow housing prices would fall the amount of mortgage payments vs income that deduction supports. People who still have that deduction would not have their budgets impacted, just the appreciation of ther home. People who do not get the deduction benefit would experience lower housing prices.

Using a policy like that to promote home ownership in an attempt to get lower income people into a budget that can afford a house has a short impact, until housing prices go up to match the new tax deduction benefited spending ability of potential home buyers.

Either the price of a home goes up, or the price of the loan. Because it is a mortgage interest deduction, it is geared to benefit lenders more than home sellers because it is better for the buyer to pay higher interest for the deduction and less principle for the non deductible house when he maxes out his spending ability to buy a house.

I bet a bank recommended the idea.

Best wishes,

Steven

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#4) On October 20, 2011 at 2:06 PM, Valyooo (99.36) wrote:

dbtheonly,

This is why I am an anarchist.  Too much debate on "gov is too big, gov is too small".  How can you ever tell how much gov is the right amount without being too subjective?  It's easier to have no gov.

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#5) On October 20, 2011 at 2:06 PM, davejh23 (< 20) wrote:

"Because a majority of citizens authorised the spending first, and then foolish supply side economic experts promised us we could cut taxes and pay the bills for the spending we had asked for. It did not work. It turned out that the taxes we stopped collecting became borrowing and interest payments to the same people we were no longer collecting taxes from. It is long past time to revisit that failed decision."

In what way did a majority of citizens authorize the government's reckless spending?  Simply by voting for ignorant and/or corrupt politicians?  A majority of citizens didn't authorize spending a trillion+ dollars that we don't have on multiple wars, or spending hundreds of billions to bail out failed banks, or wasting billions on ridiculous home/car/appliance stimulus efforts, etc...  Rolling back the Bush tax cuts and Obama's payroll tax cuts would not even come close to closing the budget deficit, and most economists agree that rolling back of the payroll tax cuts alone come January would likely push us into recession.  I'm not saying that nothing needs to be fixed, but I don't believe there is a simple solution when we're teetering on the edge of recession. 

I agree with db's statement: "And it's not as much a matter of cutting taxes, as cutting the underlying Government."

When even a 100% federal income tax on the wealthy wouldn't close our budget gap, you have to start looking at significant cuts along with any tax increases. 

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#6) On October 20, 2011 at 2:19 PM, Frankydontfailme (27.26) wrote:

Yawn. Both of these statements are correct: "Raising taxes is not a solution", "Cutting taxes is not a solution."

Way to be trite.

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#7) On October 20, 2011 at 3:25 PM, Varchild2008 (83.69) wrote:

Dbtheonly wrote,
"And that uncertainity is the very opposite of what SSI is about."

Actually SSI is 100% about uncertainty.

Every single year I get in the mail my SSI report and it always says that by the time I turn 50 years old, SSI benefits will be cut by almost 1/3rd due to its insolvency.

That is the world we have right now and you suggest putting the money into the hands of the individuals would somehow create worse uncertainty?

I'd rather take my chances with my own $$$ than to watch it evaporate into thin air as I keep getting reminded of by the SSI agency.

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#8) On October 20, 2011 at 3:27 PM, Varchild2008 (83.69) wrote:

Oh and since when have we ever cut taxes???

We have for Income Taxes....

But Corporate Taxes remain sky high.

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#9) On October 20, 2011 at 3:39 PM, Varchild2008 (83.69) wrote:

Gasoline Taxes?  Have always gone UP

Property Taxes?   UP UP UP UP

State Sales taxes?    UP UP UP   Michigan Sales Tax was lower in 80s.

Ciggarette Taxes?  UP UP UP UP UP

State Income Taxes?  Yes sir.....Just cause Federal Income Taxes drop, does not mean overall tax burdon has....  States have boosted Income Taxes to fix their Budget Shortfalls. 

Michigan under Jennifer Granholm raised State Income Taxes.

Shall I continue?????

When you refuse to look at the Overall Tax Burdon that a single individual in the Middle Class making $50,000 - $100,000 a year,
then you miss the picture completely.

You can sit there saying that Lowering Taxes doesn't work by pointing to how we lowered Federal Income Taxes and our economy still stinks....

But what about the HIDDEN Taxation of Increased Governmental REGULATION????

We have past 75 brand new Major Regulations costing tens of billions of dollars which ultimately passes to the Consumers through price hikes.

I don't know about you but I am sick and tired of General Mills raising the price of a box of Cereal and yet they have no choice!

People still think that lowering taxes doesn't work on the premise that somehow....America has lowered taxes??? we have??

Under Ronald Reagon we raised taxes all over the place at the same time that he Lowered the Federal Income Taxes.  People forget that.  It is the OVERALL burdon of taxation that must be dealt with;.

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#10) On October 20, 2011 at 3:49 PM, whereaminow (21.14) wrote:

Yeah, I don't know what you would have been doing for the past 100 years to believe that taxes actually get cut. 

If the government revenue stream stays constant or goes up, as it has under every administration for the last 80 years or so, then that money comes from somewhere.  

Now even if you were to lower taxes across the board, to where the upper middle class paid 1% in federal income taxes, the government's revenue stream would remain unchanged.  They would either borrow the money or print it.  Either way, it's a tax.  So all the Republicans do is shuffle the tax burden.  Printing money and borrowing money (to be repaid with more taxes or printing money) shifts the tax burden from the rich to the poor.

So neither the Establishment Left nor Right has any solution on  the tax problem. Yawn. Same old same old.

It would help to cut spending, and reduce government revenues that way, then the relief would come because their would be less reason to borrow and print.  At that point, if you can get to a balanced budget.

The tax code should actually be frozen in place.  All tax reform is a scam.  At that point, once it's frozen, you could have the Ron Paulians come in and start cutting out taxes en masse from the tax code, starting with the most impressive.

Finally, although I give MMTers a lot of sh*t, they have it right on federal taxes.  There is no need.  It's a relic of the gold standard, and government's attempts to get around the constraints of that standard. The Federal Reserve could easily print the money for all federal income taxes due, at the very least the taxes from households, and reimburse that to the Treasury on our behalf.  Then at least, you wouldn't have to deal with the draconian and barbaric IRS.  

Michelle Bachmann worked for the IRS.  Enough said.

David 

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#11) On October 20, 2011 at 4:16 PM, catoismymotor (39.02) wrote:

I have a proposal!

Eleminate ALL taxes. Instead of our government feeding off of the citizens of this country why don't we run a international protection racket instead, mob style?

"Hey, Finland. You sure have a nice country there. It'd be a shame if somethin' were to happen to it. You should pay us $X billion every year to protect you from bad countries. If you don't want to I'd understand. But if you don't and somethin' were to happen to you I'd feel real bad about it. Real bad."

We have the world's most powerful military. Why not use it to generate revenue? I bet Dick Cheney already floated this idea past a few people in 2001.

-Cato

 

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#12) On October 20, 2011 at 4:53 PM, dbtheonly (< 20) wrote:

Varchild,

"Every single year I get in the mail my SSI report and it always says that by the time I turn 50 years old, SSI benefits will be cut by almost 1/3rd due to its insolvency."

Really? Wow! I'm going to have to read mine next time.

Cato,

Sort of how fire "insurance" worked in Ancient Rome? "Invasion" Insurance the USA will guarantee that you won't be invaded for the small annual sum of...

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#13) On October 20, 2011 at 5:03 PM, Frankydontfailme (27.26) wrote:

Hehe Cato. Fiiinraaand

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#14) On October 20, 2011 at 5:17 PM, chk999 (99.97) wrote:

Cato, I like the way you think.

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#15) On October 20, 2011 at 10:03 PM, mtf00l (44.95) wrote:

Two thoughts...

One, have a reduction in force of the House and the Senate, and by that I mean RIF the Congressmen and Senators and their staffs.

Two, outsource the remaining politicians to the least expensive "Free Trade Country".

That's change we can believe in!

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#16) On October 20, 2011 at 11:10 PM, devoish (98.63) wrote:

Thank you for replying all,

Varchild, as you consider State taxes, it has become pretty common for states to attempt to lure corporations with the promise of favorable taxes, which in many cases means no property taxes at all.

Best wishes,

Steven

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#17) On October 21, 2011 at 1:49 AM, awallejr (85.41) wrote:

It turned out that the taxes we stopped collecting became borrowing and interest payments to the same people we were no longer collecting taxes from.

+rec on that comment.

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