The View From 1776

What Happens When Liberals Raise Taxes

The creator of the Laffer Curve explains.

Posted by .(JavaScript must be enabled to view this email address) on 01/26 at 01:52 AM
  1. Ah, the question then becomes, "What do the liberal slow/non-learning 'pragmatic' collectivist socialists ever learn from past experience?"


    semper fidelis
    vincit veritas
    Posted by Jim Baxter  on  01/26  at  09:44 AM
  2. The problem we have now has a lot to do with tax code, not tax rates for most business and wealthy.

    Due to many things in the tax code, billion dollar profitable companies, spend millions in complying with the code's exemptions, loopholes, accounting requirements, restrictions, etc. Now, they can actually save taxes with many things in the code but the costs overrun the savings or reduce them greatly.

    With the states tax, the average is about 42% When Exxon made $16 billion in one quarter and the $10 billion profit was bannered in headlines, they also paid $6 billion in taxes. Those taxes were, of course, paid for by the people buying Exxon oil but, the cost of compliance means they made even more and could have even ended up paying more tax and still had more after tax profit, with a simple code.

    For many small and mid size business, after deductions and expenses (compliance is an expense that is deducted)the cost of compliance was 200% 300% 400% more than the final tax paid. In other words, they could have had a simple tax code, paid double the tax and had still higher after tax profits. We also pay almost 100,000 government employees in the IRS, pay their offices space, buy their computers and other office equipment, fund their pensions and health care, buy their IRS vehicles, pay for maintenance of their offices and building, etc. because of a tax code that is entirely too complex.

    But for the "wealthy," as long as you have the means for them to invest and get a better return, like we do now and like Ireland does, you can come out ahead. Ireland's income tax of 42% is probably equal to our federal plus state income tax but they have lots of wealthy people perfectly content to pay that because investment income is taxed at 20% and that encourages investing over regular income but of course, there is "risk" with investing and that is why a lower tax rate is needed to encourage it.

    With bad tax policy, we actually drive the wealthy into trusts, foundations, off shore investing or accounts, tax free securities and reduce the jobs they would create with their wealth through investments in companies making things and providing services.

    We have most of the right things for individuals, except for complexity of the tax code but it is business that we are really hurting on. We need lower rates and a simple tax code that eliminates some of the deductions but, also reduces the compliance burden. Tax revenues would actually rise, not fall if we did that even though the rates would be lower. The extra profits from lower expenses in compliance and lower prices from lower costs, would drive growth like Ireland has seen from their tax reforms.

    Tax cuts without reform will mean trouble. Tax cuts with more regulation and compliance costs will spell disaster. We need total tax reform and total entitlement reform (15% tax in the cost of producing goods for every company in America included in the prices with the 42% tax on profit that comes from the consumer too.)
    Posted by JanPBurr  on  01/26  at  10:59 AM
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