Why do people think that if the government cuts taxes, that will save us money?

Question

If the government cuts taxes, it just has to borrow the money instead. And we still have to pay it back. With interest. So that costs more.

And I know there is a theory that if you starve the beast, that somehow forces the government to cut spending, but I have not seen any empirical support for that theory.

Answer 1

You are correct and it gets worse. Deficits weaken the dollar which makes imports,such as oil, more expensive! As a result we send our money to corporations instead of the U.S. treasury. We then borrow the money as you said and pay interest. This is an example of irresponsibility at its worst and somehow the average citizen needs to wake up and throw out of office any political party that promises tax cuts when deficits result

Answer 2

It seems from your question that you already have the answer to your own question. You're right that if the gov't cuts taxes but doesn't decrease spending to coincide w/ that, then they MUST borrower that money, thereby raising the interest rate. We've seen a bit of that here in the last 4 years. Since Reagan tried it in the 80's Reagonomics has been mainly discredited among non partisan economists. Here's a quote from wikipedia on Reagonomics:

The belief by some proponents of Reaganomics that the tax rate cuts would more than pay for themselves was influenced by the Laffer curve, a theoretical taxation model that was particularly in vogue among some American conservatives during the 1970s. Arthur Laffer's model predicts that excessive tax rates actually reduce potential tax revenues, by lowering the incentive to produce. But while Federal Government tax revenues did increase significantly following the tax cuts of the Reagan years, that was mostly because of already scheduled increases in the Social Security Payroll Tax[citation needed]--while in contradiction to the Laffer Curve, revenues from the individual and corporate income tax fell substantially as a percentage of GDP. The dramatic increase in spending produced the budget deficits of that era.

Answer 3

I don't know where you get the idea that the democrats are creating industry. Saving companies that are weak is counter productive to our market. They will just continue to make the mistakes that got then in the situation they are now faced with. Tax cuts are positive for both private citizens and corporations. When it comes to private citizens if someone is taxed less then that frees up money for them to put back in the economy by purchasing products and investing in the stock market. This creates a multiplier effect in the market. By selling products to those citizens who received tax cut and have extra money to spend those companies can turn around and take the extra capital to invest back in their companies to grow and add new employees. The same is true with any added investments that might be made in the stock market. When it comes to cutting corporate tax rates the positive effect on the market is even greater. Like someone else already mentioned the U.S. has one of the highest tax rates in the world. Most people who lean toward the left tend to think this is a good thing because it is taxing the so called "evil" corporations. What they do not realize is that companies go where the best deal is and by taxing them you actually hurt our economy. For example if you owned a company in a country like the U.S. with a high corporate tax rate and they told you that to do business in their country you would have to pay roughly $350,000 for every million you made but a country like Mexico said that they would only tax you $80,000 for every million made where would you go? This is why companies go to other countries. Since we have such a high corpate tax rate companies continue to close up shop in the U.S. and move. This cause many people to lose their jobs and destroys many local economies throughout the U.S. Also, some people may say that it is not fair that these companies get to leave the U.S. and then sell their products back to us. However, it is in the overall U.S. public's interest. I say this for two main reasons. First, these big corporations are owned mostly by a combination of small stock holders like you and me (not the few rich people like many think) who are looking for a good return on their investment and to provide that return companies go where they can produce a product at the lowest possible cost. Second, if these companies where to continue doing business in the U.S. they would eventually have to raise the price of their products to cover the added cost of increased taxes. So, instead of getting that pair of shoes for $80 you would be paying $120. Now apply that to many of the products you buy and also add in the fact that your personal income taxes have been raised not cut then see how well you are living. This is why cutting the tax rates for citizens and corporations can be an effective tool in creating industry.

Answer 4

For six years they've been cutting taxes and spending borrowed money like drunken sailors. It save us money now but eventually taxes will have to be raised to much more than would have been needed in the first place to pay off the interest.

Answer 5

When people pay less taxes they spend more money and every time a dollar is re-spent it generates more tax revenue which gives the government more money. Saving money is the wrong term. Each dollar generates more tax revenue when taxes are lower.

Answer 6

Well the point is in the second part of your question. If we as Americans would force them to cut spending then we could pay less in taxes. But as long as 25% of the budget is going to garbage we will have to pay outrageous taxes. Pay your taxes,millions on welfare depend on you.

AD

Answer 7

Your theory is flawed. There are not only two choices: tax or borrow. There is another, control spending.

In effect, you are saying a family has only two choices, work two jobs or use a credit card. There is another choice. Live within your means.

Do you think for one nano-second that there is no waste in our government that can be cut or eliminated?


.

Answer 8

Well, Bush is not a good example of Conservative taxing and spending. The proper way is for the government to cut taxes and spending. This stimulates the economy, because people will have more money, and will invest it more often. If this technique is enforced properly, it will work without having to borrow money and creating a deficit

Answer 9

good one...i live in a country with very high taxes and we have paid off our national debt and we are one of the richest and wealthiest by standards of living...i am 30 with new house, 2 beamers, 1 porsche, my own business, and i can buy whatever i want. i didn't have that in america. I am doin gmuch better here. u don't even notice the taxes after a while. it's just part of life.

Answer 10

Did it ever occur to you that maybe we could cut spending? Oh God, no! That'll never happen. Yes, I know that the Republicans have been spending like drunken Democrats. I hold them responsible. But don't ever accept the premise that the government shouldn't cut spending. I think we could get by with a few less govt. programs.