Some say a recession (two quarters of negative growth) is coming. Some say it’s already here. And every time a recession comes around politicians start talking about how to “stimulate” the economy. I’m sure Ben Bernanke is a smarter guy than I am, but since when has that stopped me from spouting my opinions?
So here’s a recipe for avoiding or staying out of a recession permanently–more tax breaks for the rich.
Or as people in government term it, an “injection.” I love that one.
Former Treasury Secretary Larry Summers told lawmakers on Tuesday that Congress should consider a stimulus package of up to $150 billion. He proposed an immediate injection of $50 billion to $75 billion through a combination of tax cuts and increased spending on unemployment benefits and other programs.
The government takes your money, gives it back to you without interest, and calls it a “stimulus package” or “injection.” As though they’re giving you something that wasn’t yours before, like a Christmas present.
But that’s not the point. The point is I think the rich should get more tax breaks because I think it’s the fastest way to prop up the economy. Moreover, I think the rich should get permanent tax breaks.
It all revolves around who the rich are. Some politicians would have you believe the rich who get these tax breaks are snobbish people, more likely than not to have southern accents and ancestors who owned slaves, who struggle to maintain their lifestyle on anything less than $5.4M per year. These may or may not be the same politicians who would have you believe that farm subsidies go to help out struggling farmers who live in rickety homes on dusty plots of land, as opposed to Canadian businessmen, but again, I digress. The “rich” who get tax breaks are not the rich we see in movies. According to Democrats, I’m rich.
Why? Because I own a business. Nevermind that I’ve been living in an apartment the size of a two-car garage for the past year and a half (update: we’re moving this weekend to a bigger pad!), I’m rich because I own a business and when you join the net income of the business with my personal income I make a lot of money, although most of it went towards paying off business debt last year (unfortunately debt payments don’t count against profits for tax purposes).
Now if the government were serious about stimulating the economy, they could give me a tax break by getting rid of the corporate tax altogether, for starters. Leave the personal income tax as it is, we’ll deal with it later. But just imagine we got rid of the corporate tax rate. What is it, 35% or so? What would happen if business owners suddenly found out that no matter how much profit their business made, they wouldn’t have to pay any taxes on it, and that this was a permanent change in the tax code?
Businesses would have that much more incentive to create profits, which means growing, and that means hiring people and spending more money on products and services, which also ends up leading to job growth. Less business taxation = increased job growth = more personal income tax revenue for the government. If the government is serious about putting cash in pockets, there’s a way for them to do it such that everybody wins.
But instead we have politicians talking about giving $500 tax rebates. First of all, that’s my money in the first place. Second, what’s $500 do for me? Even if everybody in the US got $500 and went and spent it the first month what would that really do for the economy? A lot of people will put in savings anyway, or use it to cover basic needs. I guess it might help for a month or two, but then it would be gone. But go out and create 21 million jobs like Reagan did with his tax cuts and then you’re talking serious stimulus.
As usual, the solution isn’t for government to step in and try to help, it’s for them to get out of the way.