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COLUMN from DEAN ALEXANDER: This Installment / Extending President Bush Tax Cuts

By Dean Alexander

I believe taxes are a necessary evil. I reluctantly accept them and whenever there is a chance for a tax cut or elimination I am wholeheartedly for it. Tax cuts for the poor and wealthy are no exceptions.  This should be done as a matter of principle. To bill a tax cut as an economic motivation to stimulate the economy, it has to do just that.

Let us now talk about the extension of the Bush tax cuts. They are billed to us as a way to revive the economy. They say that these cuts benefit the job creators. And hence the economy. So if this is the case I am in support of these cuts, if not then we must reject them and call them what they are.

The cuts exempt people who benefit from the dividends. Some of those people are middle class or lower but a good many if not the bulk are people with money. Nothing wrong for cutting the taxes for people with money but we need to say so.

We have to see then if this will stimulate the economy better or if reallocating this money to the poorer would be better for the economy. If this money is paid to a well-to-do guy, this money will go somewhere into a savings account that may or may not be invested. But suppose this money goes to a needy person, this money is spoken for and will be immediately spent. This will be better for the economy.

The well-to-do person will have less of a marginal utility for the last dollar they receive. The poor devour everyone and would taste just as good taps the first dollar. If you want to enhance the economy, give it to those who can’t wait to spend it.

Bill Clinton may be right to ask to extend tax cuts for now but that would be on the basis of political convenience which we may agree on or disagree. But economically speaking the poor are better off and the country is better off by reallocating this money to them assuming we are not talking about the budget deficit which will have another day.

Summary: Ecomically speaking the allocation of the Bush tax cuts to the poorer or less rich will give the economy a better boost than that of the status quo.