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Actually this does NOT hint at an answer the counterfactual. Because spending is unchanged as a result of lower taxes from the government. Government spends as
by mempko 5y ago
Actually this does NOT hint at an answer the counterfactual. Because spending is unchanged as a result of lower taxes from the government. Government spends as much as it did before cutting taxes (this is because the federal government doesn't spend taxes, but spends regardless of tax income. This is what is called the deficit).
If a study was done to answer the counterfactual, my bet is that the result of higher taxes would actually increase GDP because the rich will do everything possible not to pay for those taxes. So they will do things like spend more on R&D, or increase wages, or buy equipment. In other words reduce their tax burden. If given the choice between the government burning profits via taxes, or spending more on wages and investment, they will choose the latter.
- Tyrek 5y agoCould you point to the part of the paper that you're drawing these conclusions? It's been a while since I've done serious econ work, but I'm not seeing a spending variable when I scan through the paper.
- mempko 5y agoThat's my point, the paper doesn't answer the counterfactual or even hint at what the answer would be. You implied higher taxes allow the government to spend more, but this is not true since the government doesn't need taxes to spend. In other words, taxes are not necessary for spending.
- specialist 5y agoExcess capital leads to asset bubbles. Non productive. Maybe even anti productive. Some how we've simultaneously got both surplus capital and huge a decline of new business formation. Coincidence? My pet theory (hunch) is that transaction costs discourage large funds from making medium and smaller sized investments. The uniqueness of Y Combinator kinda supports this hunch.