a reply to: six67seven
Please explain in language that a 6th grader can understand
OK, that's a fair request.
The economy is not a zero-sum game... in other words, if someone males a dollar, it does not mean someone else loses a dollar. Think about the stock
market. When a stock goes down in price, the investors just lost money because what they have isn't worth as much today as it was yesterday. So who
gains from them losing? No one. As a matter of fact, if the stock price goes low enough, a lot of other people will lose too: the employees when jobs
are lost and the managers when they don't get bonuses, to name a couple.
So how does this work? It works because businesses make value. The cell phone you are (probably) holding might cost $400, $500 or more. The materials
that make it up cost maybe $1. Most of it is nothing more than purified sand and oil when it stars out. The sand is turned into a silicon crystal,
which is turned into wafers, which is turned into integrated circuits. The oil is turned into plastic, which is shaped to form a case. At every stage,
the result is worth more than the original material. That's what profit is: more money in the economy.
So, since taxes are a percentage of the economic market, a smaller percentage of a larger market can be more. As an example, if you could choose
between 50% of $100 or 20% of $1000, which would you choose? The 50% would get you $50. The 20% would get you $200.
Taxes hurt the economy. Every person who pays takes has less to spend than they would if they didn't pay taxes. If people have more money, they will
spend more money. If they spend more money, there has to be something to spend it on, and that something is a good or service produced by a company.
The more that company sells, the more it makes, but also the more people it needs to make more to sell.Like in a restaurant, three waitresses might be
enough for now, but if the number of customers double, three just ain't enough; the restaurant will need to hire three more waitresses to keep up.
We have to have taxes to pay for stuff the government needs, but the idea is to get the most from the taxes. If the taxes are too high, they will slow
the economy so much that the amount of money coming in will drop, and if they're too low we won't have enough coming in to pay for what we need.
There's a middle ground, where the taxes are as high as they can be, without being so high they actually hurt the economy too much. The question is,
where is that level?
I have said for some time, as have others, that taxes are too high. That doesn't mean we think the government has too much money; it means we think
the government could get more actual money by cutting the taxes enough to spur the economy. As it turns out, according to the last tax cuts, we were
right. The economy has strengthened and we are bringing in more money with the lower rates. So now we want to make those tax cuts permanent, because
that will make businesses want to expand even more. Businesses want to expand when they are convinced the economy is going to keep doing well... they
don't expand when it is just a quick upturn that will go back down. Well, no more than they have to anyway, and they'll typically hire temporary
people to do that.
Hopefully, that clears it up some?