The Evil Side of Tax Cut

The argument for tax cuts is that they will induce the economy by encouraging investments, thus creating jobs, thus creating income. In reality, an average household would receive from the tax cuts to the amount of about a couple of pizzas a week which would not do much to the national consumption. Finally, the people who need help the most, those who have no job, would be left out in this process. The ones who benefit the most are the rich and very rich. The richer they are, the bigger the reward. These people would not increase their consumption because of the tax cuts. They all ready bought every thing they wanted, without having to wait for tax cuts. They would use the extra money to invest alright, buying more stocks. These money would pour into the treasuries of the corporations which the proponents to tax cuts told us that it would help them to expand their businesses which in turn would help the economy. Put yourself in the shoes of the CEO’s. Would you build more factories, hire more employees, when you have no sales? History told us that it is not so. Reagan tax cut in the 80’s did not help the economy any, so did Bush’s. The unemployment figures are the same today as that before the 2003 tax cut. Even the recent tax rebate had very little or no effect on consumption number.
Tax cuts never work well for the economy because it has a very short term effect, if any. In the mean time, the economy needs a long term solution. The proponents of the tax cut policy are always the opponents of government spending policy. Interestingly enough, it costs the government the same, whether 400 billions of dollars are coming from tax cuts or from government spending. Is one ton of cotton or one ton of steel heavier? However, there is a big difference between the two policies (tax cuts vs. government spending), in consequence. Tax cuts result in dead money. The money stops dead in the coiffures of the corporation. As we all know, the money is not good if it is not circulated. On the other hand, the same 400 billions of dollars of tax cuts can be use by the government to create job projects such as repairing and maintain the nation infrastructure, expand public transportation, encourage alternative energy research and production, encouraging research and production of fuel efficiency vehicles (Detroit surely would welcome this kind of government spending), and more… The government is the biggest consumer group as well as the biggest employer in the nation. When its resource is pumped into the economy, certainly it will produce strong impact. All the money that the government spends on job projects will not go to waste, as the tax cut proponents have always suggested. Since job projects create jobs, thus create incomes and consumption (and more jobs and income as a result), thus create income tax which comes back to the government. The Hoover Dam project, the National Highway project provided employment for millions of people for decades. Those were big government spending projects, but they also were the big jolts to the economy. Certainly, nobody could say the money spent in those projects went to waste.