Appearances over reality
In a great article here, Bruce Bartlett shows that in countries all over the industrialized world, when the tax rate for upper income earners is cut, the overall share of the tax burden as paid by the "rich" actually increases.
The reason for this is that tax cuts encourage savings, work and investment, and the people who are most likely to engage in those things are indeed the higher earners in society - even moreso when government encourages, rather than penalizes, entrepreneurs, small business, workers, and farmers for their success.
The inescapable conclusion is, then, that if one thinks the "rich" should pay more taxes, then one should support a lower overall tax rate. Bartlett suggests:
At some point, those on the left must decide what really matters to them -- the appearance of soaking the rich by imposing high statutory tax rates that may cause actual tax payments by the wealthy to fall, or lower rates that may bring in more revenue that can pay for government programs to aid the poor? Sadly, the left nearly always votes for appearances over reality, favoring high rates that bring in little revenue even when lower rates would bring in more.
This is not a difficult concept to grasp.
Here's another piece which demonstrates how important it is to get the rate of taxation right if society is to prosper.
posted by Road Hammer @ 8:56 AM
5 comments
5 Comments:
Even better ... a flat tax on income. Would you agree, B?
In Canada our capital tax rate is second highest to China according to the World Economic Forum.
Damn straight we need to cut corporate taxes. It only makes sense.
Cutting those corporate taxes would bring in more overall revenue, as the original link in my post pointed out.
Besides, if corporations believe they are being taxed excessively, they are just going to pull out and take jobs, R and D, etc. etc. with them.
The corporate tax stream would make more revenue in the aggregate if the rates weren't as high.
An analogy: Think of a goalie. If he wears no equipment, he isn't going to stop very many pucks. Therefore, we give him all kinds of equipment to wear. However, if he wears too much equipment, he's going to stop just as few pucks as he would if he had nothing on.
With corporate taxes, we need to find the right amount of equipment for the goalie - or corporate community - to wear to be as good as he can.
That's the trickle-down effect of cutting corporate taxes. You wear less equipment, you can move around more easily, and you stop more pucks.
Right now, the goalie is wearing too much equipment. If we get him to wear less equipment, his save percentage (or overall percentage of revenue paid by corporations) is going to go up.
In the end, it may LOOK like he's not going to stop as many pucks, but in reality, he will.
In fact, he'll stop even more.
For sure I'm on board with DK and I am in favour of across the board tax cuts.
When people have money to spend, it creates jobs because they buy, save or invest more. Excessive taxes kill jobs. The more people that are working, the bigger the overall tax base.
Now this is not to say that I think there should be no taxation. Not at all. I believe, though, that there is an optimal level of taxation and it happens to be lower than what we have here in Canada. Lower taxes = more jobs = more revenue for the government.
As for investments, they are a pool of capital for entrepreneurs. Take mutual funds, for instance. If I buy a mutual fund, I am saying to the group of companies in that fund that I am confident that they will take my money, spend it, and get a bigger return. I will then take that return and likely re-invest it over and over and over again. Investments are like gasoline to the economy's engine. You can't go anywhere without it.
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