Quote Originally Posted by Gawain of Orkeny
This has been proven false once again. Reducing taxes actually increases federal tax income. You get a smaller piece but of a much bigger pie.

Again it stimulates the economy and actually increases revenue.
Ah yes, more bogus economic theory stated as proven fact. These fantasies haven't worked. Take a look at the budget deficit. Did it shrink? No, it took off. Economic growth has remained weak. There are ~2 trillion reasons the theory has proven wrong, far more than enough evidence for me.

You stimulate an economy by encouraging wise investment. Encourage growth into new markets, research and development. This isn't done by cutting taxes. Simply throwing money at the consumer and hoping for the best doesn't work. Far better to use the taxes to actually build something or to support research etc. It is 100% certain that money put into those two will actually produce more jobs, and economic growth. Which would you rather have, a new job? or a pink slip and tax rebate?

At the same time another conflicting theory that I've seen touted (and often by the same folks, lol) is that when there is recession and govt. receipts fall, federal spending should pull back as well. Fortunately, that is not what we typically do. Oh sure it sounds entirely logical and has an easy to understand appeal, but what does cutting govt spending do in the middle of a recession? It tanks the economy. Why? Because govt spending serves as somewhat of a moderator to dampen the economic cycles. When business gets soft, the layoffs hit hard, hiring ends, major equipment investment ends. It is often very abrupt. Now By the same token, in an economic boom it is bad if the govt. goes on a spending spree...or decides it has room to cut taxes dramatically counting on future growth...

What should you really want the govt to focus on during a recession? Govt spending on projects that produce things that we will use in the future is one. Encouraging targeted investment is another. Spend the money while the labor is cheaper, you get more for less. It creates jobs when they are needed most and it puts infrastructure in place for when the recovery occurs. One thing is certain, employees have to pay taxes. Companies don't if they are not making a profit, but employees provide steady Federal revenue.