Reader T-bone states the theory well: (lifted from comments cactus style)
The bottom 50% are seeing no increase in real income while the dollar falls and their costs rise. Fiscal policy of low fed rates and heavy borrowing are being used to stimulate growth, and the negatives are being deemed an acceptable sacrifice. I believe the reason we need to resort to this fiscal policy is because supply side economics is having the opposite intended effect. Concentrating gains at the top is not resulting in a trickle down, even as productivy increases. However the negatives inherent in this necessary fiscal policy to compensate for the attempted free lunch is how the lower 50% are paying for the cuts in high income and capital rates. They’ll also pay in the future as neglected infrastructure will need government investment.
And as PGL eluded to, when the federal government cuts funding to the state level or cuts federally funded programs leaving the state to pick up the slack, state governments have to either raise taxes/fees or cut the services that benefit the people.
“I am willing to listen to rational explanations on how raising taxes on any wage group improves the lowest bracket. The increased tax receipts that you are advocating go directly to the Treasury. It is a little bit like claiming to help a starving man by denying the rich guy on the hill a steak.”
That’s more free lunch thinking. Increased tax receipts do not go to some vacuum in the treasury. Someone’s got to pay for spending, now or later. Even printing money would mean you pay for it through inflation. We can have people pay into SS and have the goverment borrow that money for general uses instead of keeping a balanced budget. But then when it comes time to pay back those SS money, where’s it going to come from? Are they going to tax those who paid into it a 2nd time in the form of general taxes, or are they going to have them pay for it through inflation, or what? 1+1 still equals 2. No free lunch.
Taxing a high income group certainly does help a low income group, assuming that tax increase prevents an equal amount of borrowing, or that tax is spent on something that benefits the low income group directly or indirectly, or it prevents a tax from having to be collected on that group. Seems silly that this needs to be explained.
This lifted from comments, written by reader T-bone.
Rdan here: MA has or will have about fifty towns voting on “tax overrides” of the mandatory 2.5% limit on year to year increases in the property tax rate. The trickle down effect of unfunded mandates to the local level is creating havoc with local funding in this state.
The cap itself was put in place to mandate local votes on tax increases for a town. How are your towns doing?