Tax cuts often increase tax revenue and create new jobs. In this
episode, I'm going to address the question that
I've been asked thousands of times. "Are tax cuts good for the economy?"
Absolutely. But I want you to understand the
dynamics of raising taxes or raising the revenue that's being taxed.
So, I'm Doug Andrew. I've been a financial strategist,
a tax specialist for more than 46 years. And I've loved helping people redirect
otherwise payable taxes to causes they support
because this is not really a political agenda.
I have met with many republicans many democrats
and I've never met one yet that if I gave them the choice,
"Would you like to redirect otherwise payable taxes to causes you support?"
That they didn't say, "Absolutely." So, it's interesting if we look at the pie
chart of where the federal government in the
united states spends our tax dollars, we know where our
tax dollars go. Sometimes Americans don't even know
this. But if i just take the general
categories, if there's 6 or 8 or 10
places where tax revenue generally is spent, I will list those.
And I'll ask people republican or democrat,
"So, if you had a million dollars that knew you
had to pay in tax, where would you allocate
that million dollars of taxes you pay? In what percent would you allocate it to
this cause, this cause, this cause, this cause, this cause?"
It never comes close to where the federal government actually
spends our tax dollars. And so, i often ask, "How did we get here?" If most
americans would not allocate voluntarily that their taxes
are divided up this way, why is it that the government has for
years allocated our tax dollars in these
different areas in way greater percentages than we would
ever voluntarily give? So, I want to give you a little bit
of history on fiscal and monetary policy. 2 basic
viewpoints. Again, this is not a political agenda.
If this resonates with you, I would encourage that you learn
more about what i'm talking about in one of my books. Be sure and click on the
link below. Get a free copy of my most recent
best-selling book called The Laser Fund. You just pay $5.95 shipping and handling.
I'll send out the book. I'll pay for the book.
You pay for the shipping. And you can learn more in depth about what I'm
talking about here. But let's talk about two basic
philosophies and once you understand these, you'll be
able to look back historically for decades and understand why certain
tax laws were passed based upon who was
primarily in power, in congress or in the executive
branch. And you'll understand why certain tax
laws were passed based upon these philosophies. So, a lot of times,
people feel like that they ought to have. Government do more and more and more pay
for health care, give you free college, things like this.
Medicare for all, whatever. That's one general political philosophy.
Hey, let's have bigger and bigger government.
And so, generally speaking the way they're going to
fund the government doing all of this for us
is to raise taxes. Oh, let's raise taxes. Now, they don't want their taxes
raised. They say, "Oh, no. Tax the rich people. Take it from the
rich people." Well if you do the math, if rich people gave 100% of
what they earned, it wouldn't cover some of the initiatives
that seem to be popular today. But generally speaking
in history, if you need to raise tax revenue,
sometimes the easiest way, the democrat party says is "We'll just raise taxes. And
let's take it from those who have the most money." And i'll
go through and show you the percentage that most wealthy Americans pay in
in taxes. Now, the other philosophy generally falls under the republican
philosophy where it's, "No, let's be more self-reliant. Let's
not have the government do everything for us. Let's have limited
government. And if we need to raise tax revenue for
essential services maybe health care medicare
maybe police, maybe protection, maybe fire departments,
school teachers; let's raise the revenue that's being taxed and we actually end
up with more tax revenue than if you raise
taxes." So, based upon that, you'll sort of see tax laws that were passed and i'll
give you a few examples here in just a moment.
But generally speaking, when you stimulate the economy,
when you actually lower taxes... So, the question
that you searched on this particular episode is, "Are tax
cuts good for the economy?" Historically in 1986,
president Reagan who was republican, this was his second term and he lowered
taxes. Taxes were topping out at 70 plus percent
for people who made a lot of money. He lowered
the tax brackets from 6 major brackets down to 2. And so, there was a
15% bracket if you made up to a certain amount of money 25 to
30 thousand back then, you paid 15% in federal tax.
And then anything over that amount, you paid 28%.
Now, there was this little bubble of 33%. But it was only to catch up that if you
made a lot of money. You retroactively paid 28% from dollar
one. But see President Reagan believed that
nobody in America should pay any more than 28%
of their income to the federal government in tax.
So, that was the most was 28%. Now, from Reagan through the 90's and 2000 to
2010 and so forth, what has happened is what's happened for many many decades.
Government giveth and taketh away. So, all of a sudden we came back to about
five or six brackets again and they they did away with deductions
because President Reagan actually had to do away with a lot of the
deductions back in 1986 by lowering taxes to no more than 28%. Because he
studied history. And he found... You know, he was a christian. And in the
bible, you know, God didn't require any more than 10%.
But 10% the poor person, a widow, a 10% tithing to a wealthy person.
But then he said to the wealthy where much is given much is required.
And so, in America, most wealthy people give, in charity 30%
or more of their income voluntarily because
they want to designate where their social dollars go to. But when they're
coerced. When they're forced to pay higher taxes,
they sort of resend it and it sort of asks the economy. So, when president
reagan did that, it set up the most prosperous decade
in american history since the great depression, the decade of the 90's. Of
course Clinton wanted to take credit for that.
But he did it by raising the revenue that was being taxed.
He lowered taxes and the economy started booming and the
revenue was crazy. And so, even with a lower tax,
because the revenue went through the roof, the actual
tax revenue was greater than if they had raised taxes.
Because he studied and realized that if you raise taxes,
then people go, "Why should i expand my plant? Why should i expand my business?
Why should i hire people? In fact, I need to now lay off people
because you've raised taxes. And I can't afford it so I'm going to
have to lay off people." And sometimes a lot of
general taxpayers they don't understand that they think, "Well, you have the money."
Well, no. If you raise taxes to where more than 28% federal and another
5 to 12 percent like in California on top of the federal rate,
if you take more than a third of people's income,
pretty soon you are disincentivizing, you're discouraging them from being
successful, hiring people and expanding. That's why when you just raise taxes,
people lose their jobs. People don't hire. During
the Obama era, you know, president Obama slowly was
trying to do all this but they didn't know what he was going to do
and so they just hunkered down and said, "Well, I'm not going to hire people.
I'm not going to expand my business because i may have to
end up laying off the people I just hired. So, I'm just going to hunker down
because they're not being forthright and telling
us what they're going to do." Trump comes in and he says, "I will lower
taxes. In fact, states where they lower taxes people go, "Okay,
great." And so, the business owners went out and
they began to hire and expand their businesses.
Now, you can have all kinds of opinions on the internet on this
but history shows when you actually lower
taxes, it increases the revenue that's being taxed and so the lower tax
rate on more revenue off times equals or
exceeds the revenue by raising taxes which
causes the economy to struggle and people lose jobs.
And so, those are the 2 basic philosophies. So, the first answer
that i would give you to the question "Are tax cuts good for the economy?"
Absolutely. Based on history, they have actually
stimulated the economy. And the secondary objective is it actually created more
tax revenue than by raising taxes
which which hurt the economy or sent the economy into
a recession or a tailspin. The problem is we get used to
this revenue and then they say, "Okay, it's time to raise taxes again."
This is a struggle that's been going on for a long time. Now, if you've heard
enough already and you want to learn a little bit more
about this, click on the link below, get a free copy of my most recent
bestselling book. It's book number 11, it's called The Laser Fund.
I'll pay for the book you pay $5.95 shipping and handling.
But let me go through and explain a little bit more and connect a few dots
for you. So, let me give you another example of
when this happened. During the 1990's, Clinton, he wanted to
reintroduce 5 and 6 different tax brackets
and do away with deductions. And so, that's what happens. Congress gets
greedy and they need money. And so, that's what
started to happen and the deductions were gone. And so, this
is why i say the government giveth and then the government taketh away.
Well, then what happened in 2001, September 11th?
2 planes, 2 flew into 2 skyscrapers in New York City and so forth. And
all of a sudden the terrorists accomplished what they wanted to. People
stopped going out to dinner, they stopped traveling and
flying and. The fact of the matter is more Americans,
in the previous quarter of a century 25 years had
had died in bathtub accidents and than in hijacked airplanes. But we didn't stop
taking baths after 9/11 but we stopped flying and
and we stopped traveling and we stopped eating we stopped building homes. And
so, it sent the economy into a tailspin. Well, if you haven't noticed,
the government is usually the last to lay off people.
And they say, "Oh no, we can't afford to lay off people. We need to keep them but
we need revenue." And so, sometimes they say well we've got to raise taxes.
Well, bush was republican or democrat. Well, he was republican. So, that
philosophy is, "No, no, no, no." If you raise taxes when
people are hurting, you're just going to create a
bigger problem. And so, he did the opposite. In 2001 and
in 2003, he passed tax acts that lowered taxes
and economists studied this. And from 2001,
to 2003 and 2005 and so forth, he actually
raised more tax revenue by lowering taxes than if he had raised
taxes. And he was able to have people create
jobs, refinance their homes because by lowering interest rates... This is called
fiscal and monetary policy. People pretty soon just said, "Ah, I can't
afford not to refinance my house. My heavens i can refinance it 4
or 5 or 6 percent." And their mortgage before was maybe 6, 7 or
8 percent. They go, "I can't afford not to do this."
Well, while i'm refinancing my house, it's now worth this. I'm going to take
out some equity and finish a bathroom. Well, that
means you now have contractors that have work. He created
jobs, he created stimulus. And all of a sudden
the economy starts booming again. Why? Because he lowered taxes and he lowered
interest rates. So, the answer is if you
cut taxes, if you understand economics 101,
generally that will preserve jobs. It will create new jobs. It will stimulate
the economy. And the revenue will go up. And even
though you may be lowered taxes by 3%,
you usually make it up because the amount of revenue is so much greater
that the lower tax rate gives you more tax revenue than if you
raised taxes And people lost jobs and we continued in
a recession. Now, hopefully that makes sense to you.
But basically, when you lower taxes and when you lower
interest rates, if you've often wondered why do they do this,
it's because we want to stimulate the economy
and raise the revenue that's being taxed. So, if you want to learn more about this,
I would recommend you read some of my books. I always address these types of
issues in there. My most recent book is titled The Laser Fund: How to
Diversify and Create the Foundation for a Tax
Free Retirement. And you'll understand why does the government
allow people to accumulate their money tax-free.
Well, isn't that costing the government? No, it's saving them money.
It's saving the government from trying to
take care of you in your golden years and you're on welfare. Or if you die
that your widow your orphans have to rely on government. And so, it's tax-free.
And people think, "Well, that's a tax loophole. They ought to be taxing though."
No. Because people are simply trying to take
ownership. So, the key is if you take ownership and you
are more self-reliant, you'll take pressure off of the government and you
can redirect otherwise payable taxes to causes you support.
And when you do that, I'm convinced you can make better choices with what
you do with those social dollars. Because if i can allocate that to my family or
to my favorite charities that I believe uh allocate money in a
better way than maybe government chooses to put money in things
that i don't even agree with, that's what I mean by
re-allocating, by redirecting otherwise payable taxes to causes you
believe in a new support. And I think frankly that is the better
way to go. You can learn about it. Click on the link down here and get a copy of
my most recent best-selling book. I'll pay for the book. You just pay for
the shipping and handling. Does that sound okay?
you