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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (31392)	11/10/2006 2:44:19 PM
From: TimF	Read Replies (1) \| Respond to of 541747

I'm for low taxes, but not in order to get a quick economic stimulus. Not only do I not think we need the stimulus, but as you point out and I agreed, such stimulus can be uncertain and problematic. The benefits I see from low taxes. 1 - Lower taxes means less government/political control over how resources are spent. This means more individual freedom. 2 - Lower taxes means less government/political control over how resources are spent, which leads to more efficient investment, as the private sector tends to be more efficient at creating wealth. 3 - Lower taxes means people use less money and effort finding ways to comply with or get around the tax code. The resources used to legally avoid, and illegally evade taxes are a dead weight loss for the economy as are the paperwork/reporting/compliance costs. This can be addresses more efficiently with simpler taxes then lower taxes, but lowering taxes even without simplification still provides a benefit. If the cost is lower people will make less effort to avoid the cost. 4 - Lowering taxes will tend to cause taxes to distort investment less. This is different from #2 (where the government spending has a lower return than private spending), or #3 (the direct cost of complying with or avoiding taxes). This deals with lower future returns of private investments made to meet politically selected criteria. The returns to the investor might actually be higher, if the investment is subsidized in some way, but the subsidy itself represents a cost. The downside is that lowering taxes reduces revenue in the short and usually medium run. In some ways this can be good, but what's bad about it is that it will increase the deficit. Deficit spending still means that the government is allocating the resources so you lose some of advantage #1, and all of advantage #2. But tax cuts often get argued for in terms of an economic stimulus because people want results now, and politicians want results before the next election. They don't care as much about complex hard to quantify indirect benefits.