I promised a fellow blogger, de minimis, that I will be writing why I support tax cuts. That despite my 3 part postings that support direct spending by the government. That however is purely from a theoretical viewpoint.
My support for tax cuts is derived from the following factors:-
Responses from my blog posts about effects of direct government spending and tax reduction appear to confirm these nagging suspicions:-
1. First, there are lingering doubts whether the government is serious about transparency and above board dealings. Narrative evidence and general perception, see that the government is just posturing on its declaration to be honest, above board and transparent in its dealings. Because of that, direct government spending via various departments, all the pejabat tanah dan daerahs, through state development offices and other GLCs will never reach the rakyat. Perhaps about of every Ringgit, maybe only 40 sen reach its intended target. 60% will be siphoned by the many little Napoleons. Thus direct government spending is nothing but an opportunity for corrupt officers to make hay while the sun shines.
2. Second, there is general distrust in the government. When this is prevalent, people will vote to have money into their own hands and elect in turn to spend according to their decision.
Therefore the standard textbook explanation of tax cuts being the better stimulant for our economy, becomes particularly true for Malaysian and Malaysians. Tax cuts improve the economy by giving the people more spending power and higher consumer confidence which leads to them spending more of all of their income which leads to more jobs, more business investment in more efficient technologies, and ultimately higher GDP growth.
Less taxes (as a percentage of earnings) going to the government coffers and more staying in the pockets of average taxpayers always has a positive effect on the overall economy and allows a vibrant free democracy to thrive and grow. We want more democracy so that we can kick out those hangers on and leeches that sap the economic resources of this country. I think the people have had enough of being at the receiving end of the machinations of politicians and officious and cocky government officers.
Remember that money the government uses to spend is not their money. It is the people's money that they take from us through various taxes. Lower taxes on the manufacturing, service and business sectors allows them to spend more money on their business and create more jobs. More revenue through taxes as a result of this increased commerce allows the government to maintain or even increase spending on precious social programs and health care. The resulting increased revenue allows a responsible government to borrow less money or even reduce government debt, relieving pressure on currency supply and interest rates, resulting in lower interest rates, which is good for everyone. Lower tax rates are a classic case of 'less is more' and any good government should always be searching for ways to reduce taxes and spending. It's your money.