To: President Donald Trump, The United States House of Representatives, and The United States Senate
Taxes
THE TAXING EMOTIONS OF TAXATION
We are blinded by the joy of a tax cut visualizing the few extra dollars in our pockets.
This joy is compounded by the belief that the tax cuts will stimulate the economy and increase our earnings in the future.
True the poor will instantly spend all of the few extra dollars gained. The well off will spend much of it, but some of it will go to savings. The very rich receive the bulk of the tax cut. With all their spending needs already well covered will spend a negligible portion of this new found wealth. The total expenditures, however small, will add to the economy.
But, the tax cut means a reduction in Government revenue. The Government will have to reduce spending by the full weight of the tax cut, which results in a far greater reduction of the economy than the rich contribute to it.
Historically we have seen the results of this effect. Reagan cut taxes in 1981. Recession followed. Then he repeatedly raised the taxes and each time the economy improved. Bush cut the taxes and the economy tanked. He followed with another tax cut, and he left us in the mess we are still struggling to recover from.
This great recession should bring back to mind the great depression. In 1933 Roosevelt spent money available from recently increased taxes. The following year GNP rose 7.7 percent and unemployment dropped. 1935 Roosevelt spent lavishly on infrastructure and in spite of new Social Security taxes in effect the GNP grew another 8.1 percent and unemployment fell again. 1936 the top tax rate was increased to 79 percent and the GNP advanced another 14.1 percent and another drop in unemployment followed. In 1937 with the deficit bloated the President cut spending and a recession followed.
We are blinded by the joy of a tax cut visualizing the few extra dollars in our pockets.
This joy is compounded by the belief that the tax cuts will stimulate the economy and increase our earnings in the future.
True the poor will instantly spend all of the few extra dollars gained. The well off will spend much of it, but some of it will go to savings. The very rich receive the bulk of the tax cut. With all their spending needs already well covered will spend a negligible portion of this new found wealth. The total expenditures, however small, will add to the economy.
But, the tax cut means a reduction in Government revenue. The Government will have to reduce spending by the full weight of the tax cut, which results in a far greater reduction of the economy than the rich contribute to it.
Historically we have seen the results of this effect. Reagan cut taxes in 1981. Recession followed. Then he repeatedly raised the taxes and each time the economy improved. Bush cut the taxes and the economy tanked. He followed with another tax cut, and he left us in the mess we are still struggling to recover from.
This great recession should bring back to mind the great depression. In 1933 Roosevelt spent money available from recently increased taxes. The following year GNP rose 7.7 percent and unemployment dropped. 1935 Roosevelt spent lavishly on infrastructure and in spite of new Social Security taxes in effect the GNP grew another 8.1 percent and unemployment fell again. 1936 the top tax rate was increased to 79 percent and the GNP advanced another 14.1 percent and another drop in unemployment followed. In 1937 with the deficit bloated the President cut spending and a recession followed.
Why is this important?
Increase the taxes.