The Rustle of Economics

Students of Tax Policy should carefully read both contributions in this Post. Their Comments are accurate, and fiscal stimulus based upon Tax Rebates rarely attain the desired effect. The immediate destructive element to Tax Rebates lay in they become politicized upon transfer from theory to proposed policy; i.e., self-interested Greed arises to ensure political supporters get their share of the Take, even though it doesn’t fit the actual theory, or actual propellent to the Economy. There are Those (Me) who would claim that there is no stimulus to Tax Rebates at all, as Business Interests stand ready with Price increases prior to any award. The Price increases spur Business Profits, but does nothing for Consumer Demand, Employment, or reduction of Production Costs. The sensible Taxpayer saves the Rebate, or pays off Debt, but still remains in worsened condition because of the Price increases.

Free Exchange gives good Insight into views across the Atlantic, though the links come mainly from American sources. My Answers to the implicit questions stands as January and February Retail Sales will remain basically static, but will begin to improve in the Spring for American Retailers. The ECB and the Bank of England were right in maintaining their rates, as there would not be an induced stimulus to the Economy, and the Production outlook will improve after a bad winter. China is doing absolutely the wrong thing, as Price freezes only builds bottlenecks in the Production process, while Consumer Demand continues to gain strength. The real Corrective is high taxation on Consumer Products outside the basic Life Support Products of Food, Shelter, and Public Transportation. The overall European view is sensible, and the Fed would do well to emulate the European banks.

I fear Cactus at Angry Bear is himself being disingenuous, as there are relevant arguments for a flat tax that are not facetious. The foremost argument for a flat tax being the creation of greater levels of business adventure; I use this appellation because rarely do We witness actual real increases of Product, just the creation of a multiplex of Middleman concerns dealing within the Retail or Financial sectors. By the way, Some (Me again) suggest that this activity is actually fueled by a Retail Pricing system which is about 22% higher than Consumers should actually have to pay. I regress, though, to the Protest of flat tax advocates at the inequity of having to pay more tax, simply because they are more successful; this argument being somewhat discounted by the fact greater expenditure must go in law and law enforcement to protect the Wealthy and their assets, as can be found in protection of the Poor.

The real equality of the flat tax is most understandably undercut by the insistence of Wealth in enjoying the Tax deductions which save the Poor from absolute destitution. Any genuine flat tax would nullify Personal Exemptions past a certain level of Income–say $30k per year. The Mortgage Tax Credit could have a maximum qualification that Properties be of less than $200k in value. 401k Contributions set only to discount contribution less than $10,000 per year. The only truly equal flat tax would be One where the Poor could live without any Tax reduction at all, and with the Wealthy paying a 40% Capital Gains tax where there are literally no Tax Discounts at all. lgl