Quote:
Originally Posted by Jason1
It basically works like this. Lets say you own a company that makes widgets. You have orders to make 10,000 widgets this year, and you have just enough employees to get this done. Suddenly, you get a order for 5,000 more widgets. So you hire more employees to keep up with demand. Now, lets say you get the tax cuts you were hoping for. Will you suddenly hire more people just because you received a tax break? NO, you wont, because demand is the same. Likewise, if you don't receive the tax cuts, will you start laying people off? Again, the answer is no...you still have that demand for the extra widgets and your still making money the more widgets you sell. This stuff is really pretty simple here people...
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Your analysis is a little simplistic. Lets take your example, looking beyond what we define as taxes and to what the total cost of doing business actually is:
You are a company that makes 10,000 widgets a year and have 12 employees. You get an order for 5,000 more widgets than normal so you hire more employees, right? Not so fast.
You are a single proprietor. You make 14% profit of each widget you make. If you sell 5,000 more widgets it will take you into a higher tax bracket and that reduces your margin. Moreover, you need to increase staff by 15% to meet the new demand, but if I hire a 13th employee I will need to either pay a fine to the government for not offering health-care insurance or purchase it for them on top of disability insurance, unemployment insurance, social security, etc. To top it all off, to even do any of this I will need to bet on my own business by taking out a loan to expand my production capacity to meet this added demand.
In our country, our current tax policies and regulation punish success, or let me correct that: they punish new success and maintain those who are established. For every new job a small company offers, or pay increase they make, we make it harder for them to do business, and then we wonder why our recovery is slow and jobless rates stay high while we only offer two years of tax certainty for them to depend on for their budgets.
Overall, we have to get away from these silly games we play on both sides. Democrats and Republicans use taxes as a means to play with the emotions of their constituents. Democrats love class warfare, and Republicans play the role of the stingy uncle (meanwhile increasing spending yet again).
What we need to ask is this:
What is the purpose of taxation?
If it is generate revenue for the government, then our direction is simple , even if the task is not. Throughout the 20th century and the first part of the 21st, our tax revenue has been about 17%-18% of our GDP...
REGARDLESS OF TAX RATES. Whether the top tax rate is 90% or 35%, it makes no difference. So if revenue generation is the purpose of taxation, tax policy should be whatever helps increase GDP. What that is, is a discussion for another day.
If instead, the purpose of taxation is to enact social justice and redistribute wealth, or to reward those who helped you gain power, well then we should have those arguments on those terms.
Which are we engaging in now? Look at our policy. Look at our debt. I'll give you three guesses, and the first two don't count.