On 8/4/2011 6:18 AM, Han wrote:
Just wrote in
. com:

On 8/3/2011 7:12 PM, Han wrote:
Just 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.

Sure it does. When ABC Company sells more widgets, it has more
income. That income is taxable, so ABC winds up paying more income taxes.

It would work, if the tax rate on that income exceeded 100%. See, that's
were you are so wrong.


The actual tax rate doesn't matter. As long as ABC sells over a third
more widgets by discounting its price, it pays more in total taxes.
Let's walk through an example step by step. ABC first sells widgets at
$10 each, with a $4 profit margin. If the tax rate is 15%, ABC pays 60
cents in taxes for each widget sold. If ABC sells 1,000 widgets, it
pays $600.00 in taxes. ABC then sells widgets at $9 each, with a $3
profit margin, paying 45 cents in taxes for each widget sold. If ABC
sells 1,334 widgets, it pays $600.30 in taxes. If ABC sells 1,500
widgets, it pays $675.00 in taxes, etc.