Let’s Give Tax Breaks to Boost the Economy – Not Raise Them

Let’s Give Tax Breaks to Boost the Economy – Not Raise Them

There’s a pretty basic economic lesson about taxes and keeping the economy a well-oiled machine. Business owners start making money, re-invest in their company and continue to grow. A big part of that growth is, of course, adding more employees; creating jobs where there were none before. That gives more money to more people, allowing them to now spend their income at other businesses who are growing and hiring and employing.

It’s the wonderful cycle of capitalism.

One of the biggest things that can get in the way of that process, however, is the government. Specifically, their proclivity to tax. If Joe Businessowner makes $100,000, but has to give $10,000 of it to Uncle Sam, that’s $10,000 he’s not able to spend on the business or its employees.

Here’s why I started with the economics lesson – this idea is what’s at the heart of a new plan from Kentucky Sen. Rand Paul that would give a huge boost to areas that need money.

Paul, who was elected in 2010, wants to give tax breaks to the hardest hit areas, spurring growth and giving them a chance to get out of the hole they’re in.

Writes Ralph Davis of the Floyd County Times about Paul’s plan:

“Paul says he plans to introduce a bill next month to create ‘Economic Freedom Zones’ in areas where unemployment is higher than 12 percent. Under his proposal, personal and corporate income tax in those zones would drop to 5 percent and employee withholding and the employer FICA match would be reduced by 2 percent, for a period of five years. The rates would then be gradually raised back to normal over another five-year period. ”

Long story short: Let these people keep the money they do bring home. Then they can actually use the money to help their situation (rather than letting the government use it to, say, fund spying programs).

Paul said his measure would be “an incredible stimulus,” and would reward people who have proven they can create income and add jobs to the economy. Those people who have shown they can spend money wisely would now have more cash to do so.

What do you think? Does it sound like a more sensible plan than what’s currently happening? Let us know in the comments.

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