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The economy only works when people spend money. Wall St. is no indication of the actually health of the economy, only the faith that a handful of corporations will do well (or fail).
When people spend *or* invest in production. Actually if we want to get out of this, we *really* need more of the later. A lower US$ exchange rate would fix that nicely.
Wall St is inflated because that is one place the "investor" class's excess capital has run to. Asset inflation, not investment.
Ok so here is a perfect story to explain the tax code.
Suppose that every day 10 men go to a restaurant for dinner. The bill for all ten comes to $100. If it was paid the way we pay our taxes, the first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest) would pay $59.
The 10 men ate dinner in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve. Since you are all such good customers, he said, I'm going to reduce the cost of your daily meal by $20. Now dinner for the 10 only costs $80.
The first four are unaffected. They still eat for free. Can you figure out how to divvy up the $20 savings among the remaining six so that everyone gets his fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth man and the sixth man would end up being paid to eat their meal.
The restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same percentage, being sure to give each a break, and he proceeded to work out the amounts each should pay. And so now the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of $59.
Outside the restaurant, the men began to compare their savings. “I only got a dollar out of the $20,” complained the sixth man, pointing to the tenth, “and he got $7!” “Yeah, that's right,” exclaimed the fifth man. “I only saved a dollar, too. It's unfair that he got seven times more than me!”
“That's true,” shouted the seventh man. “Why should he get $7 back when I got only $2? The wealthy get all the breaks!” “Wait a minute,” yelled the first four men in unison. “We didn't get anything at all. The system exploits the poor.”
The nine men surrounded the tenth man and beat him up. The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They were $52 short! And that, boys, girls and college instructors, is how America's tax system works. The people who pay the highest taxes should get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table any more.
When you cut taxes on low income people, it typically all gets spent in the economy.
When you cut taxes on high income people, a lot of it ends up in savings or investments.
This is study is with actual, you know, data. With actual analysis rather than "common sense." Your view of common sense would be different from mine, as I do not share your extreme left-wing world view.
Here is a counter-example, also based on actual data:
The massive drop in oil prices and hence gasoline prices at the pump over the last 9 months has been estimated to be the equivalent of a $150 Billion tax cut, which of course disproportionately benefits lower income people. It puts money in lower income people's pockets, which you opine "... typically all gets spent in the economy."
A funny thing happened on the way to reality. Lower income people did not, in fact, spend the lower gasoline and energy price windfall. There has been negligible impact at retailers. Historical data suggests about 95 cents of every $1 in savings at the pump is spent at retail. This time, it just didn't happen, and economists are scratching their collective heads to figure out where that money went.
...Giving people in the bottom 40% who don't pay any federal income taxes an amount of money, say $1 billion, is going to have a greater immediate impact on the economy than given the same $1 billion tax cut to the top 60%..
The study seems to support your point of view on that immediate impact.
What hasn't been studied is the longer-term impact. Is it really just a stimulus program for China? Is it really just a one-time shift in demand (pulling in purchases from a future time period to the present) so that that future time period will have softer demand than it otherwise might have? What is the effect of increased investment among those who are in the upper income brackets? Might they have a more positive impact - not just a one-time impact but a continuous impact?
This is study is with actual, you know, data. With actual analysis rather than "common sense." Your view of common sense would be different from mine, as I do not share your extreme left-wing world view.
Here is a counter-example, also based on actual data:
The massive drop in oil prices and hence gasoline prices at the pump over the last 9 months has been estimated to be the equivalent of a $150 Billion tax cut, which of course disproportionately benefits lower income people. It puts money in lower income people's pockets, which you opine "... typically all gets spent in the economy."
A funny thing happened on the way to reality. Lower income people did not, in fact, spend the lower gasoline and energy price windfall. There has been negligible impact at retailers. Historical data suggests about 95 cents of every $1 in savings at the pump is spent at retail. This time, it just didn't happen, and economists are scratching their collective heads to figure out where that money went.
Well, it's not like those low prices were around very long ...
... And most importantly....the truly rich put in the EXACT same as I do....for the exact same return...
Not really.
When looking at eventual Social Security benefits, not all lifetime earnings are created equal.
The first $700 to $800 in average monthly earnings counts the most, turning into an eventual $0.90 of benefits per $1 of income.
Above that level, the increases in benefits get a lot slower -- $0.32 per $1 up to about $4,600 in 2012, and $0.15 per $1 above that.
So even though top wage-earners get more benefits, they don't get as much more in benefits as their higher earnings would suggest.
Furthermore, many high-income retirees pay taxes on as much as 85% of their Social Security benefits. For top-bracket retirees, that has the same impact as slashing almost 30% off their monthly checks.
A 2011 study from the progressive Center for Economic and Policy Research concluded that phasing out Social Security benefits as income levels rose would have little or no effect on the overall Social Security program's financial viability going forward, especially when you consider the ways that the rich would respond to the move.
Right now, 90% of SS benefits go to individuals with less than $50,000 in annual income (not including what they get in Social Security). In order to have a marked impact on Social Security's financial health, a means test would have to hit far more than just the affluent. You would probably have to impair the SS benefit of those with income above, say, $35K per year -- hardly anyone's definition of rich. More importantly, the added costs of administering a means test would offset any savings.
Up until 1992 there were only three tax brackets: 10%, 20%, and 30%, with everyone earning $20K or more falling into the 30% bracket. Whether this, or the current tax brackets (two more were added in 1993) are fair or not is subjective and based almost entirely on sociopolitical ideals, the fact remains that someone earning a flat $1M and putting $700K into their pockets (assuming no State taxes paid) is a far cry from from someone earning $100K and putting $70K
Not true. The three bracket schedule came into being with Reagan iirc. Prior to that there were more than three and I dare say more than ten.
Really? What does the number of pages in the tax code have to do with economics? I would suggest that the tax code is complicated only because the economy itself is complicated. Also that only a tiny number of all the pages in the tax code actually apply to any individual taxpayer.
I would suggest that the tax code is so complicated because of special interest lobbying.
Sorry that I could not rep you again rruff and some others.
Feel free to rep me.
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