I'm a bit concerned about Trump's impending tax cut plan. I've always maintained that if you pass a large tax cut, 99% of the cut, should go entirely to the lower and middle classes of society, as these are the classes that will derive the most utility from a tax cut, and be the quickest to spend it and put it back into the economy. Also it should go to these classes of citizenry, if they've faced the most economic struggles overall, such as the American worker/Median American Household Income being entirely stagnant and having no increase in purchasing power over the past 30/40 years (As opposed to the wealthiest 0.1% of American Households which have had a tremendous increase in income and increase in purchasing power over the past 30-40 years).
And if members of these classes DON'T pay any Federal Income tax, they should be provided a tax credit, sort of like the "Negative Income Tax" that Conservative Economist Milton Friedman envisioned as a means to reduce poverty in a society.
I am worried that instead of that happening, most of Trump's tax cuts will go to the super wealthy, or corporations, and despite the lower classes maybe being afforded a few peanuts, the government will run up a large national debt for these tax cuts, and the ordinary citizen will see very few gains after the tax cuts have been passed.
I don't mind reducing the costs of business, but when the country has large debt problems, like it does now, and it did in 1952, I argue that we should adopt a similar tax code as what was in place in 1952, that helped pay off the entire WWII debt. This is why, I don't mind lowering businesses taxes, so long as taxes from businesses still pay roughly 33% of the Federal Government's revenue like it did in 1952, as a means to pay off the WWII debt. The 1950's were not really bad economic times despite the higher taxes of the era.
I decided put my idea into words regarding why tax cuts for the super wealthy, will never be a great driver of economic growth or improving American's standard of living as a whole.
"Wealthy countries are measured by how much of the entire population is middle class, and have a relatively high standard of living as a whole. Not how wealthy the wealthiest 1 in 1000 citizens are.
Yes there are two terms in Economics which shows the futility of tax cuts for the wealthy, that is still part of Conservative doctrine to this day on economics/tax policy.
#1 The Law of Diminishing Marginal Utility
Suppose we can give out a tax credit of $1,000, we can either give it to a very wealthy person who has $1,000,000,000 ($1 billion) in disposable income, or we can give it to an extremely poor homeless person, with $1 in disposable income.
The wealthy person will garner virtually no utility from the tax credit or a tax cut, that enables him to have $1,000,000,000 in disposable income, vs $1,000,001,000 in disposable income.
The homeless guy on the other hand, will get LOTS of utility if he goes from having $1 in disposable income, vs $1,001 in disposable income.
#2 Velocity of the Dollar
A dollar traveling across an economy, creates economic growth along every stop it takes.
Lets suppose we give $1 to our homeless guy. Our homeless guy is a good example, because he spends 100% of take home pay. The rest of my examples are "low income" employees providing services, who get the $1, who also spend about 100% of their take home pay.
He then spends it at a gas station on food. The business owner uses this $1 to pay his employees. The gas station clerk making minimum wage, when he gets that $1 in his paycheck, he then spends it at a movie theater. The movie theater attendant gets the $1 in his paycheck, he then goes and spends it on a haircut. The barber then uses the $1 to spend elsewhere.
The point is, as far as economic activity is concerned, this dollar is traveling across the economy, at a very fast pace. It has a very high "velocity of the dollar".
Now we take that same $1 out of the homeless guys hands, and instead give it to a man who takes in $1 billion a year in disposable income, and only spends a mere 10% per year of his take home pay on living expenses. This extremely wealthy man has a bank account in the Cayman Islands.
That $1 is going to SIT in a bank account, for a very long time, before it ever gets put back into the economy. This represents a very low velocity of the dollar. Meanwhile, that $1 isn't used to finance food for the homeless guy, movies for the gas station clerk, or a haircut for the movie attendant, and the barber never sees the dollar.
This is why enriching the super wealthy, will never create massive amounts of economic growth for an economy."
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