Please explain how tax cuts cause business investment.
“Please explain how tax cuts cause business investment.”
Sorry, but if your knowledge of economics is that lacking I cannot possible educate you. You lack a basic education.
Hint: It’s called Supply Side Economics. There’s a vast amount of literature on the subject.
So, we know right off you are not a business owner.
I am. Whenever we come into “new money”, i.e. a loan is paid off, we sign on a big new client, or get a tax break, etc., we get to decide what to do with it.
We have, in the past, given raises to key employees, purchased a new piece of production equipment, and spent it on advertising. These are business investments. They both help our company grow and they help inject new money into the economy - which enriches individuals - as opposed to paying taxes, which gives money to inefficient bureaucrats to spend as THEY see fit.
It all boils down to who do you think is wiser in their investments - individuals or the government. If you think the government is wiser, you do not belong on FreeRepublic.
Consider the following simple model:
If I or my business makes after expenses make $1M. Taxes (Total: local, state & federal) are 80% (just picking a number for percentage of taxes !).
$1M - .8 * $1M = $.2M or $200K ($200,000).
I or my business have to use the above result to pay investors, attract more investors (because I or business are a good investment!), I invest directly in the business, hire more workers to increase productivity, etc.
Clearly if taxes are lower I have more to do the above. If they are higher I have less. If they are high enough I shut down, lay off everyone and go home !
So which is better have more money after taxes to expand thus hire more people (and as a consequence make more money!) or have less perhaps lay people off and maybe even close up ?
It’s pretty simple if the business has more money it expands, more products made more people are hired and in the long run more is collected by government due to all this additional economic activity. Activity that wouldn’t exist if that “high tax 80%” was left in place & taken. Its been demonstrated time and time again. In modern times JFK did it, Reagan and others !
And the rate of 80% was picked just to have a number !