How are tax cuts supposed to work if no one has a job?

So I'm sitting here listening to both sides of the stimulus arguments...

I hear the Republicans saying "This is a huge amount of Spending!"

And I reckon back to Bush telling us to go out and Spend.

To which the Republicans say "It's not gov spending that stimulates an economy, it's private spending that does it"

To which I say "Huh? Spending is spending... unless of course you mean spending on welfare doesn't stimulate the economy, to which I would agree"

Here is the thing.

Tax cuts DO give people more money to spend, however, people don't HAVE any jobs anymore... so how do tax cuts help?

You know that DHS new campus which will be 16 Billion dollars? That's money directly going to create jobs and put money into the system at the same time.

So, tell me again, how Tax Cuts are supposed to be the way to go and spending is bad during our unique situation... because I'm not seeing it.

[edit on 9-2-2009 by HunkaHunka]

reply to post by HunkaHunka

Tax cuts DO give people more money to spend, however, people don't HAVE any jobs anymore... so how do tax cuts help?

I'll try to answer this for you. Keep in mind, I'm not for the stimulus package at all. I would be ok with tax cuts and extended unemployment benefits, but I would like this cost to be offset with cuts elsewhere.

I'm not sure exactly what the national unemployment rate is right now..6 or 7 percent? I know those numbers are probably not accurate per say as there are many who can't collect unemployment anymore or are working lesser paying jobs/part time.

For the sake of this post, let's say 90 percent are still employed. If you cut taxes for them this money will supposedly go into buying things which will in turn increase demand which then gets businesses going again who in turn will need more people to meet that demand..hence more jobs.

Problem is no one wants to spend right now. It won't matter if it's the government with the money or people. People have to spend. There is no confidence in the system. This is Obama's problem with spouting out "catastrophe." If he wanted to instill confidence he shouldn't keep saying this. I don't understand his motives here and yes I do know all the numbers with unemployment etc., but do you honestly think scaring everyone with those kind of words is actually going to help?

Our debt will deepen regardless. Even if these are government created jobs and are permanent....who pays for those jobs? Taxpayers do. There is no offset to this spending. It's so gigantic it blows away anything previous besides the bank bailout.

The thing that gets me the most on this, Republicans are blamed for the trickle down theory. Democrats say this doesn't work.

Aren't tax cuts for the middle class trickle up? That's what it seems like to me.

reply to post by David9176



First off, thanks for the reply...


Well I think the cycle has to start with jobs.

I don't see how tax cuts are the answer without jobs.


Unless the conservative viewpoint is that Tax cuts enable businesses to hire more people. But I think, as you mentioned, that business is scared. I know I'm not hiring right now.

So I say let the Gov take those taxes from large corps and use that to generate jobs which employ people making the masses more confident, and eventually business will follow, and the cycle can go back to tax cuts.

Right now though, I think we need jobs.

reply to post by HunkaHunka

Right now though, I think we need jobs.

We need jobs. We need all kinds of things. It's getting really nasty out there. My job is still holding up...for now. My workload is getting smaller and it has me worried. It always picks up in January, which it did but now it's starting to fade...which it usually doesn't. At the beginning of the year, the owner announced pay freezes and loss of personal days. To be honest, I was RELIEVED at the time, but i figured the worse was yet to come. I think it's going to hit like a freight train.

What we need is confidence in the system. It's hard to do that when you are staring down trillions and trillions of debt. It will constantly be hanging over people's heads that they will have to pay this down...and their children...grandchildren. Our government needs to show that they can be fiscally responsible. They have not shown that in years. People don't really have confidence in there government, I don't. Right now they are just hoping that if they give the government reigns in this that maybe, just maybe it will work out in their benefit.

I dunno...I guess i'm the guy who would rather take the hit than see the next generations do so. Of course there is no REAL guarantee either way of whether doing something or nothing will work, this is just how I feel.

Finally someone with brains. Bravo Hunka Hunka. A tax cut of 10% for example is meaningless if you're on a low wage, but significant if you're in a high bracket. Let me whisper this real quietly cos Republicans don't want anyone to realise but truely, this is self interest of the few, dressed up as national interest.

Yes we have a consumer oriented society that needs spending to stimulate growth.

Actually the wealthy could play their part in a recovery too by lending again. They will argue that it's not safe to lend but then the problem before was people lending recklessly and speculatively to others who couldn't really repay, or who could only repay in a boom market.

A little common sense, more spending and less hoarding will re-ignite the economy.

reply to post by sy.gunson

Finally someone with brains. Bravo Hunka Hunka. A tax cut of 10% for example is meaningless if you're on a low wage, but significant if you're in a high bracket. Let me whisper this real quietly cos Republicans don't want anyone to realise but truely, this is self interest of the few, dressed up as national interest.

I agree. The tax cuts in this plan are really meaningless. It's the equivalent to 10 dollars a week for singles and 20 dollars for couples. That won't stimulate anything. I'm not calling for business tax cuts either, at least not for large corporations. Small business of course would be deserving. I work for one so of course i would agree with that.

The cuts would have to be significant...the cuts that have been proposed are not. There should be no federal taxes on unemployment checks either. I've never understood that one. You are getting taxed on money that was taken from taxes. Double taxation IMO.

But again, to what I stated earlier, aren't tax cuts on lower and middle class people only trickle up? Instead we are proposing trickle down by government...not business. But essentially, it's not really trickle down as all of this money has to be payed by taxpayers.

Great topic Hunka. Even greater replies so far. I am I huge Obama supporter. Maybe it's due to my race, political party, I don't know. There was something that sparked my interest about Obama long before he entered the presidential race. I honestly believe he and his administration have great plans to get us all back on solid ground. But, I STRONGLY disagree with the stimulus plan. I didn't agree with it when Bush put the 1st one into motion and I don't agree with it now. It's mostly due to the fact that not only are we, the average American citizen, stuck with the bill but, the more money being printed by the treasury the less the value of a dollar will be.

There are a few things I would like to happen. First, I think outsourcing and companies moving overseas should be brought to an abrupt halt. Granted, companies save money in the long run, but it hurts the American economy. Funny thing is, the gov't won't have to implement any regulation when we are no longer to purchase from these companies.

Once some of these companies realize they'll have to come back stateside, we HAVE to start exporting more than we are importing. I don't know our Import/ Export ratio, but I could imagine. We import nearly all of our everyday household items. Food, fruit, electronics, clothing, furniture. I would be willing to put my paycheck (If I were still employed) against a doughnut and say that at least 70% of household items say "Made in (insert foreign country here)".

I don't have anything against people in other countries making a buck, but it's like my father always said; "You have to take care of YOU, before you can take care of anyone else." In the case of the country that means, how can become an Independent nation with a strong economy if we depend so much on other nations.

BTW, flags to everyone whose posted so far.

[edit on 10-2-2009 by AgentMoulder]

Well, basically, the bottom 40% , or so, of workers do not pay any federal income tax, so a tax cut for them will be a 'bonus', or welfare check.


If you look around, you can find pretty much everything -except electronics- made in the US.

Originally posted by David9176
reply to post by HunkaHunka

 

I dunno...I guess i'm the guy who would rather take the hit than see the next generations do so. Of course there is no REAL guarantee either way of whether doing something or nothing will work, this is just how I feel.

Well keep in mind that we will take the hit either way.

stimulate

As you seem aware inflation will swoop in and our money will be worthless - I'm mean worth less...

Or

do nothing

The way I see it, we have lost 1,500,000 jobs in the last three months - the previous 9 months before saw a total of 1,500,000 lost.

If that math is accurate that mean that the spiral downwards has increased by a factor of three.

If we just follow that trend that means 24,000,000 jobs will be lost in four years.

In ten years 60,000,000 jobs lost -

Keep in mind the recent acceleration - by three -

From a mathematical perspective, if we maintained this trend by using simple exponents

We would be out 18,000,000 jobs by this time next year - of 75,000,000 million jobs in four years.

my grim math would indicate negative employment before the end of a decade

That is unlikely because there would likely be government jobs left

My point is this thing is speeding up and up -

So at this rate cutting taxes would yield a diminishing return in a similar but marked fashion. So non intervention and cutting taxes would NOT produce any reversal in the trend. Not to mention that the market is very hostile to investment at this point.

This is my mathematical reason for the stupid bailout.

As far as future debt to our children -

Eisenhower implemented a 90% tax on the top 1% and during his term payed off all the debt inccurred by WWII - expanded that GDP and Expanded government - Industry expanded and we were deficit free in under a decade.


My point is we can reverse the future impact if we put our minds to it - but we cannot
start that work until we stop the profess bleeding of jobs/$$$$$$.

In short, lets patch the hole in the ship before we paint it?

IMO

IF you want real doom and gloom click the link

www.bls.gov...



[edit on 10-2-2009 by mental modulator]

[edit on 10-2-2009 by mental modulator]

Originally posted by stevegmu
Well, basically, the bottom 40% , or so, of workers do not pay any federal income tax, so a tax cut for them will be a 'bonus', or welfare check.


If you look around, you can find pretty much everything -except electronics- made in the US.

THATS BS -

I made $20,000 gross in 2004 and I brought home $13,000 -

Got $450.00 back from state and federal. State accounted for lets see..... 15% of my total taxes.

I also had pre tax healthcare deductions of $1,700 and a small pittance in my 401gae



I can scan my final 04 pay stub and post it if you'd like?

Obama should...
Take back the 800 Billion dollar reward Bush gave the corporate thieves...
Send them all to prison...
Sieze everything they own and sell it off...
Put legislation in place to prevent this from ever happening again...
Cap fatcat bonuses...

Then issue a $10,000 stimulus check to every American.

He should also put Bush behind bars with the other thieves like himself, where he, Rumsfeld, Rove, and Cheney truly belong, but that is a subject for another thread.

reply to post by David9176


Well unfortunately they thought of this possible way to possibly
save the economy.

The long term plan to prevent the economy from being saved was
to make sure and have a MASSIVE trade deficit and make as
little as possible here.

Offshore as many jobs as possible, and bring in VISA workers
under 60+ different types of visas to take that money and then
send it home via western union and other wire services.

The visa workers couldnt destroy the US fast enough so they
have allowed in about 13+ million mexican citizens who send
home billions every year via wire service.

So, when you buy something the money doesn't stay in a regenerative
internal loop spreading the wealth locally, it is shipped overseas for
oil and cheap goods made somewhere else.

So even if we did spend more, most goods are not made here now
anyways, and the effect is illusory.

It is like trying to fill a bath tub with water with no plug in the drain.

Too much is being pulled out of our economy to catch up with the
sucking sound of it going somewhere else.

A lot of ppl have a hard time accepting this was all planned, and
is doing exactly what they want.

This way they buy up distressed property for much less, and can hire
ppl in later for much less because ppl just want to eat and keep what
little they have managed to keep.

The truly sad part is this bait and switch game has been played
on the US before and the vast majority of ppl just don't read history.

They are holding the 100's of trillions derivatives disaster for last
like a sword of damocles and will let it loose when they feel it will
best serve their purposes.

I do not think we have long to wait.

Good Luck to you all !

Good question.

Let's say unemployment hits the ridiculously high figure of 20%. What then?

80% of people are still employed in productive jobs, which contribute to the GDP of the country. The problem is that the people who are employed are burdened by those who arent employed (due to progressive taxation), and have reduced their spending due to general "fear".

For the 20% of unemployed, a tax cut is of no benefit. However neither is a stimulus check in a small amount. A poor person is not going to be able to make the massive purchases that buoy the economy (such as buying a car).

So the best solution is (as always IMO), a syncretic one. I would:

1. Slash income tax for the top 30% of taxpayers.

2. Slash corporate tax; with the proviso that the money "saved" by them is to be used to employ more people/ expand the business/ build infrastructure.

3. Create federal work programs such as greenworks, infraworks etc to employ some of the unemployed.

Personally I would have 70% tax cuts : 30% stimulus. I think this reflects the situation on the ground extremely fairly, as atm only 8% are unemployed (and of that about 3% are the perpetual unemployed).

I don't even understand giving tax cuts to the rich- They can only support the economy so much through spending. If you want a healthy economy, everyone should hold enough money to be able to spend. The rich aren't going to buy a new TV every day, but if everyone in America could afford a new TV, many more would be sold. I think it's both unfair and stupid to force the rich to hold up our economy with their spending.

Originally posted by Anonymous ATS
Obama should...
Take back the 800 Billion dollar reward Bush gave the corporate thieves...
Send them all to prison...
Sieze everything they own and sell it off...
Put legislation in place to prevent this from ever happening again...
Cap fatcat bonuses...

Then issue a $10,000 stimulus check to every American.

He should also put Bush behind bars with the other thieves like himself, where he, Rumsfeld, Rove, and Cheney truly belong, but that is a subject for another thread.

The old fall-back of blaming Bush and the 'evil' corporations- who are the employers, by the way, is getting pretty old.

Originally posted by sadisticwoman
I don't even understand giving tax cuts to the rich- They can only support the economy so much through spending. If you want a healthy economy, everyone should hold enough money to be able to spend. The rich aren't going to buy a new TV every day, but if everyone in America could afford a new TV, many more would be sold. I think it's both unfair and stupid to force the rich to hold up our economy with their spending.

The 'rich' pay the lion's share of taxes- something like the top 5% pay 65% of individual taxes. Why don't they deserve a break?

Originally posted by stevegmu

Originally posted by sadisticwoman
I don't even understand giving tax cuts to the rich- They can only support the economy so much through spending. If you want a healthy economy, everyone should hold enough money to be able to spend. The rich aren't going to buy a new TV every day, but if everyone in America could afford a new TV, many more would be sold. I think it's both unfair and stupid to force the rich to hold up our economy with their spending.

The 'rich' pay the lion's share of taxes- something like the top 5% pay 65% of individual taxes. Why don't they deserve a break?

Because they DON'T STRUGGLE.

Originally posted by mental modulator

Originally posted by stevegmu
Well, basically, the bottom 40% , or so, of workers do not pay any federal income tax, so a tax cut for them will be a 'bonus', or welfare check.


If you look around, you can find pretty much everything -except electronics- made in the US.

THATS BS -

I made $20,000 gross in 2004 and I brought home $13,000 -

Got $450.00 back from state and federal. State accounted for lets see..... 15% of my total taxes.

I also had pre tax healthcare deductions of $1,700 and a small pittance in my 401gae



I can scan my final 04 pay stub and post it if you'd like?

You may want to have someone, or someone else do your taxes. I have you owing $1 in federal income tax, with your medical deduction and only 5% contribution to 401k.

reply to post by sadisticwoman

Because they DON'T STRUGGLE.

Neither do our politicians...that is unless it's paying their OWN taxes!

Originally posted by sadisticwoman

Originally posted by stevegmu

Originally posted by sadisticwoman
I don't even understand giving tax cuts to the rich- They can only support the economy so much through spending. If you want a healthy economy, everyone should hold enough money to be able to spend. The rich aren't going to buy a new TV every day, but if everyone in America could afford a new TV, many more would be sold. I think it's both unfair and stupid to force the rich to hold up our economy with their spending.

The 'rich' pay the lion's share of taxes- something like the top 5% pay 65% of individual taxes. Why don't they deserve a break?

Because they DON'T STRUGGLE.

Says who? A guy in my dinner club makes a very good living, yet is paycheck to paycheck. He just has larger bills than someone who makes less.