What’s The Right Theory?

Tax reform is on everyone’s lips – but is there a good solution?  The traditional supply side theorist (I use that term since there’s no guarantee the solution will work as predicted) says that lower taxes will help create jobs and grease the wheels of industry.  The other side is concerned about social benefits being curtailed and feels that higher taxes keep the predators in line.

The reality for most individuals and small business owners is that we need a balance on both sides.  I believe that lowering taxes doesn’t assure us growth.  I believe that we need some forms of social programs.  The question, as always, is what’s the right balance.  A tax on imports (call it what you want) will not guarantee more jobs will be created – and import “taxes” could be detrimental to our industry.  The answer is NOT getting rid of social programs, nor is it providing richer and richer benefits.  Remember, although no one is talking about it, our deficit is still a large one. With rising interest rates, a reduction in taxes without the hoped for growth would create long-term damage to our economy.

I have plenty of questions – but may be short of solutions. I don’t think it’s any different for Congress.  I for one, hope that they move slowly and remember that the economics underlying their decision is theory – and we are the guinea pigs.

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