Saturday, 8 November 2008
Why Raising Taxes On The Rich Is A Stupid Idea
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During the campaign, Obama promised us that anyone making $250,000 $200,000 $150,000 or less will get a tax cut. The rest are going to get a tax increase to help pay for the cuts. The concept of raising taxes on the rich is stupid for numerous reasons. The biggest is that it will stifle growth and job creation.
How does that work? First off, any new business expansion or business creation goes through a risk / reward analysis. One looks at the risks and weighs those against the rewards. If the rewards outweigh the risks, then the entrepreneur/business owner takes the plunge and creates a new venture or expands his current venture. Both of which create new jobs.
Enter tax hikes for the rich. If we are going to punish the success of these business through higher taxation then we are in effect lowering the amount of the "reward" for risks taken. By lowering the reward for risk, we are also lowering the amount of risk that anyone would willingly take. That means fewer new companies are created. That means less business expansion. That means fewer new jobs. In effect, the taxes stifle the natural expansion of the market.
There is a simpler way to look at the problem. Higher taxes on the wealth is nothing less than the government confiscating money from the rich and spreading it around to others. They are in effect taking money from the people who use their wealth to create companies and expand businesses and giving it to people who do not create jobs. I know I have never gotten a job from a poor person. I don't know anyone who has been employed by someone from the lowest parts of the economic ladder.
Such plans are foolish in the best of times, and down right scary when the economy is in a recession. If the Democrats are successful in raising taxes on the rich, look for a much much longer period until our economy recovers.
How does that work? First off, any new business expansion or business creation goes through a risk / reward analysis. One looks at the risks and weighs those against the rewards. If the rewards outweigh the risks, then the entrepreneur/business owner takes the plunge and creates a new venture or expands his current venture. Both of which create new jobs.
Enter tax hikes for the rich. If we are going to punish the success of these business through higher taxation then we are in effect lowering the amount of the "reward" for risks taken. By lowering the reward for risk, we are also lowering the amount of risk that anyone would willingly take. That means fewer new companies are created. That means less business expansion. That means fewer new jobs. In effect, the taxes stifle the natural expansion of the market.
There is a simpler way to look at the problem. Higher taxes on the wealth is nothing less than the government confiscating money from the rich and spreading it around to others. They are in effect taking money from the people who use their wealth to create companies and expand businesses and giving it to people who do not create jobs. I know I have never gotten a job from a poor person. I don't know anyone who has been employed by someone from the lowest parts of the economic ladder.
Such plans are foolish in the best of times, and down right scary when the economy is in a recession. If the Democrats are successful in raising taxes on the rich, look for a much much longer period until our economy recovers.
Posted by at 4:49 AM in Political Issues
Raising taxes on a business does not work. Why? Because businesses don't pay taxes per se. A tax is simply another expense that's passed on to the consumer. So ultimately, the consumer absorbs any tax increases imposed on the business.
The problem is that lowering taxes for the wealthy does nothing for the consumer either. Remember in the 70s when coffee skyrocketed and forced cafes to increase their price from a dime a cup to $.50? Like taxes, this increase was passed on to consumers. However, when the coffee market stabilized and returned to it's previous price, the dime cup was forever dead. $.50 stayed the standard price for a cup of coffee.
I honestly believe this was the intentions of the Bush Administration. Not only did they lower taxes for the wealthy, but fiscal restraint disappeared. Borrow and spend became rampant. They even concocted an unnecessary war to bleed us dry. The entire time we were told of a "robust economy" and "solid ground" economy. Now that things are in total shambles, it should be obvious to anyone of reasonable intelligence that someone's going to have to sacrifice and pick up the tab.
The Bush tax breaks did not produce jobs and It didn't keep prices down. The only thing it did was to simply make the rich richer. Now when businesses get hit up (most likely along with the working man) to pitch in, they're not going to give up that extra $.40 a cup they're making. Their increase will be past on to Joe Customer.
This was simply a shift of the wealth. People are catching on as demonstrated in 2006 and last week. It will indeed take a very long time for the working man to rise above the Bush Regime's ashes.