Trickle-Down Taxation

Item #2 of the Communist Manifesto: "A heavy progressive or graduated income tax". What isn't mentioned is that this was a way Marx could make the poor even poorer and weaker, not the rich. Marx gained power from the strife caused by poverty.
One of the best-sounding of the freebies that Obama is offering to hand out (if it’s not just another politician’s empty campaign promise) is exempting everyone who makes under $200K from the income tax. This one even tempts me. Lower taxes are good for the economy, for economic freedom, and of course for everyone who earns less than that amount of money.
But there’s a serious down-side to this. How do we fund all of the other freebies he is giving out, if we are going to cut government tax revenue with this one?
Of course the answer is simple: We are going to tax the people who make OVER $200K so much more that it makes up for the loss. Obama says it’s only fair, to “spread the wealth around”.
Now this may not be quite as bad as it sounds:
- First, people who make over $100K or so pay most of the taxes, already. Unfortunately, Bush’s tax cuts were not really all that “for the rich”, and “wealthy” people already pay almost all of the taxes. It was pointed out today that there are some companies, in fact, that are forced to pay more taxes per year, individually, than 66% of all families. It’s famous that the top two percent of earners pay something like 60% of the taxes.
- Second, tax cuts boost the economy, which increases tax revenue. Both Reagan and Kennedy both demonstrated this, cutting and simplifying taxes, and having tax revenue increase.
Unfortunately, those two things aren’t enough. The billions paid by people who earn less than $200K still adds up…and tax cuts don’t all work equally well.
For example, tax cuts that favor one group over another help the economy less, while ones that spread the burden evenly help everyone more. In fact, simply spreading the burden evenly, with NO tax cut, would boost the economy more than cutting taxes for some people, while raising it for others.
Especially when the taxes (as they already, are, and will now be more) are designed to punish hard work, success, and contribution to society.
Just as a slight increase in interest rates, so small it certainly doesn’t change any one person’s mind, has a large nation-wide impact on how much people borrow, so a tax that increases as you earn more money has a nation-wide impact on how much people earn, depressing income growth.
But there’s something involved, that’s more important than ALL of that:
WHEN Barak Obama raises taxes on people who earn more money, the wealthy will not pay a penny of it.
You will.
The counterpart to trickle-down economics (which points out that wealthy people who earn more money spend and invest more, allowing all of society to become more wealthy) is…
Trickle Down Taxes
When you raise taxes on the rich, they ALWAYS respond to defend their wealth. The more money and power they have, the better they can do this. They can give themselves raises, pay accountants to shelter their income, or otherwise make up for the new tax.
But where do they get the new money, to pay themselves enough to make up for the taxes?
From you.
Wealthy people and companies can, for example, raise prices to pay themselves enough extra to make up for the taxes. Guess who pays the higher prices.
They can also cut jobs or pay among their employees, in order to make enough to pay themselves more. Guess who the employees are.
Along with those two tools of passing along higher taxes, the rich and powerful can cut quality of products, again to save for themselves. Ice cream that was once two quarts is now 1.5 quarts, and the same price. Check Edy’s and Breyer’s, next time you’re shopping. Guess who ends up paying for all the reduced-quality/quantity food. Not the rich guys…the can afford to pay a premium for consistent quality.
Ultimately, ALL costs the government imposes on the wealthy, they pass down to you.
Oh, but the tax trickling isn’t done, yet.
If They Lose, You Lose More
Let’s say you, somehow, manage to force the wealthy and powerful to pay for their own taxes.
You are now shutting thousands of people out of jobs, and, causing more hunger and poverty.
Why?
Because the wealthy don’t put their money in giant Scrooge McDuck vaults, to play in while they cackle wickedly. Instead, they either spend or invest it. Spending it creates jobs directly. If they buy a car, someone built it, someone shipped it, someone sold it, people repair it, people clean it…maybe someone even drives it as their job. The less money ANYONE spends, the less work there is. But, let’s face is, the wealthy have more money, per person, than other people, and therefore supply more jobs with money.
Poor people have to mow their own lawns (if they have them). Middle class people may be able to pay someone to mow their lawn for them. A few dozen families might, between them, manage to keep one lawncare guy employed. But one wealthy dude may employ a half dozen lawn guys, all by himself.
Take away his money, and the rich guy may have to lay off his lawn people…perhaps one hundred times the job impact of a middle class person having to stop hiring a lawn guy.
But most of a wealthy guy’s money is not spent, so it doesn’t make jobs.
Well, not directly.
Investment Creates Jobs
The “capital” in capitalism is investment.
Rich people and companies are the reason most new jobs ever get created at all, because it requires investment to build the factory, or store, or restaurant, whatever it is. Even when poorer people start their own successful business out of pocket (something pretty rare, because of government regulation and taxes), they only create large numbers of jobs as they become successful and rich.
One of the many reasons the economy is so weak, now, is because investment is so rare, thanks to punishment of investment through taxes, regulation, deflation, and the preference for stagnating money shelters like bonds and treasury notes, over the stocks to which government has proven to be so hostile.
If we are to get back on the road to economic growth, we must first get on the road to economic freedom for all, including the wealthy, who just happen to pass on ALL effects we try to have on them, good or bad.
December 3, 2008 - Posted by kazvorpal | Economy, Politics | barak, capitalism, economics, obama, poor, president, rich, socialism, tax cuts, taxes, wealthy
No comments yet.
About
This site has its origins before the word “Blog” existed. Back then its owner, Kaz, was simply thought of as having a website that published socio-political articles with regularity…But the only real difference was that the RSS/XML protocals were not yet used this way.
The website was known as Site of the Sentient, a reference to the famous Words of the Sentient, that Kaz had been editing for years previously.
When some random portal site hijacked the domain siteofthesentient.com, it was a dark time for the human knowledge quest. Fortunately, But Now You Know is striving to take up the slack, and even has some revamped versions of the original articles, for example Conscription, is it Slavery, and How to Get Out of Jury Duty, and be a hero instead of a bad citizen.
Kaz is a writer, graphic artist, and supplements his income by being a hardcore senior web developer.
Along with this blog, you can track his efforts with the dedicated facebook page here.
Speaking of tracking:
Share This Article
And Now You LIKE
Words of the Sentient
- Criminals Are Never Disarmed — Robert Heinlein
- Power Attracts the Corrupt — Frank Herbert
- Under Democracy — H.L. Mencken
- Guard Your Enemies from Oppression —> Thomas Paine
- Your Right to Not Support Evil
- Global Warming Shamanism
- The Squeaky Wheel…May Be Foolish
- Disarming the Victims
- The Inconvenience of Too Much Liberty
- The Supreme Court, on Nipples
Other Things You Need to Know
- How to Get Out of Jury Duty...and be a hero for it, instead of a "bad citizen"!
- Why the End Does Not Justify the Means
- Sherman Anti-Trust Act, and Analysis
- Why Workers Dislike Unions
- The History of Economic Downturns in the US
- Going Green is Bad for the Environment
- Hayek's 1932 Letter on the Great Depression
- The Philosophy of Liberty
- The Tyranny of the Majority, vs the Unanimity of Liberty
Topics
- Economy (39)
- Education (1)
- environment (10)
- Family (13)
- Health (10)
- International (21)
- liberty (9)
- Philosophy (17)
- Politics (63)
- Religion (6)
- Science (6)
- Society (21)
Archives
Recent Comments
kazvorpal on The Truth about Income In… Cecil on The Truth about Income In… kazvorpal on Are the Muslim Brotherhood Act… kazvorpal on The Truth about Income In… kazvorpal on The Truth about Income In… Pithy Pontifications
- GMOs are Safer Than “Natural” HybridsPeople try to claim that Genetically Modified Organisms, for example corn with a gene spliced in that helps it resist a disease, are somehow more dangerous, because we don’t know what other changes the splicing may have wrought. The claim is made that that they are somehow “unproven” and could contain some surprise risk, but […]
- Ron Paul is Right: Don’t Abandon What We’ve AchievedIn his recent appearance on Jay Leno, Ron Paul made it clear that we should continue the fight to reclaim the Republican party from the socialist RiNOs…not abandon it for the ever-failed Libertarian party, right when we’ve achieved so much. After the fiasco of blatant rule-violation and corruption at the Republican national convention, some Libertarian […] […]
- It’s Because OBAMA Didn’t Build AnythingObama made the headlines last week, giving a speech from which a quote has been plucked and repeated, “If you’ve got a business, you didn’t build that.” This is yet another example of a quote missing the context of the speech around it. We need that context, in order to understand where Obama was coming […]
- Martha Stewart Did Nothing WrongWhat makes something good, or bad, is not whether it’s legal or banned. Anyone who disagrees can go explain it to Mr. Schindler. The difference between right and wrong, good and bad, is whether you violate another person’s property (including their body). This is the one universal “good versus evil” shared by all societies and […]
- How Green Food Causes World Hunger — Eggs“Organic” and other “Green” agriculture and food production is already widely understood to be causing food shortages, and skyrocketing food prices, worldwide, but it’s often too subtle and abstract an effect for regular people to really understand. But now we have a very stark, clear example, a crisis caused by imposing “green” techniques on everyone: […] […]
- Today, Congress Will Kill 387 PeopleNo, I don’t mean Congress will order the execution of 387 people today. I’d almost respect that more, because it’d be direct and therefore, in a sense, far more honest. But, according to a snowballing body of science, the sleep deprivation you’re suffering today because of Daylight Saving Time ends up killing hundreds of people, […]
- How Bush/Obama Create Terrorists“Look, we are AGAINST the Taliban, but if this action is repeated, we will all join the Taliban, and then these [US] forces will not be able to stay one more minute in Afghanistan.” Next time some ridiculous neocon claims Muslims become terrorists simply because they hate our “way of life”, not because of what […]
- How Government Stimulus Caused the Great Depression
- Worried about Bed Bugs? Thank the EPAYes, we all know that the DDT ban has caused the deaths of millions by malaria. But there’s something far more important to us in the US: The scourge of bed bugs has been spreading like wildfire, and they are really unpleasant. Bed bugs were pretty-much extinct in the US, by the early 1970s, killed […]
- Ron Paul in the General ElectionThere is this common myth that a “moderate” Republican — a big government interventionist — is the best choice for a general election. They are called the most “electable”…by the Big Government advocates in the media. As proof of this, we can look to how well Bob Dole and John McCain did. Conservatives compromised their principles, and […]
- GMOs are Safer Than “Natural” Hybrids
Leave a Reply