2012 Corporate Tax Structure:
With the top tax rate set at 25%, corporate incomes above $75,000 would not be taxed at the Marginal Rate.
Last, but certainly not least, are the proposals regarding the Gold Standard and the Federal Reserve System. Republicans are considering using a Gold Standard to value the U.S. dollar, evidenced by the plan to audit the Federal Reserve over the previous four years and the plan to create a gold commission to explore the feasibility of a gold standard. Ideally, a Gold Standard would restrict the ability of the Federal Reserve System to increase the money supply (thus raising inflation), since the value of the currency in circulation could not exceed the value of the gold held in U.S. reserves and depository insitutions.
So Mr. Man, Why Is All This So Bad?
In a recession, simultaneously cutting both government spending and revenue has a negative impact on the economy through increasing unemployment and raising the national debt. On the spending side, most of the proposed cuts to government spending involve reductions in federal payrolls, entitlements, benefits, and discretionary projects. Reductions in these areas raise the unemployment level directly through layoffs of government employees, cancellation of government projects (e.g highway construction) and elimination of government agencies. Debts also increase here as incomplete projects that are funded with allocated funds are canned due to lack of funding, adding liabilities on the federal balance sheet.
On the income side, reductions in federal revenue through tax cuts or tax incentives further exacerbate funding and staffing concerns for federal projects brought on by spending reductions. Also taxation tends to be the government's primary source of revenue, meaning that reductions here force the government to seek out alternative sources of income. Usually governments turn to their central banks to either increase the money supply, which raises inflation, or sell bonds on the open market which increases the overall debt. The struggling nations of in the Euro area are a prime example of the ineffectiveness of such policies on stimulating economies in recession.
Continued in Part II
Article comments
1 - Glenn Contrarian
Problem is, the conservatives have never been able to answer this one nagging question: why is it that with the exception of certain OPEC nations, ALL first-world nations are socialized democracies with what the conservatives would think are economically-disastrous tax rates and regulation, whereas ALL of the many nations around the world which have small governments, low taxes, and little regulation are third-world nations?
If the economic structure of socialized democracies was SO bad, then they'd never have become first-world nations to begin with! And if small government, low taxes, and little regulation were the path to national prosperity, there's a whole lot of third-world nations who would first-world nations already.
But none of the conservatives have been able to answer this particular conundrum...not that it matters, because the nation's economy can go to hell in a handbasket as long as they get their way, they're in charge, and they get their money.
2 - Glenn Contrarian
And Alex -
Great article, for those of us who are not facts-and-figures challenged.
3 - Igor
That business about "...tax incentives will encourage new economic activity from private sector industries. " doesn't seem to work out at all, and it certainly hasn't the last few years as businesses are just banking their tax gifts so that the money goes dormant.
4 - Alexander J Smith III
Glenn
As always i greatly appreciate you taking the time to read and comment on my work. I really appreciate it
5 - Alexander J Smith III
Igor
Yeah that's one of the reasons I think that the Fed continues to expand its balance sheet. Ideally, its job is to create conditions that make investing attractive from the private sectors POV, but they aren't using the capital, like you pointed out they're just sitting on it and so the Fed keeps pumping liquidity into the economy to keep money flowing. Demand for it is out there, but it seems the federal government are the only ones really looking to capitalize on that demand
6 - Igor
IMO our entire tax break idea, which is little more than trying to bribe businesses to actually do business, is a failure. Take away ALL business tax breaks, create a sensible system of outright subsidies, like SBA, and finance too-big-for-private-money jobs outright, and vigorously enforce anti-monopoly laws to break up overgrown capital concentrations that are stifling entrepreneurship by small bussinessmen.
We've got to cut back overgrown sunset behemoths the way that a good gardener cuts back any wildly overgrown plant in his garden.
7 - Igor
The republicans basic economic idea is wrong: they wish to move more money into the hands of capitalists (they assume, I guess that those older wiser hands will better administer the money than the silly whim-driven masses).
But it is wrong. Demonstrably wrong. Economies prosper, or not, according to the demand created by the most numerous consumers, for the simple reason that their high Marginal Propensity To Spend gives them the highest Economic Multiplier. Every dollar they spend is echoed through the economy 3 or 4 times.