There is no slam dunk way of increasing aggregate demand, you are right about that Major. And I like how you have kept your debate on the issue and not gotten personal like I was afraid we were going to. But at the same time, it is strange to see someone argue against something they just admitted would have at least a modest impact on the economy. Why not give it a shot. And you now have to admit that there is not way to predict how companies will dole out dividends. If they can attract stockholders with dividends, and if dividends are taxed lower, then they will be handing out more dividends because that will be a more efficient way of attracting stockholders. Whereas before giving someone a $1000 divided would have only given them 600 dollars, now giving them a $1000 dividend will give them $1000 and be more attractive. When you are talking about Macroeconomics, and we are here, that will have a huge impact on the rate of investment. We are not talking about whether or not citizen X is going to invest more if the dividends tax is eliminated, we are talking about whether or not a percentage of the population will invest more. If only 10% invests more, then you will have a huge increase in investment. Also, right now the return on stocks is not good. But in the future, if the dividends tax is still not there, the value of having stocks will be greater and will increase their anticipated worth. But something you are missing through all of those quotes from the media is that eliminating taxes that hurt businesses not only has a modest economic impact but also drives up the business morale prompting business expansion. I don't know what you mean by saying that businesses will just "keep extra money as profit". Corporations don't do that. Every dollar is supposed to be accounted for and used for the good of the company. CEOs and CSO's are on salary and it is true they can recieve bonuses like any other employee, but they don't get to keep this "extra profit" you speak of. That money can be given to share holders are dividends, as if often the case, or it can be reinvested into the company.
The problem with this analogy is that it doesn't answer "how much" the government should tax. And that's why you guys are arguing now. I think I'll avoid this never- ending argument.
The middle and lower class are the consumers who keep Best Buy, Wal Mart, Sears, Foleys, Dillards, etc in business by purchasing product from stores that are staffed by other middle and lower class citizens. For the most part I don't think you're going to find the upper 2% income citizens browsing in these stores. Trickle down economics doesn't work because you're relying on the wealthy to invest into businesses during a recessionary economy, which is something that the majority of them simply are not going to do. Example, you don't quit your job and open a sporting goods store and hire 3 employees to help you run it if you aren't positive that you can make a sustained profit doing so. This service/tech economy of ours relies heavily on the middle and lower classes having the ability to stimulate the economy by consuming goods and services. And I also think the tax analogy is somewhat flawed since it doesn't take into account the percentage of the population that is already wealthy and lives off trust funds and other investment that put them back down towards the middle class tax bracket. The restaurant analogy only takes into account the individuals who are making a significant salary each year.
The way the illustration is set-up, each should pay about $10 for lunch.... but they don't. Each should get a refund proportional to what they paid in.... but they don't. SOme who paid nothing expect something. Those who paid the most, get proportionally the least. What you have raised is a different and legitimate question, however. Another time.
I think it is funny how people on these boards always try to present their tax/economics positions as if they are facts - with their credentials, etc...and how the other side is "wrong." This, despite the fact that economics is in no way exact and there remain people who spend lifetimes studying the subject yet coming to a myriad of conclusions, solutions, etc.
That is a good point rimbaud, but people with opinions are much more interesting than people without opinions.
The all-knowing Trader_Non-Hispanic Name told me in chat that he is working on his classic to be posted soon. I find it sad that someone has to work on a BBS post, but maybe that's just me.
