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Taxes, aka “income redistribution” – part deux April 16, 2010

Posted by ev0rev in Uncategorized.
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I won’t dwell on the tax issue beyond yesterday’s post… but I found an article that so eloquently addressed our current tax code that I wanted to draw attention to it.

This is a fantastic article!

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1. Chris - April 19, 2010

The government seems to be bleeding money and should require quite a few transfusions to stay alive. What is their thinking in doing this? How do they expect to pay for more programs when they are paying people NOT to pay taxes? How does this make any sense?

2. ev0rev - April 19, 2010

Therein lies the concern. We have an increased tax burden being placed on fewer people. Granted, that burden is being placed on the wealthier tax payers right now but the concern is for the long term effects this will have in terms of the wealthy reinvesting in the economy or creating jobs, etc.

3. Chris - April 19, 2010

If the wealthy in this country consists of the business owners/corporations, and the wealthy are being asked to shoulder most of the tax burden of our country, wouldnt they start looking for other ways to cut costs? Wont that lead to businesses being taken overseas even more so than they are now? Wouldnt that lead to even MORE jobs lost, and none being created to replace them? How does taxing the wealthy help? Wouldnt it be more beneficial to the country to just stop bleeding money. Stop paying tax payers to not pay taxes! In that article I believe it mentioned that it gives people tax credits to change the windows in their homes. Why? Why is paying a higher utility bill not incentive enough? If you are stuck every month with a $600 bill because your heat is going out the window, isnt that incentive enough to fix the windows in your house? Why does the government have to bribe you to do so? The government should let those people pay the $600 a month until they DO something about their own energy waste. Let them bleed money for a change!

4. ev0rev - April 19, 2010

Ideally, the incentive to change windows would indeed come from economic preservation. By subsidizing the windows, the government is able to steer the actions of society. I’ll grant you that this artificial manipulation runs contrary to the long term good of the industry (as it artificially creates a market where there is possibly no or little demand) but it serves the short term needs of the government in that it gets people to fix their windows.

It’s very much like the famous “broken window” scenario. It can be argued that if I should break a window, then I create an immediate and artificial economy of scale. The window repairman is hired as are, possibly, cleaners to eliminate the hazardous fragments and manufacturing the new glass as well as possible window framing. I’ve artificially stimulated the economy by creating jobs and stimulating manufacturing to address a need. Granted, that need is artificial and very short term… but it existed all the same.

The scenario fails to take into account, however, that economic stimulation would have come in one form or another anyway. If I, for example, had NOT broken the window and simply gone on my merry way to eat dinner at a restaurant. It’s true, the glass worker(s) and the cleaners would not have been required but my economic impact simply shifted to the waiter(s), the cooks, the busboys. Rather than spending my money on a broken window, I spent it on a fine evening meal. The scenario also fails to take into account that if I had spent my money on the broken window, I then would have not had those funds toward dinner.

Subsidizing any product is simply market manipulation. It creates a need where there might not be one otherwise. This is where it’s impact is most felt… it stifles innovation toward any products that might be more effective. If a company can make money through subsidies by making a widget, it diverts any real effort toward innovation or price control because they have a captured/artificial source of income.

And yes, taxing corporations too heavily will indeed force them to reconsider location. Ultimately though, and this is the part that government officials have a hard time grasping, said corporation will simply recoup any/all costs associated with those higher taxes through higher prices for the rest of us. Attempts to “punish” corporations for profitability tend to result in further strain on consumers.


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