Han wrote:
Just Wondering wrote in
. com:


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.

You are correct Han. And further - Just Wondering's proposition is too
simplistic - as he even admits himself. It does not work that simplisticaly
in the business world - let alone in the convoluted world of the US tax
structure/economy.

--

-Mike-