Sunday, October 24, 2010

Translating political speak - Taxing the Rich


The Dems are banking on the idea that raising taxes on the top 2% will produce "X" amount of dollars of revenue for the government.  I don't know how they come up with these "fuzzy math" numbers.  Taxes are based on profit margins/income.  But how can they predict what a company's profit will be, especially in these questionable times?  That's why I call it fuzzy math.  It's similar to the numbers the CBO (Congressional Budget Office) used in the healthcare debate.  They are only predictions, about as reliable as a weatherman's predictions! 

Well here's a history lesson which has proven that overly burdensome taxation on the so-called "rich" has quite the opposite effect on government revenue. The paradox is....that increasing taxation on businesses has decreased expected revenues for the government. Even a Democrat, New York's Governor Patterson, admitted this happened in his own state when they raised taxes on businesses there. It forced many businesses to leave and relocate to more business-friendly states...and yes, unfortunately, some even moved their operations overseas, in order to remain viable. Also, unrealistic demands from labor unions have been known to sometimes force businesses to make cut backs, such as reducing their workforce (lay-offs or firings), using non-union workers or outsourcing jobs. We don't want that, right? The workers demands are pricing themselves right out of a job!

So, history has proven several times over in the past that increasing taxes on businesses equals less revenue for the Federal government. Instead, wouldn't it be better to lessen their tax burden, to where government revenues, over time, will actually increase!

This is known as the Laffer curve, named for Dr. Arthur Laffer, economist and professor who advised Pres. Ford and Reagan. Business owners, who are the ones taking the risks, that were able to keep more of their profits, more often than not, used it to reinvest in their companies, using it to expand, thus hiring and producing more.  Everyone benefitted from that "trickle down effect".  The Dems may characterize this as going back to the old way of doing things.  Sometimes, getting back to the basics, which have been proven to have worked in the past, is not such a bad thing, is it?!  Learn from history!

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