Cut taxes to raise revenues

[Texsox]

It doesn't stop at the 27th level, and that is using $100 as an example.  When you start adding zeros and make it billions instead of hundreds, it works better. 

 

There are ineffeciencies that don't get factored in, but in theory it works.  There is still a pretty big disagreement amongst economists on how well it works, and if the real life things affect it enough to not make it worth while.  Personally I believe against government waste, and if you factor in controling government spending it does work better than the government spending the same amount of money.  But in real life it is murky at best.

I went 1000 levels and it never reach 100% it was 99.9877 returned. It can never go over $100 unless someone is adding into the original $100. If you start with $100 you will end with $100 no matter how many time you divide it up.

[southsider2k5]

Again, I am not conceeding that government waste is anywhere near that high. What waste I've seen is brought on by excessive laws regarding specifications, the biggest one is buy American. So if we are that ineffective, we need to push our elected officials to improve.

 

However, for the sake of debate I will agree. I then ask isn't it true that the company that is making more profit can pay their people better and those people will spend more at the local restaurant? I thought we were trying to get money into peoples hands?

 

If the owner of the hammer company that is supplying to Home Depot is squeezed for profits how does he expand? And wouldn't there be a bigger risk of him building the hammer in China? At least with the US Government buying the hammer we know it is Americans that will be employed. Or is that even a factor in thuis model?

Government ineffeciency is the single biggest problem I have with the tax system.

 

For simplicities sake I didn't even get into foreign, let alone any wage competition. Yes there is always incentive to go with cheaper labor. But the question is what are you giving up with that cheaper labor. American auto workers still exsist because they do enough better at quality to make up for their cost. Quality vs Cost is the central decesion on where to build something at. Something you probably see a lot more than I ever will where you live.

 

With the 10 hammers vs one, it gets into not just net profit, but profit margin. In any business you have fixed costs no matter what. But will you make more selling 10 hammers for a small profit, or selling one hammer for a large profit, becomes the question there. That has to do with supply and demand determining optimal price points.

[southsider2k5]

I went 1000 levels and it never reach 100% it was 99.9877 returned. It can never go over $100 unless someone is adding into the original $100. If you start with $100 you will end with $100 no matter how many time you divide it up.

I don't have any of my old text books with me to give you the actual Calculus calculations that go into the mulitplier as I am working. I will see if I can find them later.

[Texsox]

I don't have any of my old text books with me to give you the actual Calculus calculations that go into the mulitplier as I am working.  I will see if I can find them later.

I don't think you will need an equation.

If 1,000,000 are standing around and person one starts with $100, sends 20% to Washington and hands the rest to person #2 you will have $80. At the end of 1,000,000 exchanges, you are still dividing the same $100.

 

If we begin to say that someone will pay more for something because they are keeping more of their earning, that seems inflationary.

 

I am not claiming that decreased spending - and - decreased taxes might not have a better impact on the average American. But what I've seen is decreased taxes and increased spending.

 

I keep hearing how Reagan only spent all that money because he needed to get things past a dem congress. The fact of the matter is, the money was borrowed and spent. That to me is a fraud.

[southsider2k5]

I don't think you will need an equation.

If 1,000,000 are standing around and person one starts with $100, sends 20% to Washington and hands the rest to person #2 you will have $80. At the end of 1,000,000 exchanges, you are still dividing the same $100.

 

If we begin to say that someone will pay more for something because they are keeping more of their earning, that seems inflationary.

 

I am not claiming that decreased spending - and - decreased taxes might not have a better impact on the average American. But what I've seen is decreased taxes and increased spending.

 

I keep hearing how Reagan only spent all that money because he needed to get things past a dem congress. The fact of the matter is, the money was borrowed and spent. That to me is a fraud.

I finally remembered what I was missing from the formula. Dollars generated by money from loans on saved money. All of the money that goes into savings can be loaned out by banks. The government only requires a bank to have about 20% of their savings in actual cash on hand. The other 80% can be loaned out, which also goes to monetary creation and spending.

[Texsox]

I finally remembered what I was missing from the formula.  Dollars generated by money from loans on saved money.  All of the money that goes into savings can be loaned out by banks.  The government only requires a bank to have about 20% of their savings in actual cash on hand.  The other 80% can be loaned out, which also goes to monetary creation and spending.

Sorry,

I didn't realize people were waiting in line for deposits so they could borrow money.

 

Has anyone else been turned down because the bank loaned all their money out and needed to get some more?

 

[southsider2k5]

Sorry,

I didn't realize people were waiting in line for deposits so they could borrow money.

 

Has anyone else been turned down because the bank loaned all their money out and needed to get some more?

 

If they are getting to the point where they are up against their figures is when banks start to raise rates. They figure they don't have to loan out money, so they can charge more for it.

[Texsox]

Of course to bring in more money to banks they increase their savings rates and the consumer earns more interest. Any I thought that was a good thing.

 

Plus, how does that increase the $100 to generate more tax revenue to pay for all the new programs?

[southsider2k5]

Of course to bring in more money to banks they increase their savings rates and the consumer earns more interest. Any I thought that was a good thing.

 

Plus, how does that increase the $100 to generate more tax revenue to pay for all the new programs?

Because not only does the money that spent create money. The money that is "savings" at the banks is lent out to people. So it isn't taken out of circulation. But it is also used by the public, mirroring the same multiplier methods-the percentage of money the banks are required to keep on hand.

[Texsox]

Because not only does the money that spent create money.  The money that is "savings" at the banks is lent out to people.  So it isn't taken out of circulation.  But it is also used by the public, mirroring the same multiplier methods-the percentage of money the banks are required to keep on hand.

So who is paying taxes on this money? Remember we are trying to figure out how that $100 taken away from the treasury becomes $110 without anyone paying more in taxes?

 

That is the question.

[southsider2k5]

So who is paying taxes on this money? Remember we are trying to figure out how that $100 taken away from the treasury becomes $110 without anyone paying more in taxes?

 

That is the question.

The person who recieves the money from the bank, spends the money. The person who recieves that income pays taxes on it. That is how it passes the $100 mark. Like I said, it is a calc problem, I will try to find that formula.

[southsider2k5]

Here is a site that talks about the formula, and a chart of it without taxes included. It is the simple version, that also leaves out savings.

 

http://william-king.www.drexel.edu/top/pri...uil/model4.html

[Texsox]

The person who recieves the money from the bank, spends the money.  The person who recieves that income pays taxes on it.  That is how it passes the $100 mark.  Like I said, it is a calc problem, I will try to find that formula.

So far we've taken $100 from the treasury and returned, at most, the same $100.

 

Using Occam's Razor:

 

I was going to send $100 to Washington. We cut my taxes and I give it to a bank so they can make loans. The $100 goes to someone who pays income tax on that $100. So he sends in $20. It still sounds like a $80 drop in revenue to the US Government.

 

Again, I cannot see how we can simultaniously cut taxes and increase spending without running up huge deficits that eventually must be paid back. Our politicians all seem bent on this free lunch of decreased taxes and increased spending. Nice con if you are trying to get re-elected.

 

If we are going to cut taxes we need to cut government spending. We need a balanced budget amendment that actually balances the budget. We can't have all the loop holes that are used.

 

The biggest fallacy that our government uses is basing the budget on predicted income. Imagine going to your spouse and saying well we can't seem to balance the budget. Well just change the incoome projection and it looks fine.

[cwsox]

Tex, the complicated piece of reality is that the savings rate is at an all time low.

 

 

And not just because Americans like to spend.

 

 

Interest rates paid on savings and certificates of deposit are too low to encourage people to save. The are the lowest that I can remember in my own life and from any time period that I know of in American economic history.

 

Of course interest rates on savings will not go up unless the interest rates on loans go up.

 

In the meanwhile, however, it has never been more profitable to be in the lending business because of the artificially high interest rates on credit cards. There are short term deals up there but many lending institutions soon slip people up to 24.9%. That in my mind is usury and I am not sure why that is not illegal - I am sure it is in most states but not for nationally chartered institutions.

 

There is no way for you to go from $100 to $110. There is one truth thatI can share with you. The glib can try and disguise the truth like in a shell game but the truth remains:

 

there is no such thing as a free lunch.

 

It is curious to me that no one has commented on Greenspan saying and Bush agreeing that future social security benefts will have to be cut to pay for the massive deficits.

 

I know you are conflicted about the next election. In Michigan a lot of Republicans have already decared that they are voting for the Democratic candidate because they cannot abide a lifetime of preaching fiscal policies that have been so violated by this administration. It is amazing to me to watch and has torn many county republican parties apart out here. Our mayor (former GOP chair, memeber of GOP executive committe, his wife is also long standing Republican elected official and currently now my county commissioner) was almost voted out of the local party because he is in that camp. 71 years old and a lifetime of party loyalty and they are treating him like s*** because he is voting Dem for one office because he believes so deeply that this current econmic destruction of America must stop now. When he told me, I was blown away but I am also very impressed with his commitment to fiscal sanity.