Is raising taxes good for the economy, neutral, or bad?

[A18]

Here's an interesting CATO article on the subject.

http://www.cato.org/pubs/pas/pa-272.html

15 Percent National Sales Tax: Effective Tax Rate with Poverty Exemption for Family of Four

[J-Mann]

I think this is a fairly good idea.  Granted, I'm horrible with numbers and I'm no economist, but I don't understand one thing about it: does everyone get a rebate of $18,588?  I'm guessing they do, but the article isn't really clear, as far as I'm reading it.

[David S]

Considering that the federal government currently sucks nearly $2 trillion out of the economy any increase would be bad. We need tax reductions, not increases.

[A18]

I think this is a fairly good idea.  Granted, I'm horrible with numbers and I'm no economist, but I don't understand one thing about it: does everyone get a rebate of $18,588?  I'm guessing they do, but the article isn't really clear, as far as I'm reading it.

Yes, everyone gets the rebate, rich or poor. Also, the rebate is slightly larger for people with larger families.

[Nym90]

Considering that the federal government currently sucks nearly $2 trillion out of the economy any increase would be bad. We need tax reductions, not increases.

And NONE of that goes into helping the economy at all? The most optimal thing for the economy would be to have no government?

I realize that you probably don't think that's true, but if you are saying that all money that is spent by the government is sucked out of the economy, the implication is that there is no benefit from it whatsoever (it gets taken out, but then put back in, in ways that should at least theoretically make the economy more productive...the increased efficiency to the economy that many services bring about increases the amount of money that people make in the first place, so much of the money being taken was, in a sense,  put in by the government at first to begin with). You are saying that no government spending is beneficial to the economy at all.

What I'm saying might be a little esoteric, so here's a concerte example. If the government builds a road to relieve traffic congestion, and as a result all users of the road save a total of, let's say, $1,000,000/year in reduced fuel costs (just making up a number here for simplicity's sake), then the taxes on that increased income aren't being taken out of the economy; government spending enabled people to save money that they otherwise would have wasted on excess gas that wasn't needed.

Or, if the police force, as a result of its existence, saves people $1,000,000/year in money that they otherwise would not have had, due to the increase in crime that would have resulted if the police didn't exist. Obviously crime is horribly inefficient and hurts the economy, just as congested roads do. These are both examples of problems that are too wide-scale and expensive for private businesses to be likely to try to tackle on their own. It's just not going to be in any one business's best interest economically to make a concerted effort to reduce crime or traffic congestion.

[The Duke]

Raising taxes is always bad in and of itself.  However, in certain situations, the potential increase of solvency in the Federal Budget can outweigh the cost of taking capital out of the private sector.  In wartime, sometimes new taxes are required to finance the effort, and even though the impact on the economy from the tax increase may be negative, the impact of ending the geopolitical insability brought on by military hostilities and the offsetting of new defense sending with new revenue can outweigh the cost of new taxes (assuming the level of new defense spending is high enough to warrant such an increase).

[Nym90]

Well said, John. That was basically what I was trying to say, but I tend to be verbose.

The military is another good example, where the economy is often better off; the benefit of having a secure nation and removing threats more than outweighing the expense in taxes, in most though certainly not all cases.

One must take a holistic view of taxes; consider ALL benefits and expenses that directly or indirectly result, both qualitative and quantitative.

[Richard]

Ah, right, I forgot about that.

I still contend that raising prices by 20% or so nationwide wouldn't be good for the economy. Yes, people would have more money to spend, but they would be discouraged froms pending due to the higher prices. People would realize that if they save and don't spend, they won't pay as much tax. If people spend less, the economy gets worse.

This is a myth.  In most European countries, the sales tax is 17.5% to 25%.  In Ontario, it is 15%.

If there is one fact of life, it is people like to spend money.  A 20% sales tax will discourage some wasteful spending, but it will encourage saving instead.  Both spending money and saving money are good for the economy in different ways.

Spending money stimulates supply and demand.  Saving money finance the current deficit and makes the united States less dependent on foreign capital.  Additionally, saving money stimulates the economy because you're injecting money into investments.  The bank can lend your money out to other people, or you can put the money you saved into bonds and stocks, which is a direct investment in the economy.

The only way saving money will not benefit the country is if you take it out of the bank and stuff it in your pillow.

The benefits gained by eliminating income taxes and the saving billions spent each year by individuals and corporations to hire consultants (who needs to know the 17,000 page tax code) will be astronomical.  The downside will be unemployment will go up initially, because the IRS and a lot of consultants and CPAs will be out of a job.

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Incorrect.  The CATO Institute's study clearly shows that this is not the case.

[David S]

I have no argument with saying that the Federal government can and should do some things. Certainly defense is a job the constitution rightly gives to the federal government. But the military expenditures are only  about $500 billion out of a $2.3 trillion dollar federal budget. Where does the rest of it go? Social security takes about $400 to $500 billion. Personally I'd rather keep the soc sec taxes and take care of my own retirement. Medicare/Medicaid take another $400 to $500 billion. Those programs were started to provide healthcare for the elderly and the poor. In my opinion, what they have in fact done, is drive up the price of healthcare so that today working people can't afford it. Even huge corporations such as GM are staggering under the weight of their healthcare costs. Before Medicare/Medicaid doctors made housecalls. Try to get one to do that now.
That adds up to a cost of about $1.5 trillion. Only the $500 billion military part of that is a constitutional function of government but even if we allow the others where does the remaining $800 billion go?

In the private sector, competition forces business' to be efficient. The government operates as a monopoly and is not forced to be efficient, so money can be squandered all over the place. Witness the outstanding success of the American economy compared to the dismal failure of any government run economies. OK in the U.S. some people are very rich while others are poor, but in the U.S. the poor people sit home watching a color TV! In the state run economies of the former USSR for example, economic equality was achieved by making everyone poor. No one there could afford the items we Americans take for granted. Most Americans live in nice houses, have one or more cars, mulitple TVs,  PCs, air conditioning, you name it. I cannot think of any state run economies that achieved that level of success. All of this is possible because of business not government. Business' that compete in a free market system will always be far more efficient and customer oriented than government. So we should direct as much of our resources as possible into the private sector, not government.

[Filuwaúrdjan]

Depends

[TeePee4Prez]

Not always.  I know I have been notorious for it in my time as Senator.  In the recent case, yes it would be good for the economy.  Bush cut taxes WAY too much and mostly for the wealthy.  Money multiplies better among middle class people than it does the wealthy who whorde it and contribute little.   

[Richard]

Not always.  I know I have been notorious for it in my time as Senator.  In the recent case, yes it would be good for the economy.  Bush cut taxes WAY too much and mostly for the wealthy.  Money multiplies better among middle class people than it does the wealthy who whorde it and contribute little.   

Way too much?  What?  Here is my tax cut I would do:

"The 16th amendment is hereby repealed."

[Nym90]

Regarding repealing Social Security--the fact of the matter is that poverty will go up, especially among senior citizens. I realize it makes sense to say "let everyone take care of their own retirement, we shouldn't have to pay for anyone else's retirement", but you are going to end up paying for those people anyway when they make stupid decisions and squander all of their retirement money. People don't just go away and die, you have to pay for them somehow. More poverty=more crime, which costs everyone more money.

I agree fundamentally with a lot of what Libertarians say, but the biggest problem with the ideology is that we don't all live in a vacuum. Everything that everyone does affects everyone else. You can't just compartmentalize everything and expect it to work out.

I agree that government needs more competition, and should be forced to compete on an even keel with the private sector for the providing of many services, but in many cases there are no private businesses willing to provide a service that will make society run more efficiently and effectively. The advantage of the federal government being so big is that it can afford to do things that would not be cost effective or feasible for any private business. In that sense, the government is a corporation, providing a service in return for a fee, it's just an extremely large corporation that has 200 million shareholders (every registered voter in the USA owns a share of stock, and we vote regularly for CEO, board of directors, etc.). It also doesn't earn a profit, which does provide it with a competitive advantage vs. private business, though private industry has the motivation of profits to counterbalance this.

Government does have an incentive to streamline and improve; democracy. If government officials are wasting your tax dollars, vote them out and vote in folks who won't. Democracy forces accountability on government, just as the free market forces it on the private sector.

[David S]

There is a big difference between government and a business. Business can only get your money if you give it voluntarily in exchange for their services or products. Government forcibly takes your money, even for services that you may not use. Also business gives you choice. Government does not. Some examples; If you want a car you can buy one from GM, or Ford or Chrysler or Toyota, etc.  You can buy a big truck if that suits your needs or a small economy car, or a sports car or an SUV. You can also pick from a multitude of features that best suit your needs, and you can pick the best means of financing it. You can also buy a used car if that fits your budget better, or no car at all if you prefer. By comparison lets look at a government run "business", public schools. Government says you owe us a percentage of your property value to pay for the schools even if you don't have kids and never use the schools. If you don't pay we'll seize your property or put you in jail. Also if you have kids they must go to the school we say they go to. If you don't send them there we'll put you in jail. Thats a huge difference. Which one would you rather do business with?

[FerrisBueller86]

Raising taxes is bad.  However, raising the deficit is (in the long run) even worse.

The debate SHOULD be about spending.  If you think taxes are too high, then the real problem is spending.  If spending is cut, then the deficit can be reduced or eliminated WITHOUT raising taxes.

[○∙◄☻¥tπ[╪AV┼cVê└]

This sounds like a loaded question.
Of course taxes by themselves don't help the economy, duh.

[minionofmidas]

This so entirely depends on
-who you're going to tax
-how high they're currently taxed
-what you're going to tax them for
-what they're currently getting taxed for
-what you're going to do with the money
-what you're currently doing with the current tax income
...that, quite apart from "refusing" to answer this overly simplistic poll, it is simply impossible to do so, to have any sort of grasp of the matter, and to remain intellectually honest at the same time.

[minionofmidas]

There is a big difference between government and a business. Business can only get your money if you give it voluntarily in exchange for their services or products.

Not if you need the service or product to live - in which case you only have some very limited choice, nowhere near enough for market conditions to apply.

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By comparison lets look at a government run "business", public schools.

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Of course, if you look at schooling as a business, you have already failed some basic common sense tests.

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You did go to school, you have used it. Quite apart from the Social Security and Healthcare costs incurred by low birth rates.

[Filuwaúrdjan]

Of course, if you look at schooling as a business, you have already failed some basic common sense tests.

:-D

[David S]

There is a big difference between government and a business. Business can only get your money if you give it voluntarily in exchange for their services or products.

Not if you need the service or product to live - in which case you only have some very limited choice, nowhere near enough for market conditions to apply.

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By comparison lets look at a government run "business", public schools.

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Of course, if you look at schooling as a business, you have already failed some basic common sense tests.

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You did go to school, you have used it. Quite apart from the Social Security and Healthcare costs incurred by low birth rates.

I don't think of government as a business. I was responding to NYMs comment in which he said government is like a corporation providing services for fees. My point is that private business can only get your money by offering you products you want to buy voluntarily. Government takes your money by force. And business offer you choices while government does not.

Of course I went to public school. What choice did I have?

Who would you rather deal with; someone who forcibly takes your money and gives you what they think you need regardless of whether you want it or not, or someone who offers you a wide selection of goods and services, that you are free to to buy or not as you see fit?

[Nym90]

Everyone benefits from public schools; their existence results in a more educated populace, which results in lower crime rates and more productive workers who will do better quality work in their jobs, and better selection for corporations to choose from in hiring.

That's what I was referring to earlier, you can't just compartmentalize it like that. Everyone benefits from things like education and social security, even if the benefit is indirect enough that most people don't realize that it's there.

[Dr. Cynic]

It all depends on the condition of the economy.

[Bono]

Of course, if you look at schooling as a business, you have already failed some basic common sense tests.

The Weak case For Public Schooling

Also, before 1850, there were no public schools, so they were more or less a business(or a charitable work). And before 1850, when Massachusets became the first state to force children to go to school, the literacy rate there was of 98%, where as of ten years ago it was of 91%, although if the "functional illiterates" were removed, the rate would have been much lower.

[David S]

Everyone benefits from public schools; their existence results in a more educated populace, which results in lower crime rates and more productive workers who will do better quality work in their jobs, and better selection for corporations to choose from in hiring.

That's what I was referring to earlier, you can't just compartmentalize it like that. Everyone benefits from things like education and social security, even if the benefit is indirect enough that most people don't realize that it's there.

With regard to public education I'm willing to compromise. Use vouchers. That at least allows some amount of choice and introduces competition into the picture. Thats not as good as a true free market but its probably the best we can get.

With regard to soc sec I think the government system is a bad deal. Over the long run investing in the stock market offers a really good return. If you simply took the money you had to give to SS and invested it in stocks you would have a sizeable amount of money to fund your retirement. Over the last 30 years the dow is up over ten times. Thats a great return. When government gets your ss payment they spend most of it on current retirees, and what ever is left gets spent on whatever else they feel like spending it on. There is no money in the trust fund, only IOUs for the money they took. In a few years that money will be needed to pay benefits, but instead of useable assets the fund has only IOUs. So government will have to raise taxes to pay the IOUs. That means young people like you and my kids will get stuck with higher taxes to meet commitments to geezers like me. I don't think you are going to like it. SS has been a good deal in the past becasue government runs it like a Ponzi scheme. In a Ponzi scheme, the people who get into it early make out well, but those who get into it later get stuck holding the bag, an empty bag.

[David S]

Of course, if you look at schooling as a business, you have already failed some basic common sense tests.

The Weak case For Public Schooling

Also, before 1850, there were no public schools, so they were more or less a business(or a charitable work). And before 1850, when Massachusets became the first state to force children to go to school, the literacy rate there was of 98%, where as of ten years ago it was of 91%, although if the "functional illiterates" were removed, the rate would have been much lower.

That second link presented an excellent article in support of totally privatizing education. I support that view completely. Unfortunately I believe it to be unattainable as it would cause liberals to go into a semi-catatonic state resembling the creatures in "Dawn of the Dead" and devouring anyone they encounter! Hence my compromise position, vouchers.