When a person deposits $100 into a bank, that $100 becomes some where between $400 to $500 due to money multiplier effect/lending.
Therefore, when there is a tax of $100, not only government is taking the $100 but it is also taking additional $300 to $400 away from the money market.
Of course, when the government takes that $100, there is a coefficient of government's marginal utility, which is at 0.4. So, every $100 that goes into the government, only $40 comes out as output. Government is essentially making the $100 worth 1000% less.
This is why tax cut is so important. Tax cut increases the government revenue in a long term because there are larger pools of money to tax. Tax increase decreases the government revenue in a long term because there are smaller pools of money to tax.
When a tax cut is given to people who has large sum of money, those moneys are in the circulation in form of savings, bonds, investments, ect... More money in circulation in respect to the rational GDP growth the better. The rate of money circulation indicates the health of the economy.
Tax increases on people who has large sum of money do not increase the tax revenue collected by government in a long term, 2+ years. Taxes discourage investments. Businesses don't pay taxes. Individuals pay taxes. Taxes on businesses are the cost incurred, thus passed onto the consumers, individuals. More taxes on businesses in a certain geographic area encourages businesses reduce the cost of taxation. If the margin cost of moving its location is less than the cost of taxation, then the businesses move. If a computer manufacture has a computer that costs $1000 with a added taxes/regulations $50, the computer is sold at $1000. If a computer manufacturer can reduced that $50 taxes/regulation, and sell the computer at $950, the computer manufacturer has a price advantage.
Tax increase also has very bad long term effect, lowering the GDP in a long term. 0.1% lower GDP rate over 10 years is like $20 trillion loss on US economy. This is like a losing a 1.5 years.
When people favor a tax increase, they are favoring worse economy for all. Tax increase helps no one but the competing cities, counties, states, and nations. It's a self inflicting loss.
The debt exists independent of tax cut or tax increase. You could incur a debt without you being taxed more or taxed less in your own life. In order for an individual to pay down the debt is to direct the income to paying down the debt. This also means that outflow has to be decreased.
In the case of government, it doesn't make money like you and me. They merely transfer money from productive usages to unproductive usage, like paying down the debt. Since, the government doesn't make any money, way they should pay off the debt would be decreasing the spending else where in order to accommodate the gap. When the government takes the money from the productive usages, the government is decreasing the marginal utility by 1000%, thus in a long run, it is decreasing overall pull of money. This also means, they are decreasing overall productivity.
Tax cut doesn't come from the government coffer. It's other way around. Government gets the money from the people to fill up their coffer. You don't want to decrease the productivity to pay off the debt. If the government didn't increase the spending for next 10 years, it would not only pay off the debt but give more back to the people they have taken.
Taxes = regulations.
California will have 725 new laws this year. For example, If we say that the compliance cost for the each law is about $1, every company in California will be paying $725 more this year than last year, that’s after the regulations that they have passed the year before. Every law they pass are taxes. So, every year, California imposes 700+ new laws. In a decade, that’s 7000 new laws. The cost associated them is compounded…. Accumulative compliance cost for last 10 years for this year alone would be $7,320 +/- per company.
I don’t know the accurate number, but let’s suppose that there are about 2.7 million companies in California. For this year, the 2.7 million companies will pay $19.7 billion just to comply with these regulations for last 10 years. They aren’t doing anything productive or useful with these costs. In 2008, California’s GSP was at $1.87 trillion. So, the tax imposed on Californian by this law about 1%. Thus, last 10 years of regulation effectively decreased the productivity of California by 1% at least. Even if these numbers are slightly off, I think the point is that the cost of compliance hurts. If you look at the states where they have the most problems, you will find that they are all states with high taxes, high regulations, and high debts.
Consumers in general didn’t cause this debt or deficit. It’s the politicians increased debt and deficit with ever increasing government regulations and government programs and people who voted these politicians in the first place. About 77% of the government spending is on none defense spending. The state entities like UK and Bangladesh are required by their very existing function to protect their borders, intruders, and at time, go to war. States are not required and created to pay for high school educations, school lunches, bus passes, or health insurance.
In 90s, there were persistent deficit. And during that time, any projected surplus is useless because politicians will find ways to spend them to get votes. That’s how politicians get their votes, with other people’s money. I love how these politicians pat themselves on the back while spending other people’s money. I love how these politicians claim how they solved some nebulous problems after their predecessors who were in same position who passed laws made same victorious claims.
Way to slower and eventually stop the deficit and debt is for the government programs to freeze or decrease, and the politicians stop voting for programs like the Universal HealthCare, the ObamaCare, a Medicare version 2.0. These pages are filled with interfaces/abstracts. Actual Implementation could be in many multiples. If you have a single page law that says a school should not carry any sodas. How many pages would it take to describe the actual implementation of the law? I would say at least several pages if not more than tens of pages. What’s would be the compliance cost for these pages of law/regulation? That’s before anyone receives any harm or benefit. People who passed these laws won’t be around or be responsible for these laws. In fact, they are never ever responsible for what they have passed.
In the case of government, it doesn't make money like you and me. They merely transfer money from productive usages to unproductive usage, like paying down the debt. Since, the government doesn't make any money, way they should pay off the debt would be decreasing the spending else where in order to accommodate the gap. When the government takes the money from the productive usages, the government is decreasing the marginal utility by 1000%, thus in a long run, it is decreasing overall pull of money. This also means, they are decreasing overall productivity.
Tax cut doesn't come from the government coffer. It's other way around. Government gets the money from the people to fill up their coffer. You don't want to decrease the productivity to pay off the debt. If the government didn't increase the spending for next 10 years, it would not only pay off the debt but give more back to the people they have taken.
Taxes = regulations.
California will have 725 new laws this year. For example, If we say that the compliance cost for the each law is about $1, every company in California will be paying $725 more this year than last year, that’s after the regulations that they have passed the year before. Every law they pass are taxes. So, every year, California imposes 700+ new laws. In a decade, that’s 7000 new laws. The cost associated them is compounded…. Accumulative compliance cost for last 10 years for this year alone would be $7,320 +/- per company.
I don’t know the accurate number, but let’s suppose that there are about 2.7 million companies in California. For this year, the 2.7 million companies will pay $19.7 billion just to comply with these regulations for last 10 years. They aren’t doing anything productive or useful with these costs. In 2008, California’s GSP was at $1.87 trillion. So, the tax imposed on Californian by this law about 1%. Thus, last 10 years of regulation effectively decreased the productivity of California by 1% at least. Even if these numbers are slightly off, I think the point is that the cost of compliance hurts. If you look at the states where they have the most problems, you will find that they are all states with high taxes, high regulations, and high debts.
Consumers in general didn’t cause this debt or deficit. It’s the politicians increased debt and deficit with ever increasing government regulations and government programs and people who voted these politicians in the first place. About 77% of the government spending is on none defense spending. The state entities like UK and Bangladesh are required by their very existing function to protect their borders, intruders, and at time, go to war. States are not required and created to pay for high school educations, school lunches, bus passes, or health insurance.
In 90s, there were persistent deficit. And during that time, any projected surplus is useless because politicians will find ways to spend them to get votes. That’s how politicians get their votes, with other people’s money. I love how these politicians pat themselves on the back while spending other people’s money. I love how these politicians claim how they solved some nebulous problems after their predecessors who were in same position who passed laws made same victorious claims.
Way to slower and eventually stop the deficit and debt is for the government programs to freeze or decrease, and the politicians stop voting for programs like the Universal HealthCare, the ObamaCare, a Medicare version 2.0. These pages are filled with interfaces/abstracts. Actual Implementation could be in many multiples. If you have a single page law that says a school should not carry any sodas. How many pages would it take to describe the actual implementation of the law? I would say at least several pages if not more than tens of pages. What’s would be the compliance cost for these pages of law/regulation? That’s before anyone receives any harm or benefit. People who passed these laws won’t be around or be responsible for these laws. In fact, they are never ever responsible for what they have passed.
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