Tax Cuts from the Taxman
There are so many debates and clamor about tax cuts whether it helps the people of the United States or not. . People ask who it favor, and what exactly does it do. In times of economic crisis people question almost anything related to finance. People argue that tax cuts actually balloon the taxes collected, and some people argue that tax cut was made for the rich people and hardly ever give relief to the poor.
What exactly is tax cut and how does it affect the economy. Tax cut was essentially designed to offer relief to tax payers. President Bush pushed a series of tax cuts in the years 2001 and 2003, and this measure lowered federal taxes immensely. Aside from that, marriage penalty was decreased, it lowered capital gains and tax rate on dividend incomes. For taxpayers with dependents, the child tax credit was raised from $500 to $1000 per child, which by itself is already a big relief to most.
Many of the American citizens argue that tax cut is just for the rich saying that the biggest weight are lifted off the shoulders of the richest. This was countered by saying that those who pay the most taxes of course will feel the biggest relief.
In times of recession, there is the unending argument if tax cut is hurting or benefiting the US economy. People who feel the benefit of the tax cut wanted it extended because they say that taxes reduce income and pulls back economic growth. With the tax cut in place, people see a boost in the economy because more money is circulated. Despite the relief that federal tax cut was supposed to bring about, many politicians and taxpayers oppose to this and raised the issue that the government was losing significant revenue from taxes that could be used to cover the massive deficits in budget. Then comes the problem in revoking the tax cut, because it has been implemented for a long period of time, when it goes back to its original rate it would feel more like a tax hike instead of reversion, thus hurting the taxpayers.
Republicans and Democrats have been known to take opposing sides on the federal tax cut issue. Republicans are known to agree with tax cut and keeping taxes low, while the Democrats are all for raising taxes.
Originally, defiant U. S. President Barack Obama, a Democrat, just signed an extension on the payroll cut tax, a rare ceasefire on the bipartisan battle over taxation among many things. The law will not only extend jobless benefits but also give extra take home pay and bonuses to the working class. Critics of the President think that this could be a re-election strategy costing $93 billion in deficit. President Obama states that the extension was crucial in the recovery of the nation from its deepest recession saying that this decision was based on several discussions with economists who all forecasted that this would boost economic and job growth in the next coming months. All this declaration is in contrast to the original view of the president on tax cut issue. The president was remembered to have stated that he has long been opposed to tax cut saying that the country just simply cannot afford them and will fight what is considered as the republicans’ central economic doctrine to end it once it expires.
After the tax cut extension has been passed as Law, the next question should be “Will tax cut stimulate economic growth?” This one question may have a blurry answer for now. Those who doubt that this is going to be the case in the future are basing their speculations on historical data of 10 years tax break. This, they says did not help materialize the job and economic growth that they were predicting. If there is no consumer demand they say, and then there will be no investment, thus no jobs are created. They argue that tax break simply widened the income gap between the rich and the poor.
Some economists speculate that cutting taxes today will create more jobs on the future. Investors, they say can respond to this marginal to tax break by investing more in new businesses and opening up more employment to the public. In addition, tax cut gives people the chance to consume more goods and invest in businesses or even save up for the future.
There are more than one factors contributing to a success of a nation aside from federal taxes but we cannot help but agree that it is an important contribution. In conclusion, making the taxation system more stable and reasonable is a very important undertaking, but as a nation, and it may be the economic stimulus that Americans are waiting for, but we should not be banking too much on it to serve as a catalyst towards and economic overhaul in the country.
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