Does lowering taxes for the rich really help our economy (e.g. Reaganomics)?

Question

Wouldn't our economy get a boost if the middle- and lower-classes got the tax cuts instead of the richer classes?

Answer 1

No for the rich at large but specifically for the business owners. A lower tax burden for business owners encourages them to put more of that capital back in to their businesses there by creating more jobs.

Answer 2

It depends on what you mean by 'help'. Also, there are several different 'economies'. There's the macro-economy, dominated by trans-national corporations, and 'national economies' such as China.... who oddly enough own a lot of stock in various corporations....and have significant say in the affaris of those corporations. Then there's the American wage-earner and his/her personal 'economy', currently taking a beating. Not to mention the 'underground economy' and the criminal economy. The last two are largely untaxed and are massive. Lowering taxes for the rich basically lowers taxes for corporations....their tax breaks have made it possible for them to buy up other corporations to increase market share...not a bad idea in a world that's currently at 100% production. The problem with being stuck on something like 'Reaganomics' is, while it may be a 'solution' to a problem at one time, it can become the problem at a later time. Kennedy 'lowered taxes' at a time when there was slake in production...that worked at the time, but that was then and this is now...different times....it ain't as simple as they tell you!

Answer 3

Clearly taxing anyone at 100% (even if just upon marginal income past a certain threshold) will be a total disincentive to produce.
Also taxing anyone at 0% would result in no revenue for the government. Hence the laffer curve. This demonstrates that there is a maximum revenue point for the government and that the amount of revenue will fall away either side of that tax level. Obviously if revenues fall away at a certain tax level, despite marginal tax rates being higher, it must be because the economy is shrinking. Similarly if at any point on the curve revenues increase as a result of lower tax rates the economy must be expanding rapidly.
This is not subject to debate. What is however is the question of where this maximum point lies.
When Kennedy lowered the maximum tax rate (from 95%) we did see significant expansion very quickly.
When Reagan and Bush lowered the rate (from much much lower starting points) we saw federal revenues fall significantly for some years. When growth did eventuate three things were noticed. It co-incided with significant expansions in government spending (mostly defence which due to security rules has a very low rate of importation involved). It happened despite the predicted increases in private savings and greenfield investment not actually coming about. And finally it happened despite increases in imports (not surprising since the propensity to import of those with high incomes is the highest). Hence speculation among the left is that it was the Keynsian factor of deficit spending that produced the growth spurts of Bush and Reagan.
Economic growth under both presidents has been no greater than was experienced under Clinton and unemployment and poverty rates have been higher than they were in Clinton's second term. Clinton did not cut federal tax rates but rather increased them.
All three administrations have been subject to external shocks to the economy and to windfalls probably outside of the president's control (although to be fair this was probably a larger factor in Clinton's time than in the other two). All three administrations were long enough to experience both the ups and downs of the economic cycle.
Tax cuts should produce more activity within the private sector of the economy but have never really been tried without a sharp increase in deficit spending within the public sector. The idea that they will pay for themselves has not eventuated since Kennedy.
So at best the jury is still out.

Answer 4

actuallly the top 10% of earners in our country pay 90% of the taxes according to the IRS. And yes, putting money back into the pockets of the citizenry does stimulate the economy and result in increased tax revenues from sales. But dont let anybody buffalo you that the tax cuts only help the rich. The tax cuts are aimed at the middle class. We actually benifit from them more than the rich do. Of course the poor dont benifit because, frankly, they dont pay income taxes. This effect of stimulating the economy has worked time and time again, despite the fact that the democrats try to claim it doesnt. A lot of what they say just doesnt ring true. Listen to all of the carping about the national debt and how our economy is on the rocks then go to the Govt. Accounting Office site and read the reports. The economy is doing great and the national debt is down so low and tax revenues are so good that they project it may actually eliminate the national debt by the end of the next physcal year. Listen then verify. Dont trust a politician. They all lie!

Answer 5

It helps to some extent. When Reagan took office, people in the highest tax bracket had to pay 78% of their income in taxes. Would you be motivated to make money with your business if you only got to keep 32% of what you made? If you were still motivated, would you pay the full tax, or would you look for ways to dodge it? If you tax people at a reasonable rate, you'll have less people who will try to find loopholes in the tax code, and who will be motivated to stimulate the economy with their business activities.

On the other hand, once you achieve a reasonable rate, cutting taxes for the rich just makes for a bigger budget deficit because the government isn't taking in enough money. More of the tax burden falls on the poor and the middle class and inhibits their ability to achieve wealth.

Answer 6

You can segment it any way you like, but the principle of the Laffer Curve is simple.

At a 100% tax rate, the government raises no revenue.
At a 0% tax rate, the government raises no revenue.
As you increase from zero, total income increases, but only up to a point. The question is, have we or have we not passed that point?

Now, it is possible that we have passed that point for one income bracket, and not for others, but in the end, it really doesn't matter anyway.

The fact is, the rich will never pay taxes, because they always have someone (customers or clients or tenants) to pass the increase along to. This will always be the Middle Class, because the poor will simply demand more tax subsidies to pay the increases, and get them because there are so many of them who vote.

So, yes, lowering taxes on ANYONE will help our economy if we have passed the "optimization point". As I said, the question is whether or not we've passed that point, and in my opinion, we have.

Answer 7

Reagonomics lowered taxes for everyone, but since the "rich" pay more taxes, their cuts were higher. I'm betting everyone on this forum works for a rich person, or at least a person richer than themselves (except for libs who are usually social workers getting paid by the govt).

It's the wealthy who create the jobs and drive the economy. Just a fact. America has a competitive economy, wherein the talented or ambitious are rewarded (ideally anyway). Punishing those with high acheivement with high taxes cuts down innovation, business development, and job growth.

So, yes. If you want to switch to a socialist system, you'd have to change the nature of our society. When you have multimillionaires like Edwards, Kennedy and Kerry saying they "speak for the working class", you know they are disingenous.

Answer 8

it will help the rich to become richer . Ironically this will attract more foriegn investment and increase local investment. By this way the economy will be boosted, while the poor will not have so much advantage it will give more job chances and the conditions for the poor will be better.

Answer 9

there is lot more to economy than taxes. No considering the kind of money rich people make in USA. specially CEOs who make millions of dollars every month even if company and shareholder losing money. The system and corporate laws here are protect rich and wealthy. Plus Reagan wasn't an economist he was just another popular street smart like Bush.

Answer 10

No, the rich are rich because they save (or hoard) their money, any the lower classes spend more to look like the rich. They're the ones who help the economy.

Answer 11

Well, it depends on where they decide to draw the line at for "rich". Is $70,000 per year rich if you live in San Francisco or New York? In general, lowering taxes helps the economy, no matter who gets the tax break. All I know is, I hope the dems don't consider me rich, I have lots of very necessary ways to use the money I earn.