Why are Democrats saying we need to lower taxes on the middle class; I thought tax cuts had no effect?
It's amazing how, prior to an election, everyone realizes that tax cuts DO Help the economy.
- LibraryannaLv 710 years agoFavorite Answer
Pay attention. Tax cuts to the RICH do not help the economy. That's well established because the rich don't tend to spend the money, or if they do they buy foreign made things or put it in offshore accounts. By letting the tax cuts expire (the republicans wrote that law, so they are now dancing around saying that the democrats are behind it their own plan), then we will reduce the deficit even further. (It's already gone down 8% in Obama's first year, even though he included the wars in the budget, which Bush did NOT do.)
Tax cuts to the middle class results in more money to the middle class who will actually go out and spend it locally and, indeed, stimulate the economy.
So what the dems are saying is that tax cuts to the top 2% does NOT stimulate the economy, which is confirmed by most competent economists, whereas tax cuts for the middle class does stimulate the economy.
But of course, you have to twist what they say. They have always said that tax cuts for the middle class is a good thing, that's why Obama cut taxes for the middle class when he got into office.
The real question is, if the republicans believe tax cuts helps the economy, why do they want to eliminate tax cuts for the middle class, who can make use of them, but keep them for the rich, where it does no good.
Oh that's right, it's the rich who are stuffing their pockets and they are the rich - the politicians that is. Basic selfishness.
- 10 years ago
Tax cuts that wind up being spent by the beneficiary of the tax cut, such as is the case with tax cuts for middle class taxpayers, does increase economic expansion.
Tax cuts at the top of the earnings scale, where the money tends to be hoarded in investment accounts, does very little to increase economic expansion.
Tax cuts at the top 3% of earnings generates a return of around 3% to 5% tops. That's not too shabby when you consider current interest rates, but it's not all that much when compared to tax cuts elsewhere.
Tax cuts to the middle class return about 50% because much of that money is spent. The knock-on effect of increased spending multiplies the economic benefit. Some of it may go to pay down debt and some might be saved and these tend to limit the overall benefit.
But if you think that's good, how does 150% to 200% sound? That's the economic benefit of putting money in the hands of an unemployed worker whose benefits have run out! He'll spend every dime he gets his hands on just to survive. Hungry people buy food, not put money in savings or pay old bills (except enough back utilities, rent or mortgage to avoid being kicked to the streets).
This isn't anything new. I've been making this point for YEARS, day in and day out. So have most mainstream economists. It's got nothing to do with politics and everything to do with basic economics.
- oshellLv 44 years ago
It shrink the clever marginal tax expenses of the wealthy plenty better than for center type human beings. The results of the shrink in the marginal expenses became extra important for wealthier taxpayers than for decrease earnings human beings as a results of fact credit for inner maximum deductions, dependents and the standard deduction shrink decrease earnings taxpayer's taxable earnings to a plenty better degree than does lowering the marginal cost. maybe you may desire to verify up. See article linked decrease than. It additionally shrink the capital gains cost from 20% to fifteen%, which became a extensive benefit to the very wealthy. the best .02 % of families, with earning over $a million million, the wealthiest of the wealthy, get fifty 4% of all capital gains earnings. decrease than Obama's plan the marginal expenses for each guy or woman making much less that $250k for couples will proceed to be the comparable mutually as the marginal expenses for those making extra will enhance between 4 - 5%. this is the right element to do. the wealthy can arise with the money for it, the middle type can't and the sales is mandatory. ultimately, you're mischaracterizing what became claimed. The Bush tax cuts have been mentioned to earnings the wealthy better than the middle type and that became precisely genuine. I dare you to find even ONE direct quote from Obama the place he says that the Bush tax cuts have been in basic terms for the wealthy. i do no longer think of i will carry my breath.
- MadManLv 710 years ago
No. Tax cuts help politicians get re-elected. The best thing to do, from an economics perspective, would be to let the tax cuts expire. All of them. But from a "will I be re-elected", some should be kept.