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Old 07-24-2012, 01:02 AM
 
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Hi, I have a few questions that I'd like to clarify.

1. If we tax the rich highly (say around 70%) would that help or hinder the country, and why?

2. Why can't we just create full employment by nationalising many key industries?

3. If increasing taxes curbs job creation, then can't jobs be made some other way?



I'd like to try to keep this as neutral as possible, and not a war about capitalism v. socialism - thanks.

Last edited by Kenneth-Kaunda; 07-24-2012 at 01:30 AM..
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Old 07-24-2012, 01:22 AM
 
Location: Ohio
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Quote:
Originally Posted by Kenneth-Kaunda View Post
Hi, I have a few questions that I'd like to clarify.

1. If we tax the rich highly (say around 70%) would that help or hinder the country, and why?

2. Why can't we just create full employment by nationalising many key industries?

I'd like to try to keep this as neutral as possible, and not a war between capitalism v. socialism - thanks.
1. If the tax was that high(with no deductions) what would be a person's inspiration to do anything to make more money?

2. That is how the old USSR was, that worked out pretty good for everyone didn't it?
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Old 07-24-2012, 01:32 AM
 
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1. Ok, there wouldn't be any great incentive to make more money - but why should that matter?

Couldn't the workers just do something else?
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Old 07-24-2012, 01:59 AM
 
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1. High tax rates don't necessarily deter inspiration to work. What they do encourage though is consideration of other nations as home bases. Or rampant tax evasion if its possible. People who make high incomes on the whole don't make big money because its what they chose to do. They make big money because they are the best at what they do and what they do are things which generate money. If you get into an industry and think you'll make big money because you see lots of it around, chances are you will crash and burn long before the money materializes.

The answer is more a matter of consideration of competition from other countries. You can nominally up the rate, but you can't obliterate it. Some US states charge about 10% more in income taxes, give or take, than their cheapest competitors. It hasn't deterred NY or CA from being extremely productive with tons of high earners. If they tried to make it 30% I bet they would start running into issues.

2. Nationalizing key industries is not a panacea for anything unless you are suggesting outright stealing. Remember an industry only can support so many workers and its based on demand for its products and its ability to produce them efficiently. National control doesn't increase either. Now if your idea is to just go and take over the companies with no compensation to their current owners you could temporarily earn a lot of money through theft, but good luck with that. Your business creation rate would plummet to zero overnight. No one would sensibly start a business in such an economy.

3. Don't believe job creation is all about taxes. Taxes are just an additional cost. If businesses are very healthy and producing lots of marginal income they can absorb tax increases. Where tax increases cause trouble is when the marginal income is right on the razors edge of going negative. If you make a business pay 20% more in expenses because of a tax increase and they were barely making money to begin with, they probably would just close up and you'd see a lot of job loss. The only alternative would be to keep the most productive workers they have and try to make it work, but this would generate a lot of job loss too and it would be the least productive out of work and those would be the hardest up to find new work.

But be careful of assuming the opposite is true, that tax cuts create jobs. Tax cuts create jobs only when you take a marginally negative business and make it profitable because the cost of taxes is now reduced. If a business is already making money, tax cuts only produce extra profits for the owners. Now the owners might spend some of their newly minted profits or expand business so there would be some potential for job increases, but its not a 1 to 1 correlation.

The bottom line for all three is to understand taxes are at an essence just a cost of doing business. When you do across the board tax cuts or increases to be "fair", expect to cause a lot of displacement in the economy. It isn't an efficient way to manage tax policy, but in current "soundbite" political climate they tend to be the desired answer. Taxes bad, tax cuts good is way too simplistic, but the average voter doesn't have time or interest in understanding it any better than that.
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Old 07-24-2012, 02:41 AM
 
Location: Ohio
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Originally Posted by Kenneth-Kaunda View Post
1. Ok, there wouldn't be any great incentive to make more money - but why should that matter?

Couldn't the workers just do something else?

WHY should I work harder or build my business if the Government is going to take it in taxes?

I don't follow the "workers do something else" line.
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Old 07-24-2012, 02:50 AM
 
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Originally Posted by Willy702 View Post
But be careful of assuming the opposite is true, that tax cuts create jobs. Tax cuts create jobs only when you take a marginally negative business and make it profitable because the cost of taxes is now reduced. If a business is already making money, tax cuts only produce extra profits for the owners. Now the owners might spend some of their newly minted profits or expand business so there would be some potential for job increases, but its not a 1 to 1 correlation.
thanks for the long reply

so is there a way around this problem?

ie: tax too much and businesses lose out, tax too little govt. loses out.

what is the answer?
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Old 07-24-2012, 02:53 AM
 
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Originally Posted by Trackwatch View Post
WHY should I work harder or build my business if the Government is going to take it in taxes?

I don't follow the "workers do something else" line.
My idea here is that you would still build up the business in order to make a nice sum of money, just that the amount of profit would be less.

Now if you chose not to expand your business once you hit the 70% band, and laid off some workers , then they could work for another company.

Simplistic yes, but let's see where it goes.


anyway, how about this idea?
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Old 07-24-2012, 02:56 AM
 
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One suggested solution is to resolve the issue of people paying no taxes or ridiculously low taxes. Rather than raising taxes from 40% to 70% for people who already pay a decent amount in taxes... why not raise taxes from 0% to a reasonable amount for those who aren't paying taxes?

70% taxes limits expansion and investment.
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Old 07-24-2012, 02:58 AM
 
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What kind of people pay 0% taxes?

and here I mean any kind of income tax -ie: state + federal.
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Old 07-24-2012, 03:03 AM
 
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Originally Posted by Kenneth-Kaunda View Post
What kind of people pay 0% taxes?

and here I mean any kind of income tax -ie: state + federal.
White people, black people, tall people, short people, American people, foreign people, etc. There's all kinds of people that pay 0% taxes. It cannot really be classified to one type of person.
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