Another Win for Supply Side Economics

by Rocket Finance

Rocket Finance is a personal finance blog, however, I believe that our view of religion and politics have a place in personal finance. Spending priorities, philosophy of work and the economy all affect personal finance. This article demonstrates what one person is willing to do for money. The woman’s morality/religion has a great impact on her personal finances.

That said, I found this article to be fascinating and another piece of support for supply side economics. The article is entitled, “Global Economy Booms as Taxes Fell“. Here are some quotes from the article:

Indeed, the global economy is growing at about a 5 percent annual pace, according to the International Monetary Fund, after growing 4.9 percent in 2005 and 5.4 percent last year. By contrast, the global economy grew at a 3 percent pace from 1980 to 2000 and at 4.7 percent from 1960 to 1980.

Then an explanation:

This is the story of globalization, of free trade, of the Internet, of China, of India. Then there’s this: The 21st century has also seen a global effort to reduce tax rates. Since 2000, according to theTax Foundation, more than half the countries in the Organization for Economic Cooperation and Development—the group of 30 nations that includes most of America’s major economic competitors—have lowered their top marginal rates, reducing the OECD average rate from 45.93 to 42.95 percent.

When taxes are high, only the little guy suffers.

1) Business owners simply pass taxes on to the rest of us. Gas taxes are not paid by the oil companies – they are paid by consumers!

2) When “rich” people spend money, they spend it on items and services offered by the rest of us. When I was in construction, rich homeowners with a lot of money to spend offered me my best chance of becoming wealthy myself.

3) When someone making $3,000,000 a year gets a 3% tax cut, they have $90,000 more to spend on services and products made by the rest of us. When I get a 3% tax cut, it only grows the economy by $900.

4) When a behavior is taxed at a high rate the behavior decreases. When the 1990 luxury tax on yachts went into effect, the wealthy purchased their yachts from foreign countries – or not at all. Who suffered? The rich? No, middle to low class shipbuilders in the northeast.

5) All taxes are passed on to the consumer. We (you and me) pay the taxes for big corporations. A tax break for Exxon/Mobile or Walmart or Eli Lilly results in lower prices for all of us.

I am not rich. I don’t own a corporation. I have less than $5,000 in retirement savings. High taxes on the wealthy will not help me grow my nest egg. In fact, some might consider my income level to be near poverty level (when you consider that I have threed kids). However, I understand that low taxes for business, corporations and even CEO’s gives me the greatest opportunity to grow my own personal finances.

Bring on tax cuts for the wealthy! (so I can be rich someday)

  1. 2 Responses to “Another Win for Supply Side Economics”

  2. By plonkee on Jul 23, 2007 | Reply

    Although its interesting that places that have the highest tax burdens are those that are the happiest / have the highest standard of living (think Scandinavia).

    What I think really benefits the little guy through growing wealth is unrestrictice trade practices especially cross-border trade.

  3. By rocketc on Jul 23, 2007 | Reply

    I’m not sure if I agree with your first statement. . . Sweden is moving away from socialistic policies such as high tax rates. I’m not sure how to measure happiness in a particular country. One way is rather macabre: per capita suicide rates. All of the Scandinavian countries rank ahead of the US. Another is if people want to live in your country. The US can’t keep people out. I’m not sure that either standard is has any relation to taxes.

    I somwhat agree with your second statement, but I would rather have tax cuts. There are many in the US who believe that open trade agreements have moved many jobs to low wage countries and have made it difficult for our own workers to get jobs.

    The unemployment rate might be the greatest way to judge the impact of lower taxes. In general, the US (and Ireland) have lower taxes than the rest of Europe and much lower unemployment rates as most of Europe. Could be causation, could be only correlation. . .

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