Bush tax cut analysis

[mookiemookie]

Originally Posted by Aramike

It depends on what you qualify as "rich".

The Bush tax cuts was indeed a large cut for the rich, but they were also large cuts for those business owners seeking growth.

You're right - trickle down economics is a myth, but that's not why tax cuts work in the first place. An excellent article: http://www.businessandmedia.org/comm...om20060111.asp

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The article's central premise highlights the fatal flaw of trickle down, supply side, Laffer curve, whatever you want to call it economics. Lower tax rates are not as much of an incentive to work more as the author thinks. People will continue to work and earn money, regardless of the general level of taxes. Look at an effective 100% tax rate under Soviet Russia - by the author's line of thinking, nobody would work. But they did. When our top marginal tax rates were 90% in the 1950s we saw a big economic boom.

The Laffer curve also fails on the lower end of the tax rate spectrum. If you're keeping more of what you earn (i.e. paying a lower tax rate) the effect of lower taxes is not going to have the same effect as it would if you're a high earner (i.e. high taxpayer). You're giving up tax revenues and not getting much in return for it.

Plus, if you're working a full time 9-5 schmuck office job, you're going to continue to work your 9-5 schmuck office job regardless of the tax rates because you need to put food on the table. Most people are fairly inelastic in their work habits.

I've said it before - no one in their right mind is going to give up extra income because the government is going to tax a portion of it. I'd love to make enough to have the problem of dealing with 35% or 39.5% top marginal tax rates.