current US income tax system explained

[SaburoS]

Originally posted by Dead Man Flying
If you cut taxes on those earning the least amount of money, who live paycheck to paycheck, you're going to increase demand.  Any extra money provided to them is going to find its way back into the market, which in turn will lead to job creation and capital investment.

I'm not attacking a tax cut on the wealthy, mind you.  However, believing that cutting taxes for the wealthy alone will lead to economic improvement (i.e. increasing supply rather than demand, hence supply-side economics) requires a real leap of logic.

-- Todd/Leviathn

S!!!

[Mirge]

russias economy skyrocket'd after they introduced a flat income tax.. the lowest rate in europe as of now. http://www.papillonsartpalace.com/russias.htm
im sure you can find other articles on it.

[Toad]

Todd,

Where did the consumer demand go?

Things were rocking along reasonably well, albeit in a slowdown, until 9/11 and the anthrax scare.

Is that what made the turtle pull his head into the shell?

If so, will a "tax cut" (or direct transfer of wealth of about $350 each to the lowest two quintiles) change this attitude?

Not arguing, asking your opinion.

[SaburoS]

Just our of curiosity, how much income taxes were paid by GE, GM, etc?
Percentage wise are they paying the same, more, or less than the average?

[whgates3]

a lot of tax charts are inaccurate, as they dont account for the AMT, which tends to screw people in the $60k - $500k range...corporate taxes are stupid - they just translate to higher prices, paid by you. its a great way for gov't to hide taxes...effectivley there is a national sales tax in corporate income taxes, but nobody tells you when you're paying it

[Toad]

I take it you had no point with that comment then.

[Nash]

President Bush's budget chief said Wednesday that the White House envisions federal deficits in the $200 billion to $300 billion range over the next two years, a dramatic worsening of the government's fiscal picture since last summer.

The acknowledgment of the bleaker fiscal prospects was sure to fire the partisan budget fight between the Bush administration and Democrats, who have accused Bush of ignoring revived federal deficits and even fueling them by proposing new tax cuts.

In remarks to the U.S. Chamber of Commerce and later to reporters, Daniels downplayed the near-term shortfalls, which stand to surpass the record $290 billion in red ink that occurred when the first President Bush was held office in 1992.

‘‘We ought not hyperventilate about this issue," he said.

[Toad]

I think the case can be made that this is a rather unique downturn in the history of the US economy.

How do you end a recession where people are just not in the mood to spend? Neither Hoover nor Roosevelt really had much success after the '29 cataclysm. I think the case can be made that WW2 ended that one.

Now we've got 9/11 and the consequent effects. The travel industry, particuarly the airline element is on its rear. Spending is up a bunch for a lot of reasons that were never players before.

As I said, I don't think this one fits any template.

[crowMAW]

Originally posted by Toad
I think the case can be made that this is a rather unique downturn in the history of the US economy.

Cyclical economic downturns are common.  There have been many in US history.  What is unusual is that we have gone for nearly 10 years with excellent economic growth.

While 9/11 was certainly a major factor in the current  downturn, it really began earlier with the failure of the dot-coms.  In that case, investors suddenly realized that the total assets and projected incomes (primarily from advertising) of these companies did not justify their stock prices.  Then 9/11 frightens consumers (they don't want to be in public gathering areas where commerce takes place) and business travelers are stranded for a month without adequate air service or are too frightened to use the air service available.  That certainly put a damper on growth.

There have been similar economic shocks that led to a recession...the massive increase in the money supply in the late 70's; the early 70's oil embargo; the margin call of 1929; etc.

How do you end a recession where people are just not in the mood to spend? Neither Hoover nor Roosevelt really had much success after the '29 cataclysm. I think the case can be made that WW2 ended that one.[/B]

There is not a quick fix.  Once people feel they have survived the worst of the recession and feel secure in continued income, then they will spend again.  Note the part about continued income.  That is why short lived tax rebates don't bring an economy back to life.  People realize that this is a one time thing and they may not get the money next year.  Only the belief in continued stable income allows people to risk spending rather than saving.

Unfortunately, a recession is caused by the fears of individuals aggregated.  If we truly acted rationally as individuals in our own best interest and the best interest of the group, we would not have a problem.  But Nash's theory does not work well for large numbers of independent actors such as 300 million Americans trying to decide how much to spend for Christmas.  In that case, our independently rational decisions lead to sub optimal results.

[Nash]

I have a theory?

[crowMAW]

Originally posted by Nash
I have a theory?

LOL...I hope not!!

That's John Nash...Nobel Prize for economics.  I think they made a chick flick movie about him.