According to the report, the Republican Presidential candidate Ted Cruz plans to cut tax at least $8.6 trillion over a decade. He plans to impose a flat 10% tax on personal income and cut the corporate tax rate. According to the analysis, this would become the second most expensive tax proposal in the GOP presidential field.
As what we talked about in class, the big cut of tax could increase the deficit, causing the decreasing of national saving, increasing of real interest rate, and decreasing the level of investment. Also, if the tax decrease, government has to print money to fill the requirement of government spending, there would be potential risk of hyperinflation.
Her's the link:
https://www.washingtonpost.com/news/powerpost/wp/2016/02/16/cruz-tax-plan-would-cost-8-6-trillion-second-only-to-trump/
Wow that's a pretty expensive plan. Although I'm all for keeping as much money as possible, I don't think that this is a smart move. The deficit is only going to continue to rise if taxes are cut. I think that some of the current presidential hopefuls don't understand this basic fact. You can't complain about a rising deficit, and then attempt to cut taxes.
ReplyDeleteI agree with Samuel. Although the idea of cutting taxes seems great at first, it can lead to many problems in the long-run, such as what you mentioned with a decrease in national savings, an increase in real interest rate, and a decrease in level of investment. Americans will have to decide what is more important to them: less taxes or a decrease in the deficit.
ReplyDeleteI think everything that has been mention holds some degree of validity. However, a lot of politician boast ideals that they think will get them into office. I find it hard to believe that any adviser will think twice about telling Ted that this level of cuts is possibly to extreme to enact. Secondly, I don’t think the government “has to print money”. The Fed controls that in our country rather than the government itself. Furthermore, I have far more faith in the Federal Reserve when it comes to preventing seigniorage than I do in the fiscal policy makers. What I’m getting at here is, hyperinflation might be a bit of a hasty generalization. In addition, I think the question that Skye brings up is very good! I would like to add to that question: if we choose to cut taxes, seeing as that seems to affect many individuals immediately and most people are reluctant to deny a tax cut. Who will be able to fund our national borrowing since the global markets are tanking?
ReplyDeleteI also agree on the fact that cutting taxes can be quite hurtful in the long run. Everyone seems to jump at the idea of cutting taxes when often times, the cons weight out the pros in a situation like this. All economic decisions have their ups and downs. What matters is what this country can handle economically and a tax cut will absolutely decrease national saving, increase real interest rate, and decrease investment. What is the best route to take here is the question.
ReplyDeleteI agree with Jake. The real question is what is the best route to take and it seems that major tax cuts is one and the possibility is using negative interest rates. If tax cuts are implemented then people are going to save less, and if they use a negative interest rate policy then people would be charged to save, therefore, encourage them to spend. It will be interesting to see if Fiscal or Monterey policy will be the solution.
ReplyDeleteI wish candidates would express where specifically they plan on spending less money in the government budget. I feel like the whole promise to reduce taxes without consequences is an empty promise that many candidates tell the general public in order to get votes. But if each candidate had a clear-cut plan of where they were going to reduce spending in the government people could better assess which candidate is best for them.
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