Ok so it is Germany, but the start of said downfall.
What we really have to worry about is the fact that the U.S. is not a closed system. In a globalized economy our tax rates can be a major factor in whether or not capital stays in the U.S.
Let me know if what I said makes sense to anyone other than myself... :wacko:
Excellent point...the issue of "supply side economics" is far broader than just government tax receipts.
If Supply-side economics works so well, why do we have the largest record deficits ever under Bush and Reagan? And yet under Clinton, we started to actually balance our books and had the longest economic expansion in the history of this country?
Theoretically if Supply-side economics works have a 1% tax bracket and we will have so much tax revenue we will magically balance our books. The reality of it is that people try to make all they can, regardless of the tax rates. Purchases of equipment, etc. are tax deductible. So if you cut tax rates low enough, the entrepreneur has less incentive to buy new equipment. A higher tax rate actually encourages re-investment. It costs LESS of your own money to buy the equipment in a higher tax rate environment. If you didn't buy the equipment you would pay it out in tax. If tax rates are too low, you will take the money, and pay the tax, rather than re-invest in equipment. As a business owner, that is how it works with me. If I am going to pay a bunch of taxes, I will buy more equipment that I need. If I am not paying taxes, I don't need the deduction.
In reading this thread, it appears to me that the two sides of the debate are working with two separate definitions of "supply-chain economics." If there was an agreement on the definition then perhaps there would be more agreement on whether it works.
It also seems to me that a greater profit potential leads to more market participants, i.e., more small businesses.
Heres a very simplified example.
Option A: Stand to make X amount.
Option B: Stand to make 2X amount.
Option C: Stand to make 3X amount.
The obvious option is C. Tax rates do not factor into this equation. Whether the tax rate is 10% or 50%, the smart decision maker choses option C.
The question isn't simply where people invest their money. You need to also ask if people are willing to invest money.
I simply stated there would be more small business in the US w/ lower tax rates. I didn't assert that money would shift from one sector to another.
1) The real issue with the annual budget deficits (as I believe I stated before) is not tax revenues...I believe they are well over $3 Trillion each year...but rather the issue is spending...the government spends too much. To tell me that $3 Trillion is not enough makes me sick!
2) Obviously, there is a "point of diminishing returns" with respect to the additional tax revenue created by reducing tax rates (in simplistic terms...if we went to a 0 tax rate then tax revenues would obviously be 0)...the Laffer Curve addresses this issue.
Having said that, we are taxed too much! Anyone that disagrees is just not paying attention or has socialist tendencies.
If you want to see what low taxes and limited regulations will do from an economic standpoint...look at what is transpiring in Dubai!