Just Wondering wrote in
. com:

On 8/3/2011 9:21 AM, Han wrote:
Jack wrote in
:

On 8/2/2011 11:13 PM, Lew Hodgett wrote:

Cut taxes so that additional debt is created.

Except since at least JFK, cutting taxes has ALWAYS resulted in
increased revenues.

Fudged statistics, I'm sure. At least it defies logic that by
cutting income you'll get more money in.

No it doesn't. If ABC Company and DEF company both make widgets at a
cost of $6 each and sell them at $10 each, they'll have the same
income.
But if ABC Company cuts its selling price to $9 each, it cuts its
income by a dollar for each widget it sells, so it will make less
money, right? Wrong. It stimulates the market - more people can buy
widgets when they cost less, so more total widgets can be sold. Plus,
some people that would have bought from DEF now buy from ABC to save a
buck. As a result, by reducing its price and thus its incremental
profit margin, ABC gets more money. It's more complicated, but
reducing incremental tax rates has the same overall effect -- it
stimulates growth in the private sector, which ultimately results in
increased revenue.

Widgets aren't like taxes. What you are saying goes for widgets because
of the elasticity of demand. You can increase demand by lowering prices,
thus with a smaller margin, increase net profit. If you lower income
taxes, people have more disposable income, but spending that extra income
(if they do it at all - now they may be paying off debt) does NOT
increase income tax revenue.

--
Best regards
Han
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