Dept. of Alterantive Facts: Quantity

quantity (n) a measurement (not to be confused with quality)

I could send this prior to the House GOP version of the tax reform bill being released.  Time to read the details of their plan, then watch for the Senate’s version.  One of my senators has already responded, which meant that she had composed a response to constituents before any of us had a chance to see the legislation.  The politics of speculation.

President…, Senators…., Representative…

You have made comments about upcoming tax reform legislation eliminating various tax deductions/loop-holes, and reducing tax rates for corporations. To date, most of the details that I can find are speculative and more ideologically driven (“relief for middle class tax payers”, “grow the economy”) than useful for analysis.

A major premise which I read in your statements is that tax relief will stimulate the economy and provide jobs for workers in the USA and West Virginia. This appears to be based on the idea that if tax rates are lower for corporations and those with wealth in our country (e.g. capital gains taxes and estate taxes), then companies and wealthy individuals will use this money to start new companies, increase production, and thereby generate more jobs.

However, economic history does not support his belief.

With low-interest rates, companies will borrow money from investment banks to open up new shops, build new facilities, or upgrade existing production lines. Furthermore, most of the upgrades in facilities are going to automation (e.g. computer systems, robotics) not to hiring more workers. Companies will likely redistribute tax relief funds to the owner’s or investors through dividend and capital gains payments on the stocks that they own.

Regarding tax relief for wealthy people, they make their money not by clocking-in to the company, but by investments in stocks and bonds. The extra money that they will have through lower taxes rates and deductions will go back to the stock-market to increase the value of their investments. However, increased stock value only goes to the person who purchased the stock at one price, then sold it at a higher price. No one is directly hired to a company because the stock price when up. The middle-class might benefit indirectly to stock prices increases because their 401k/403b retirements plans.

If you look at the history of tax relief to corporations and wealthy people, the year after tax breaks to them, unemployment rises. Thus, I caution you about trying to sell tax reform on the idea that it will stimulate the economy.

In contrast, history shows that money or credits provided to those with limited income or living pay-check to pay-check do return those funds immediately to the economy through payments for housing, clothing, food, gas, health care, etc. Conservatives usually disparage this idea as redistributing wealth. The believe is that it is not fair to corporations or wealthy individuals to take their assets to give to people with fewer resources. But, if your reason for tax reform is to stimulate the economy and encourage job creation, you would do better to give money to those who will spend it.

I think a more useful discussion would be to ask “what do citizens in the USA need for quality of life?” I suspect that the answer would be health, housing, clothing, food, transportation, national security, education, job and retirement security, relationships, children, and leisure. I’m bet some actuaries could then figure out how much this costs. Maybe somewhere between $1 million to $10 million would be sufficient for most of us to live on. Beyond this amount, what justifies someone possessing assets that he or she will never really need?

About hermitsdoor

Up here in the mountains, we have a saying, "You can't get there from here", which really means "We wouldn't go the trouble to do that". Another concept is that "If you don't know, we ain't telling." For the rest, you'll have to read between the lines.
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