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Tax Cuts For People Who Really Don’t Need Them

With the midterm elections coming up this fall the two political parties are out their fine tuning their propaganda in order to make the other look out of touch with the majority of the voting public.  Since the Democrats are the political party in charge of the White House and both houses of the Congress, they have a lot more to lose than their Republican opponents.  Despite their attempt to paint the Republican’s as little more than a bunch of obstructionists, people aren’t all that happy with the Democratic Party’s weak-ass attempts to push through a more liberal agenda.  Democrats have control of the legislature.  Why is it so hard to get anything done unless your heart just ain’t in getting anything done?

Consequently, there is a concern that the Democratic supporters don’t have much to look forward to this year.  And without much to look forward to, Democratic voters are more likely to stay home while Republicans are more likely to turn out and take control of things this year.  Republicans are expected to regain control of at least the House of Representatives and possibly the Senate.  Democrats had their chance to get things done.  And it looks like they’ve squandered it.

A good number of the people in this teetering economy want the comfort of doing nothing or doing only what sounds easy and most attractive.  And despite the lack of merit for many ideas or their ability to deliver on their promises, a lot of people cannot help but give these ideas some credence.

One idea that I take issue with is the idea that we shouldn’t allow the reduce tax rates former President George Bush, Jr. passed early in his first administration to expire later this year.  Under the guise that the American economy was slowing and reduced taxes were needed to stimulate the economy, the tax cuts were pushed through with the political equivalent of warp speed back in 2001.  And according to the Labor Department, the immediate effect was that the unemployment numbers started to rise and there was an increase in the number of jobs lost in the American economy.  It wasn’t until almost three years later that the job market began to create jobs again.  But four years after that, the job market seriously tanked again.  All of this happened with tax cuts firmly in place.

Now I understand the benefits of stimulating an economy with tax cuts.  Keep more money in the hands of the people, they’ll spend it on services and products, the companies that make those services and products will have a cash infusion, those companies will hire more people, those people will earn wages, the resulting wages will promote buying, and everybody will be paying more tax revenue from all the increased financial activity.  That’s a cool idea.  People out of work will benefit.  People who are struggling to make ends meet benefit.  Wealthy people will benefit as well.

But tax cuts for wealthy people doesn’t have quite the same effect as tax cuts for lower to middle income people.  People at the bottom rung of the economic ladder are more likely to spend every dime of their tax break, resulting in the desired effect of having the money circulate through the economy, while people at the higher end of the financial spectrum would probably be more likely to simply watch their bank account grow from the stimulus and not letting the money circulate through the economy as quickly.

In theory, people at the upper end of the financial spectrum have more disposable income and can afford a higher tax rate.  With everybody’s emphasis on getting the federal deficit back in check and getting America’s financial house back in order you would think these people would step up and do what they can.

Instead, there is a lot of complaining about how the wealthy, the top two percent of American earners, can ill afford their tax rates returning to pre Mr. Bush numbers.  Small business owners with six figure profits claim that can’t help their fellow Americans because they don’t know their tax liability and other such nonsense.  Trust me, if I was a small business owner and I had a two hundred grand net annual income I’d be damned if I let a thirty five percent tax rate going to a thirty nine percent rate keep me from expanding my business and hiring more people.  I’m not about to shoot myself in the foot over something like eight grand.

But keeping tax rates low for the wealthy is one of those issues that sound so attractive to some people who don’t have a dog in that fight.  We don’t need to increase taxes on the wealthy.  We just need to cut spending.  Keep the government’s hands off our Medicare and Medicaid.  We don’t to stimulate the economy, just keep doling out the unemployment checks.  These ideas might sound attractive.  But when you really think about it they really just don’t have much merit.

Thursday, September 2, 2010 - Posted by | Life, Taxes, Thoughts

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