Quote:
Originally Posted by Doove
Worst case scenario. It's just as likely the business owner will hire someone to cover the hours she doesn't want to work. Particularly where not doing so will accomplish nothing but shooting herself in the foot given the lost income.
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Why is it just as likely? The store owner takes on extra costs for the new employee that she would not have to pay for herself. She has to pay the employee wages, payroll taxes, SS and Medicare, and possibly other benefits. All or nearly all of that money would have gone directly into the store owners pockets if she kept working 50 or 60 hours a week. And THEN, she still has to pay the higher (60%?) income tax on what is left over.
You are essentially arguing that if we raise income tax rates at the top level, we will increase employment. If that was true, we would long ago have raised the top marginal rate to 90% and we would have 100% employment. But that hasn't happened, has it?
If what you are saying was true, then communism would have worked.
If what you are saying was true, then the high-tax countries of Europe would have lower unemployment rates than we do. But they don't. In fact their unemployment rates are typically twice our rates.
France tried to do what you are saying more directly. They passed a law mandating a MAXIMUM 35 hour work week. I work with some French professionals that frequently have to exit teleconferences because it is the end of the day and the French government actually checks parking lots to see who is working late. The idiotic theory was that if you stopped everyone from working more that 35 hours, they would simple shift the hours over that amount to the unemployed. It clearly hasn't happened.
So, no, you can't just fill the gap.
Quote:
Originally Posted by Doove
Or we get more stores.
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Really? Where do you get the start up money for all the new stores?
Because the proposed higher tax rates are on all income, including investment income.
And if investors are paying higher taxes on the money they loan out, they are less likely to invest it in anything except the very safest of investments. If capital gains tax is, say, 40%, you will get much less investment than if it was 20%. You still incur the same risk with respect to losing your money, but your reward just got drastically reduced.
Look as it this way. Let's say you have money invested already. Somebody wants to borrow $500K to open a small store. If the cap gains is 20%, you have to sell $625K of your assets, pay the 20% capital gains tax ($125K), and then lend the remaining $500K. So, you have to make at least a 25% return ($125K) on the $500K just to get back to even (at $625K). Only after that point will you be making money.
Now change the tax rate to 40%. Now you have to sell $833K in assets, pay the 40% capital gains, ($333K), and then led the remaining $500K. Now you have to make a 66.6% return on the $500K just to get back to even. But your risk of losing your money is just as high.
The higher you raise capital gains taxes, the less attractive investing becomes. So people do less of it and you get less economic growth.
There is a reason why capital gains taxes are lower than incomes taxes. Generally, you have no choice but to work (and pay income taxes). But you always have a choice not to invest.
It is inarguable that people and businesses modify their behavior and choices in response to tax policies. It is often described as "dynamic scoring" and the government too often ignores it when dreaming up pie-in-the-sky tax revenues schemes.
