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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.
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.
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?
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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