Thursday, November 20, 2008

Democrats should support supply side tax cuts and more federal spending

We are entering the governing season and hopefully those of us on the left can transition from protest into policy.
I totally disagree with the Republican notion that raising taxes is always bad for the economy.
For instance if there are industries that provide goods or services where the consumer demand is very elastic, then a rise in corporate taxes (passed on to the consumer) won't have any negative effect on the economy but instead would raise government revenue. For example, if the govt. raised taxes on luxury events such as the Super Bowl,tickets to the Oscars, or Professional Fantasy Camps-- there is so much demand and little supply that it would be a good way to raise revenue without badly impacting the economy.
On the other hand, Democrats who talk about "taxing the rich" under all circumstances as though it never matters are also wrong.
For instance, right now if you own a Starbucks franchise and are making a profit, the decision to expand and buy another store location is going to depend almost entirely on the tax environment you are expecting in the near future. Therefore, a dramatically lower tax rate on that particular person can be the difference between:
a new store being built (construction jobs/remodeling jobs)10 people having a joban area having better choices in retail
and yes, that person making more money..
I give these two examples to show that Democrats need to be smart and offer solutions that matter.
1. We should cut taxes dramatically for people who are taking a risk with their money to create jobs. This should not extend to people who are making paper)or electronic) transactions in the stock market or some other virtual reality. I'm talking about real risk that envisions real job growth.
2. We should raise taxes on people who are gaining from unearned income unless they then risk it in a real venture. So this would mean people who make money because they:
sold Google stock short
hedged the U.S. currency against the Euro
should pay a higher tax rate
unless they took that money and did something productive like:
-bought and held stock in a company for a minimun of 1 year.-bought and held debt in a company/government for a minimum of 1 year.-started a business.
or some other economic activity that potentially could help the economy
3. The government should pass a Universal Healthcare bill that reduced/removed the burden of healthcare from business. This could be financied initially with debt. If done correctly it would stimulate the economy because millions of people would become new healthcare consumers. This is good debt because a healthy country would become more productive and easily earn more to pay off that debt.
4. The government should dramatically increase the infrastructure spending to fix America's electicity grid, roads, rails, communication cables, etc. Again, if done correctly it would stimulate the economy and it would be good debt passed on to the future taxpayers because they would have something to show for it.
There you have it, cut taxes for people willing to create jobs, leave them alone or raise taxes on the rich not taking real job producing risks, and massive new spending that will help the country in the long run.

Craig Farmer
making the word "liberal" safe again!

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