Tax Cut Utility

Greg Mankiw presents a clip as Kennedy called for his Tax Cut of 1963. I would never criticize Greg, but his transmission of this clip to serious Economics students seems essentially flawed. The first comment I would make is the fact that One has to be 44 years old to have even been alive when he made this Speech, and about 65 years old to even Vote on the issue. The second comment I would make is that Tax rates are already only about half the real tax revenue rate for Personal Income, and about only 20% of the real Tax revenue rate for Corporate Tax. The real Capital Gains tax revenue rate is only about half of the 1962 rates as well. Kennedy talked of a Tax Cut in a time of high real Tax rates, which is a condition nonexistent Today.

Economists are most adverse to the usage of Marginal Utility analysis in the application of Tax Cuts. I am afraid, though, that such analysis developed for other economic structures work equally as well in decision-making determining Tax rates. There were extreme Gains to be made in application of Tax Cuts in 1963, when real Tax rates were extremely high. The early Reagan Tax Cuts proved to be marginally much less generative of economic performance, and Reagan had the foresight to raise those rates, as did both the elder Bush and later Clinton. It actually brought on the Boom of the 1990s, and corruption of those earlier Tax rates led to the Tech Bust bringing this era to an end.

The current Bush administration again turned to Tax Cuts, though they accomplished little investment in the domestic economy; they actually providing funds for the Corporate structure to invest Overseas in order to achieve the present level of Offshoring. We now have extreme pressure for Inflation, with huge increase in Public Debt, and untaxed Capital Gains leading to high pressure on both Business and Consumer Consumption Price levels. I am potentially in the minority of One, when claiming that the only effective Counter to Inflation is effective Tax rates. lgl