We sometimes see a lefty advocating somewhere on the USMB for distribution of wealth from the rich to the less rich; they'll spend more money, demand goes up, and our problems are over. But there are some problems with that: the first being the rich don't make that much money. Obama is constantly pushing for allowing the Bush Tax Cuts to expire on the top 2%; you know what you get in more revenue for that? Maybe $80 billion a year. I don't think $80 billion/yr is going to make much difference spread over the rest of us.
Another issue is tax evasion or avoidance. You know what happens when you raise tax rates? People look harder for ways to not pay it. Money that could have been used for investments in the economy instead go into less useful areas that reduce their tax burden. And if the burden gets too onerous, the rich guys sell out, pack up, and move out. As in out of the country. Surely you've seen stories about the rich leaving France these days; the same thing has happened over and over again when somebody somewhere tries to soak the rich. The rich respond by saying "Fuck You", I'm going elsewhere and I'm taking my money with me. Now it's hard to tell how much impact that really is on an economy as big as ours is, but how smart is it to promote policies that encourage anybody to leave or work less hard, or innovate less.
Then there's the question of what higher tax rates would do to the economy. How much of a dampening effect would it have, would the rich guys invest less here and thereby harm the recovery? Look - when a businessperson looks at starting up or expanding a business they do a cost benefit analysis: what are my costs going to be if I do this and what is my expected Return On Investment (ROI)? It should be obvious that a higher tax rate means higher costs and lower ROI, and the result is fewer startups and less expansions. And BTW, increasing the Cap Gains Tax doesn't help much either.
Another issue is tax evasion or avoidance. You know what happens when you raise tax rates? People look harder for ways to not pay it. Money that could have been used for investments in the economy instead go into less useful areas that reduce their tax burden. And if the burden gets too onerous, the rich guys sell out, pack up, and move out. As in out of the country. Surely you've seen stories about the rich leaving France these days; the same thing has happened over and over again when somebody somewhere tries to soak the rich. The rich respond by saying "Fuck You", I'm going elsewhere and I'm taking my money with me. Now it's hard to tell how much impact that really is on an economy as big as ours is, but how smart is it to promote policies that encourage anybody to leave or work less hard, or innovate less.
Then there's the question of what higher tax rates would do to the economy. How much of a dampening effect would it have, would the rich guys invest less here and thereby harm the recovery? Look - when a businessperson looks at starting up or expanding a business they do a cost benefit analysis: what are my costs going to be if I do this and what is my expected Return On Investment (ROI)? It should be obvious that a higher tax rate means higher costs and lower ROI, and the result is fewer startups and less expansions. And BTW, increasing the Cap Gains Tax doesn't help much either.
