Tax cuts may fuel bubbles as bubble investments appear to offer best profit.
Tax cuts may increase leverage volume. With more money you can do more stupid things.
This doesn't mean we shouldn't strictly regulate finance.
Tax cuts may fuel inflation after a bubble bursts. With no reliable assets to invest in, wealthy people like to spend, and they do not mind if the prices get too high for regular folks.
Equality of tax cuts does matter. Not only "trickle down" may work or not work. Bush tax cuts disproportionally empowered wealthy individuals and bigger companies. Smaller businesses got their modest cuts, but were often crushed or swallowed by giants' competition. Advocates of small-scale businesses should tell more precisely, what tax cuts are needed.
When high taxes are legitimized (not as money for value but as good in themselves) the public sector might get a carte blanche for inefficiency. Things don't work? Just ask the government for more "free money" via higher taxes. Indeed, you could argue certain nations at certain times have suffered from "public sector bubbles".
This "oranges" argument does not negate the bad "apples" of low taxes. It is close to extreme caricature, as if smart people could not refrain themselves in the middle. I pointed out my own "legitimation" in a parallel thread. The whole point is that high or low taxes are good not "in themselves" but depending on other conditions.
In my view, the public sector is not supposed to be "most efficient". The point is to provide basic level of servises to the whole population. If the private sector can do better (for some, most probably), let it be! What I see is that the private sector likes to find its own level of inefficienties when there is no pressure from the government.
Your point would be clearlier with a particular example of a "public sector bubble".
Freedom includes the freedom to be stupid (often known as the crucial societal need called "putting all your eggs in one basket" or "entrepenurship").
Wealthy people won't affect the aggregate spending by much if you live in a reasonably equal society (ie not the US), and even if you do, inflation in the price of Champagne, Beluga caviar and luxury yachts won't affect the price of bread and milk much. Paris Hilton obviously doesn't eat 100 kg of bread every day just because she can afford it.
(1) to compensate higher labour costs; this ammounts to protecting the profit share of the business; (2) reorientation to more "able" customers; how else would you rise "productivity" measured in service payments.
Celebrities may not be vying for tons of bread, but quality bread (and other bread) sellers do shift their marketing decisions.
