Quote:
Originally posted by Sawzall
tw wrote: No tax cut nonsense has ever created innovation.
I will grant you that. But I would suggest that *overtaxation* has stifled innovation time and time again. Why? Because innovation, beyond an idea, requires free cash flow in order to be converted into actual productive goods or services.
I do not see it as a zero sum game - the ideal tax rate will generate the maximized tax revenue. A rate too high will evenutally fail since it "eats the seed corn" of enterprise. I generally find the concept of a rate too low as absurd, but then again, I tend not to support government beyond the basics.
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That logic holds except for a few blaring problems. First, the US has a world's lowest tax rates. IOW if a tax cut (without corresponding reduction in spending and debt) will improve an economy, then taxes all over the world are way too high - innovation is being stifled everywhere. In some countries with low tax rates, there is a shortage of innovation. But in other high tax rate countries there is a booming economy due to great innovation. IOW there is no relationship between stifled innovation and tax rates.
Second, there is no shortage of capital. The "eats the seed corn" is a classic Reaganomics sound byte without any basis in facts. A shortage of capital is indicated by high interest rates. Where are those high interest rates?
Innovation does not have a capital shortage. Historically, capital shortages are directly traceable to a shortage of capitalists who can appreciate and invest in innovative products. This is the reason for success created by venture capitalists - people who can invest in innovation because they recognized what is innovative before it comes to market. However the anti-innovation GM could raise all the capital they wanted in the 1970s and early 80s because American capitalist were mostly MBS educated - did not have a clue as to what a computer chip was (see Intel's long suffering because they could not raise capital). There is no shortage of capital - obviously. So why do we need tax cuts? Because emotion has replaced logic.
Third, many governments with higher taxes have strong economies. Innovation is not a function of tax rates. Economic health is a function of whether government can also invest wisely. If government is a poor investor, then the tax cuts must be associated with corresponding reductions in spending. Some economies (ie Scandanavian) provide more social services, have extraordinarily high taxes, and have some of the world's best living standards. High taxes are associated with responsible government spending - therefore stronger economy. Tax cuts only solve a problem when associated with corresponding spending reductions.
Four, the next post will demonstrate the real mindset behind the 'cut taxes' concept being pushed by low intelligence but power hungry politicans.
We do know that tax cuts without paying off debt and without reducing spending is an economic narcotic - long proven in history. A short term increase in GNP (that does not represent growth) followed by a recession is what tax cuts create. If the economy ever needed a financial boost, that is Greenspans job. Why do some think a low intelligent politican knows better? Emotion has replaced logic.
Even if the White House doesn't understand economics - they have political promises to keep. Screw the economy. George Jr's tax cut is all about politics. Anyone who thinks this tax cut is healthy for the economy - espeically since we are still paying done the Reagan debts - is simply fooling themselves.
We have this grand oppurtunity to finally pay off Reagan's mortgages. Instead another political type is more interested in his political standing (and reelection) than in doing the job. Taxes do not stifle innovation - as demonstrated above three time over. Number four will demonstrate why so many don't know what the back room power brokers are really doing. Notice the real mindset of tax cuts.