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Paul Ruth

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Use the tax deductions system to spur economic groth, and this is not just another tax cut idea.

I would like to share an idea I had to one, help resort the government budget, and two, to increase economic activity. I have entitled my idea The Non-Profit Employment Incentive: It is outlined in brief below.

The basic concept is for profit businesses large to small, to help employ people who they may lay off, or those who need a job through non-profits. The system would work just like the donation program for tax deductions and so on, only these donations would go specifically to employ people at non-profits. So if company A donates $1 million to a non-profit to hire 20 people for a year, then they would get a tax deduction, and/or reduce liability, and so on.

The two major benefits to this program would be increased employment and economic stability, and increases tax revenue without having to raise taxes. When someone is employed that salary is spent 5 to 7 times in the economy, which also means that tax revenue would be 5 to 7 greater for that money. This should spur economic growth, and make downturns less painful in the future.

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    Mar 27 2011: Just allowing companies to have more money to hire people would not make sense becasue why would a company hire people that they do not need.

    The idea is to use money that they give to charity already to focus it on developing more jobs. It may not be a full 100% liability reduction either. Companies would be in favor of suppoting the idea becasue it help to expand the economy, which means more people can buy cars, more can buy homes and so on.

    As I said, when someone is employed the money is spent 5 to 7 more times, which would increase tax revenue in the larger picture. So in a 3 year plan the government would be bringing in more money without pulling money out of the economy. This is not a short sighted plan.

    It not exactly a loop hole since the money is not going directly into the company pockets. If a bank is able to use some of their gains to spur more people to buy houses, and for more companies to start up business, then it create a more sustainable economic landscape. I agree that there just needs to be more taxes collected, but it does not solve the economic woes.

    ####If a company A makes $10 million and reduces by $1 million, true the tax revenue would be less from that company. BUT, since the money is going to sepcificly to create jobs, then those jobs have to pay income tax. So the 1 million is still being taxed. Plus that million would get spent in the economy 5 more times increasing overall income, which increases tax revenue. Not to mention more people would spend more, (sales tax revenue), and more people could buy more houses (property tax revenue) ########

    The idea uses the fundemantals of a free market economy to generate more wealth. Thanks for commenting.
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      Mar 28 2011: what is better than a good business? a bigger good business! if i have a company that performs well, i definitely want to expand it. open a new shop, a new factory, get new clients, increase production. to do so, i need capital.

      every money spent is spent multiple times. you can't count it on the benefit side, but ignore on the downside. as you take away money from a company, you take it away many times as well. governments often brag about how good what they do is. but they often forget to mention the price of it.

      except you want to take away from a functioning, successful company, and give to someone else. at best it is a net zero, but more probably a net negative transaction.
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        Mar 28 2011: There are times when a company can't expand even if they are doing well. This was the problem in the great depression. There were companies that were making profits. The issues was that there was no more markets to be explored becasue everyone else was too poor to aford to buy things.

        Most of the time good companies tend to keep things stable. If they need capital to be given to them by the goernment to expand, then they are not a stable company money wise. Good companies make their own capital, by being good companies.

        If companies are pulling in profits, then those profits are going to a few people (like investors, and the rich) who spend their money at lower rates than somone who is middle class. Plus, the profits are after they have paid their labor cost.

        True societial wealth is created by creating jobs. More importantly creating middle class jobs. It is better for the money to be in middle class hands becasue they spend a larger percent of their income than the rich. There is only the benifit side to what I am saying. MY idea is not to take money away from companies, but allow them to make the best decesion.

        This is pretty simple economics. Thanks for commenting.
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          Mar 28 2011: it is not possible that a company does well, but can't expand. if the entire economy is shrinking, the company still can take away market from competitors. remember, "doing well" means doing better than the competitor.

          we exactly talk about companies that ARE about to expand, but can not, since you took away their profits. it is also not true that companies make capital for themselves. this is only one way, the other is through the banking system or other forms of investment.

          it is also not meaningful to "spend at lower rate". put in bank, store at home in a sac, or buy a luxury yacht, neither will put the economy in any worse shape. what counts is the amount of value created by labor, and the amount of consumption. what can put the economy down is malinvestment. another thing is government policies that deter people from saving.

          your economics is indeed simple, and just as wrong. you buy keynesian views on face value. i don't recommend it.
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        Mar 28 2011: I think that you are forgetting that sometimes companies lack an incentive to invest. This is why they do not expand. In fact over expansion is a common cause for a company failing. Companies even if doing well, can't expand becasue the risk is too high. Taking out other competitors market share only adds to more risk if the economy gets worse.

        If some put money into a bank, and the bank cannot lend because the economy is not growing fast enough, then what good is it to creating wealth?

        Yes I do support Keynesian view becasue the classical economic view of the early 2000's lead to a greater problem later. Sure drop taxes for the rich, lower interest rates to nothing, and let business run wild. That really turns out well. Then again what would you really know about the economics of the Industrial revolution where there was great masses of wealth created, as most people were living in a poverty hell. How about the 1930's when people rioted and were killed becasue people did not have enough to eat. I think you need to look at the human side of your thoughts.

        The key to any economiy is jobs. Why do you think investment stops when the unemployment rate spikes? Companies historically do not always create new jobs. In fact they look for way to cut them becasue labor is a cost. Then again I am sure you are happy about the banks sitting on huge amounts of money, and not lending to small business after they were bailed out by this evil government. People like you always are aginst government involvement until the system is about to collapse. You may say let it fall BUT, it bring everyone down with it.

        Maybe you are the one that needs to wake up and stop putting trust into the wealthy. Comapnies do not work in the interest for all. Yes it is simple, but you have yet to understand it.
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          Mar 28 2011: some companies don't want to expand, some make mistakes, and so on. it does not matter as long as there are companies, many of them, that do expand and do make good decisions. that is how capitalism works. you are tried on the market.

          banks lending and the economy growing is in reverse relationship than you suggest. if there are savings, the economy grows. except if the money markets are crippled by stupid state regulations.

          the key to economy is not jobs, but production.

          unemployment rate spikes because there is no investments. more precisely, after a period of massive malinvestments, the labor markets can't adjust because of stupid regulations.

          i don't put trust in the wealthy. i put my trust into people. responsible, autonomous, hard working people.
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        Mar 28 2011: This is your problem with seeing the correct side. Capitalism sometimes does not work!!! Take a look at history. Pure capitalism is dangerous. The US deregulated engergy and we got Enron. Deregulate banking and we got AIG. Yeah there were banks that were doing right, but the system was corrupt.

        Less enforced regulation on oil lead to the gulf oil spill.

        Maybe you should read up on what is was like in Detroit in the 1930's when ford would lay off thousands of workers at a time.

        Time and time again we go over Classical economics, and it fails, and it fails, and fails again. The princuples are solid, but the practice is not perfect. The problem is that hard working people get screwed by the wealthy if something does not step in to enforce. Supply side economics is over. Grow up and look around. It no longer works, nor does it explainn what happened in 2008.
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          Mar 28 2011: i took a look at history, and i read a lot about it. pure capitalism does not exist, and did not exist ever. the closes thing was the post industrial revolution england and US. but marxism quickly started to erode it, remnants of the power houses too, then came the wars, and came the "progressives", and keynes, and all went downhill from there. enron and recent banking shenanigans all happened on a throughly regulated economy. the oil spill also happened due to idiotic regulations: liability cap, state granted license, and all. in detroit, in 1930, there was a so called "bust" that followed the so called "boom", which was caused by idiotic bank regulations and the also idiotic government.

          classical economics does not exist. since keynes, we can call it officially dead. but even before that, states were pre-keynesian. what you observe now is the failure of interventionalism and keynesianism. and true you are, they fail all the time.

          however, i recommend you studying austrian economics, instead of the classical british. smith and ricardo were geniouses of their times, but the true masters of economics were the austrians. and it not only explains what happened in 2008, but predicted it!
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        Mar 28 2011: The recent economy was not thoughly regulated. You need to look up the repealed Glass- Steagal act. How is that a regulated banking system?

        Oil companies blatantly ignored the regulations in place, and then paid off regulators. The system became corrupt. The history in detroit was a result of bad banking and over speculation, which is why we must look ay other ways of creating wealth other than just companies.

        Allowing too much trust in companies is dangorous. A main componant of Austrian economics is laize fair economics which is the same of the industrial revolution. Putting everything back to a individual behavior is an easy answer but may not expaln it all. Why would someone working in a best interest write bad loans? Why would people sign loans they do not understand? The glass steagall act could have scientifically predicted the outcome. This means that economics is not purely behavioral. There are also actions that can be taken to correct bad behavior. Austrian school of economics is really just taking the next step from Smith: http://www.econlib.org/library/Enc/AustrianSchoolofEconomics.html. Individual right to choose, economies work best when people seek the best for themselves.

        Keynesians also predicted 2008 becasue there was an obvious demand pull inflation in housing. The market became over saturated (which means banks could no longer write any more loans, meaning that they could not expand even if they wanted to) and housing prices shot up across the US.

        Austrians are really just more well thought out classic economist. Austrians just deny that economies can be judge and predicted by ideals, and math.
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          Mar 29 2011: the glass-steagal act is a bank regulation. how would that prove your point? free (state provided) deposit insurance is the worst thing ever. it undermines risk awareness of banks, and creates incentives to reckless lending. one of the main causes of our problems. such regulation has no place in a free economy.

          corruption is part of the state. why there is corruption in every country?

          i don't trust companies. i trust the system. the system will give negative feedback for any harmful activities, and positive feedback for efficient service.

          why would people sign loans they don't understand? answer yourself. you say people are stupid? i don't think that. those so called "bad loans" were actually very good. free party for a few years, with no risk other than losing a house that you never could afford anyway. banks also won. every participant won. that's rational. we, all others, lose. thanks, wise government! good job!

          keynesians possibly predicted, but only in the bathroom or basement or somewhere. look up peter schiff videos on youtube, he debated a lot of "experts" from 2005 up to now. this is documented. what keynesian wrote or talked about a bust before 2007?

          just? not just. that is a very tiny detail in austrian economics. the important thing is that it is based on human action, how people act and react. an austrian for example never would such a silly-billy thing that demand pulls the economy. not more than the cart pushes the horse.

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