by Respectfully - Supposn

Created on: February 11, 2009   Last Updated: February 16, 2009

Supply-side economics is the concept of "diminishing returns" applied to taxes. Proportional increases of revenue do not keep abreast with proportional increases of tax rates. Their graphed curves diverge primarily due to increased efforts to avoid higher taxes.

Tax cuts may induce reversal of tax evasions. Many tax evasions are legal and/or are of some partial or net benefit to our nation.

Decreasing federal revenue itself is a deficit to the federal budget. Supply-siders will generally stop reading at this point because to them this is a statement of heresy.

Taxes themselves are a transfer of wealth and not incorporated within the calculation of the gross domestic product, (GDP). Supply-siders generally also believe that non-government spending itself is intrinsically more beneficial.`
[A dollar's spent to construct Hoover Dam was of less economic consequence than a dollar spent to produce the Las Vegas Flamingo? Would there have been a Flamingo Hotel if the dam wasn't built? The Entertainment industry may be larger than our public law enforcement industry, but is a dollar's entertainment of greater national benefit than a dollar's public law enforcement service?].

Both tax cuts or additional government spending might temporarily "stimulate" an economy. A tax cut will not in itself compensate for its induced government debt. Increasing federal debt can be an economic advantage only if borrowed funds contribution to our economy exceeds the increased debt service expense. On this point I concur with President G. H. W. Bush's description of Supply-side as "Voodoo economics". The spending's done but we retain the debt.

Many believe as income tax rates increase beyond some point, (My guestimit is approximately 25%), the graphed divergence between tax rate and revenue increases grow significantly and proportionately greater.

Wealthier segments of our population love supply-side economics. It's a concept that attributes some economic benefit due to cutting and detriments due to increasing tax rates. We're all amiable to concepts we perceive to also be in our self interest. Those who serve the wealthy or otherwise require their good will also reflect those opinions.

Supply-siders have little regard for other considerations in regard to their concept. Only when a tax rate's significantly large does the proportion of tax rate and revenue modification begin to significantly diverge.

The concept of diminishing returns act in concert between multiple categories of taxes only if the revenues of the taxes are derived from the same source and from related tax bases. The concept's not applicable to the total of corporate and individual's income taxes because both their revenue sources and tax basis are unrelated. Rather than a few major tax sources with severe tax rates, there's advantages to taxing more sources and tax bases at lower rates.

Complexity and additional overhead expenses due to multiple taxes would be decreased due to IRS's existing economies of scale. Proposals to shift a significant portion of our revenue sources from income to consumption taxes has some merit.

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