LOWERING TAX MYTH

There are those who think the myth that lowering taxes, especially on the wealthy, improves the economy. I have been fond of pointing out that lowering taxes is an inefficient way of improving the economy (http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html).

A more recent analysis that comes to the same conclusion is by Fareed Zakaria

(http://www.washingtonpost.com/opinions/fareed-zakaria-romney-is-wrong-on-tax-cuts/2012/06/07/gJQAy1pHLV_story.html?wpisrc=nl_opinions_Fri).

OK, the drill is that when the wealthy get more money, they buy more non-productive things like Treasury bills, notes and bonds, and buying existing stock does nothing for the company the stock represents, only the IPO and bonds benefit the company. Also when the wealthy get more money they do things that might benefit the global economy (like buying chalets in Switzerland, Bombardier personal jets from Canada, and islands in the Bahamas). When the middle class gets more money they pay down debt.

It is quite clear that Bush-41 and Clinton raised taxes, and we had the best economy of my lifetime and the Federal government had four years of positive cash flow. Bush-43 got the biggest tax cut in history and the economy tanked, from which we still haven't fully recovered. Even job growth from 2002 - 2007 was the poorest since the Great Depression. And all the tax cuts that Obama has given (e.g. extension of the Bush-43 tax cuts, a third of the stimulus package, the payroll tax cut and its extension, the small business tax cut, etc.) may have kept us out of a deep depression but haven't pulled us out of the poor economy, though we may be slowly coming out of it.

Though all the evidence is to the contrary, the myth of the benefits of tax cuts continues.