Originally Posted by pricejj
Really? Then how do you explain the increase in consumer spending resulting from the 2012 Social Security tax rate cut from 6.2% to 4.2% (which was the wrong tax to cut, since it further adds to SS's insolvency, but that's besides the point).
And if you attempt to say that the tax cut was insignificant, then why did Obama do it?
The answer is, every single time you cut taxes, it puts money in the pockets of people who will either spend it, or invest it. Obama knows that, and that's why he cut the SS tax...to spur the economy.
I don't think anyone is disputing that. His point was that you start reaching the point of diminishing returns the lower your effective tax rates already are. For example, if your effective tax rate was 60% and it was slashed in half to 30%, there would be a huge boom of money that would flow into the economy. However if your effective tax rate is 10% and is cut to 5%, the effect is a lot less significant, although you would still see some effect. And what if the tax rate is near zero? There's only so much you can do with taxes, and considering our tax rates are at historic lows that argument isn't as powerful as it might have been in the 50's or even in the 80's.
There has to be an intelligent balance between the tax rates and the overall revenue, otherwise you run budget deficits like we have for the past decade.