Posted by
HaskinsNews.com -Justin Haskins on Thursday, April 10, 2008 9:58:39 AM
Tax cuts for the wealthy is one thing neither Barack Obama nor Hillary Clinton support; yet, it is possible that tax cuts for the rich, along with tax cuts for everyone else, is actually a good thing for the economy. First let's just think about the actual theory that goes into this: The main idea behind giving tax cuts for the wealthiest 1% of Americans is that they are the sector responsible for over 80% of our wealth and the majority of our jobs. This is, whether you like it or not, a simple fact. (And by the way, I do not like it.) But, if you give tax breaks to the wealthiest 1% and small business owners, then what you do is give companies, small businesses, mom and pop stores, and virtually ever piece of America's economy more money to spend on expanding their businesses rather than using that money to pay taxes.
One of the first principles of economics is the idea that within a free-market economy such as our own, any taxes or expenses placed on a business will simply be passed on to the consumer through the price of the product. Therefore, if you tax big business at a higher rate than you tax the rest of Americans, then the cost of producing that product (which includes the taxes charged by the government) will automatically be included through the price.
Secondly, increasing taxes on the richest 1% includes small businesses, which means that it is not only the Wal-Marts and McDonald's of the world that are going to be hurt by increased taxes. Of the richest 0.5%, which accounts for 750,000 taxpayers, two-thirds report small business incomes.
During the Ronald Reagan years, (Hate him or love him, it proves my point) tax revenues increased 28% throughout the 1980's. The reasons deficits ensued is because spending increased by 36%, outweighing the gains caused by tax cuts.
Also, in 2005 and 2006, tax cuts on the wealthy led to increased tax revenues by 14% each year. Also, tax revenues at the beginning of 2007 had totaled 2.4 trillion dollars from 2006-2007. This total is $400 billion dollars higher than the collection peak of 2 billion dollars in 2000, the end of the Clinton years.
The economy is struggling now, but those struggles have NOTHING to do with tax breaks. The housing market, poor choices by consumers, and high gas prices are causing our current (or future, depending on how you look at it) recession. I'm not, by any means, saying Bush is doing the right thing. Spending is increasing year after year...but his tax cuts are the problem with the economy as the tax revenues prove beyond a reasonable doubt.
In recent American history, high tax rates often lead to poor economies. Under JFK, who inherited EXTREMELY high tax rates, the unemployment rate was:
1961 6.7%
1962 5.5%
1963 5.7%
Following JFK's terrible death, the implementation of his tax program under Lyndon Johnson, which led to tax cuts for the wealthy led to very low unemployment rates:
1964: 5.2%
1965: 4.5%
1966: 3.8%
1967: 3.8%
1968: 3.6%
1969: 3.5%
Under Jimmy Carter, who had marginal tax rates up to 70% for America's wealthiest few, the economy crumbled.
Unemployment rates under Carter:
1978: 6.1%
1979: 5.8%
1980: 7.1%
1981: 7.6%
1982 (carried into Reagan's term): 9.7%
Under George Bush's tax cuts for the wealthy, the unemployment rate for the last three years has been under 5%, currently standing around 4.8%.
Only three of Bill Clinton's eight years in office had unemployment rates lower than the current unemployment rate.
Maybe taxing the rich at higher rates isn't such a good idea.
Justin Haskins