At what point are taxes bad - economic theory

Discussion in 'Economy' started by Toronado3800, Dec 6, 2012.

  1. Toronado3800
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    Toronado3800 VIP Member

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    Again I have worked myself into a circular argument with myself pickle again and am bringing this up mostly to get criticized.

    Follow this for strange thinking.

    Situation 1
    Mr. Goodson is an average man earning a quite average salary of $100 a time unit. Most folks have similar expenses and income. He is taxed $1 and like most other folks has $99 to spend. Over a month Mr. Goodson goes and spends $50 on housing/food/utilities/healthcare, the normal things in life. Of his other $49 he makes his Honda payment, buys some jeans from Malaysia, buys a $8 DVD from wherever they are made. $20 of that $49 leaves the country, the other $29 of that goes to shipping companies and the service industry.

    So after the government invests that $1 of taxes back into infrastructure or corruption the country now has $80 of his $100 still in it.

    Situation 2

    Mr. Paine is another average man in a similar country in a parallel universe. Mr. Paine earns a quite average salary of $100 and has typical fixed expenses as well. Taxes in his universe have always been higher, lets say $40 of his $100 goes to taxes. This leaves him and most folks about $60 each to spend in a month. Now with less money going around prices are lower so he only has to spend $30 on housing/food/utilities/healthcare and is left with $30 to spend on the other normal things. Of that $30, $12 leaves his country as he buys foreign goods, $18 cycles around to shipping companies.

    Mr. Paine's government invests $40 back into infrastructure and corruption and all and the country still has $88 of the original $100 in it.

    ***************************************************
    To figure out how Mr. Paine's life is harder I must look into the cost of FOREIGN goods as the cost of domestic goods will mostly be adjusted downward compared to Mr. Goodson's world since Mr. Paine and his neighbors have less money.

    So is the limiting factor to safe taxation largely the amount of income you have left to buy foreign goods?

    Does the government really keep more of our money in America than we do as individuals and is that better for the economy?

    Thanks for putting up with the rambling. Obviously I believe there must be a limit to taxation but I need it spelled out for me.
     

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