Post by Rob W. Case on Aug 3, 2006 9:01:31 GMT -6
The economy currently remains positive even with the pinch from gasoline prices. But why? Tax cuts! Since people get to keep more of their own money, they are able to spend more, and since people spend more, the government’s revenues are then doubled, or tripled by means of sales tax.
The concept of tax cuts was first tried out by President Calvin Coolidge in the 1920’s, the second, by John F. Kennedy in the 60’s, the third by Ronald Reagan in the 80’s, and the fourth by George W. Bush in the 2000’s. Each and every time it has been tried it has worked with a vengeance. But why? Why does it work so well? If I had to sum it up in one word that would simply be volume.
This strategy also coincides in principle with low prices. When you go to a place that offers low prices (like Wal-Mart), you wonder how can they stay on top when their prices are so low? When the competition across the street sells a bottle of shampoo for $3.99, and when Wal-Mart sells it for $2.49, you begin to ask yourself how does Wal-Mart make more than the competition. Those who would look at it at face value (who do not think in depth) would assert that the competition would make more money because it sells for a higher price. That thinking is wrong. It is wrong because of the science involved. When a shopper shops, some things factor into mind.
1. Price
2. Urgency of the item desired or needed.
3. Convenience
If the customer shops, and sees that the price is high, they then wonder if they should purchase the product at all, or if they should hold out for when they shop at a store that offers a lower price. If they decide not to buy the item on account of the price, they will move on and the item will continue to stay on the shelf. If they go to the competition, and the price is significantly lower, then impulse will set in, removing any feeling of hesitation, and the product will be removed off the shelf. As this occurs more and more, and as bottles fly off the shelf, at the competition, most of the bottles remain on the shelf. As more and more bottles remain on the shelf, the person who keys in the order for the stock load orders less, making the bulk quantity less thus reduces the chance of a higher quantity bulk discount. The worst scenario for a business is when someone buys the product by convenience at their own leisure.
If people do not feel like taking the time to visit another store, wait in another line, and so forth, they will most likely overlook the higher price. In a way, the consumer is paying a, shall we say, “Leisure tax.” Of course those who shop with discretion outnumber those who shop out of convenience, and that is why the lower-priced store makes more money. Since people constantly buy, the volume is increased on the stock that the store orders from the warehouse.
With tax cuts, the system is sort of similar. When a politician initiates a tax cut, this is what results….
1. Tax cut is implemented.
2. More people have more money in their pockets to buy.
3. Spending increases and consumers, by shopping at a lower priced store, are able to obtain more for their money, and stay within their budget.
4. The more people buy (and they do buy more when they have more money), the more they pay in sales tax.
5. The more sales tax rolls in, the more the Government gets.
Bottom line: By uniting the economy with tax policy, the consumer can control how much the government gets by how much he spends.
Now, with those who support tax increases, this is how the system goes.
1. Tax increase is implemented.
2. People become a bit more discretionary in their purchasing habits.
3. Less spending equals less sales tax.
4. Less sales tax equals less money going into the Government.
Bottom line: At face value, it would appear as though the government would acquire more money if it initiated a tax increase across the board. That is what the politician who sees the tax increases as beneficial sees. In essence, under this scenario, Government (both Federal and State) force you to pay what they want, so in perspective, they get their money when they want it…. right now.
When people have more money, their more disciplined attitude towards spending is relaxed, and thus, they are more likely to loosen their money belts. They are able to let their guard down a bit. Without their “guardian” in their mind telling them not to buy this or that, the consumer has a bit more freedom to buy whatever he wants. As his needs are filled, the door that conceals his wants is unlocked. This too stimulates the economy.
Every time a tax cut follows a tax increase, better results always occur. Since a higher volume of consumers buy when they have more money in their pockets, the Government at both the State and Federal levels, receive more revenue. When a person pays a lower price at the store, more volume sells, thus raking in more profit for the company (because they buy their bulk in higher volume, it’s as if they are getting several pallets of product in for free).
Do you see the connection here? Volume is the key that creates prosperity in the long-term. Those who fail to see this truth can only look within the current timeline, and that is, in fact, dangerous to the economic destiny of consumers. What it all boils down to is the here and now versus the long-term effect. If you support a candidate that supports a tax increase, then you better be prepared for some hard times ahead. With high gas prices in the summer, high gas prices (for heat) in the winter, can you really bare to have more taken out of your paycheck every week? I advise that you think about it.
The concept of tax cuts was first tried out by President Calvin Coolidge in the 1920’s, the second, by John F. Kennedy in the 60’s, the third by Ronald Reagan in the 80’s, and the fourth by George W. Bush in the 2000’s. Each and every time it has been tried it has worked with a vengeance. But why? Why does it work so well? If I had to sum it up in one word that would simply be volume.
This strategy also coincides in principle with low prices. When you go to a place that offers low prices (like Wal-Mart), you wonder how can they stay on top when their prices are so low? When the competition across the street sells a bottle of shampoo for $3.99, and when Wal-Mart sells it for $2.49, you begin to ask yourself how does Wal-Mart make more than the competition. Those who would look at it at face value (who do not think in depth) would assert that the competition would make more money because it sells for a higher price. That thinking is wrong. It is wrong because of the science involved. When a shopper shops, some things factor into mind.
1. Price
2. Urgency of the item desired or needed.
3. Convenience
If the customer shops, and sees that the price is high, they then wonder if they should purchase the product at all, or if they should hold out for when they shop at a store that offers a lower price. If they decide not to buy the item on account of the price, they will move on and the item will continue to stay on the shelf. If they go to the competition, and the price is significantly lower, then impulse will set in, removing any feeling of hesitation, and the product will be removed off the shelf. As this occurs more and more, and as bottles fly off the shelf, at the competition, most of the bottles remain on the shelf. As more and more bottles remain on the shelf, the person who keys in the order for the stock load orders less, making the bulk quantity less thus reduces the chance of a higher quantity bulk discount. The worst scenario for a business is when someone buys the product by convenience at their own leisure.
If people do not feel like taking the time to visit another store, wait in another line, and so forth, they will most likely overlook the higher price. In a way, the consumer is paying a, shall we say, “Leisure tax.” Of course those who shop with discretion outnumber those who shop out of convenience, and that is why the lower-priced store makes more money. Since people constantly buy, the volume is increased on the stock that the store orders from the warehouse.
With tax cuts, the system is sort of similar. When a politician initiates a tax cut, this is what results….
1. Tax cut is implemented.
2. More people have more money in their pockets to buy.
3. Spending increases and consumers, by shopping at a lower priced store, are able to obtain more for their money, and stay within their budget.
4. The more people buy (and they do buy more when they have more money), the more they pay in sales tax.
5. The more sales tax rolls in, the more the Government gets.
Bottom line: By uniting the economy with tax policy, the consumer can control how much the government gets by how much he spends.
Now, with those who support tax increases, this is how the system goes.
1. Tax increase is implemented.
2. People become a bit more discretionary in their purchasing habits.
3. Less spending equals less sales tax.
4. Less sales tax equals less money going into the Government.
Bottom line: At face value, it would appear as though the government would acquire more money if it initiated a tax increase across the board. That is what the politician who sees the tax increases as beneficial sees. In essence, under this scenario, Government (both Federal and State) force you to pay what they want, so in perspective, they get their money when they want it…. right now.
When people have more money, their more disciplined attitude towards spending is relaxed, and thus, they are more likely to loosen their money belts. They are able to let their guard down a bit. Without their “guardian” in their mind telling them not to buy this or that, the consumer has a bit more freedom to buy whatever he wants. As his needs are filled, the door that conceals his wants is unlocked. This too stimulates the economy.
Every time a tax cut follows a tax increase, better results always occur. Since a higher volume of consumers buy when they have more money in their pockets, the Government at both the State and Federal levels, receive more revenue. When a person pays a lower price at the store, more volume sells, thus raking in more profit for the company (because they buy their bulk in higher volume, it’s as if they are getting several pallets of product in for free).
Do you see the connection here? Volume is the key that creates prosperity in the long-term. Those who fail to see this truth can only look within the current timeline, and that is, in fact, dangerous to the economic destiny of consumers. What it all boils down to is the here and now versus the long-term effect. If you support a candidate that supports a tax increase, then you better be prepared for some hard times ahead. With high gas prices in the summer, high gas prices (for heat) in the winter, can you really bare to have more taken out of your paycheck every week? I advise that you think about it.