Another thought on taxes...

The rallying cry of most conservatives these days is that we don't want to raise taxes on the "job creators".  I mean, that was the point of Bush tax cuts right?  But where are the jobs, then?

I actually think we have our logic wrong.  We assume that lowering taxes on the wealthy will spur economic development because the wealthy then have extra income to invest in the economy, either by buying goods and services, or by growing the businesses that made them wealthy in the first place.  But, everything that's happened in the last decade makes me think this doesn't actually work.

I don't know where the tax break money is going.  I suspect it's going to Wall Street -- my irritation with which is it's own post entirely.  What we can say, however, that the tax break money isn't building roads or paying soldier salaries.

So, let's consider the alternative for a moment, which is higher taxes on the wealthy; something more in line with what we had in the 80s and 90s.  If I'm wealthy, and I know that I'm going to lose a portion of my  income every year in taxes, how am I going to protect my wealth?  I'm probably going to do the typical things, like look for tax shelter and loopholes, but isn't one of the best ways to perpetuate my wealth to re-invest in my own company?  If my business is bigger next year than it was last year, isn't that the best way to ensure my continued wealth?  Re-investment is probably one of the biggest and most effective tax breaks of all.  Giving an actual tax break really just creates more disposable income.  Which, in the hands of someone who already has all their needs met, provides little ancillary benefit.

I don't know, maybe I'm out there.  Kinda makes sense to me though.  And I actually found out that there are groups of the wealthy that feel the same way:

"Our country faces a choice – we can pay our debts and build for the future, or we can shirk our financial responsibilities and cripple our nation’s potential.

Our country has been good to us. It provided a foundation through which we could succeed. Now, we want to do our part to keep that foundation strong so that others can succeed as we have.

Please do the right thing for our country. Raise our taxes."


1 comment:

  1. A few years ago my bro-in-law was bent with my sister because she was spending too much money on dance. He proposed scaling things back. She told him he just needed to make more money. Isn't this essentially the same landscape of the current political showdown?

    The Dems want to raise taxes and keep all their sacred cows just as they are. The GOP says we don't need more money, we just need to cut wasteful spending. Now, as a government worker, I can testify that our government is pissing egregious amounts of money down a gopher hole. I'm appalled at how ineffectively things are run and how money is allocated. There are simply too many special programs catering to a very narrow demographic.

    I disagree that tax breaks aren't helping businesses. The idea is simple: higher taxes means higher costs of business. In order to keep your prices competitive but still turn a profit you need to keep your overhead low. Higher overhead means lesser profit margin. What's the fastest way to decrease overhead? Eliminate a position and make the guys in the next two offices down do that job too. Not an uncommon scenario. And thus the GOP remains firm that lower taxes creates jobs/prevents job attrition. But the reality is, our tax rate is one of the lowest in the world. We could raise taxes some and not keel over.

    Here's the bottom line: they're both right. I actually agreed with Obama on raising taxes for people making 250k a year or more. If you're making that much money, paying a little more ain't going to kill you. The GOP cried foul on this b/c it was going to hurt small businesses too. This was true. Which raises the next issue: tax code revision. We need a workable tax code so that more than 50% of Americans pay taxes and these crazy loopholes are eliminated. The loopholes are killing us. Our code is so wonky that raising taxes on people making 250k would also effect small businesses. Instead of adopting random code sections wholesale written by lobbyists representing deep-pocketed clients, creating a hundreds of pages of garbled mess and loopholes, how about we adopt a cohesive tax code that actually works? Crazy idea, I know.

    And one other thing, a small tax raise won't kill business. What's killing business more than anything right now is uncertainty. Because the market is so uncertain, businesses are holding on to their money and not expanding or investing for the future. They're saving for another rainy day. All of Washington needs to stop acting like a bunch of whiny children and grab the bull by the horns.

    There you have it: get a workable tax code, the Dems will get more money, and then maybe they'll agree to stop pissing money down gopher holes. More dance recitals for all!


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