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Old 09-02-2018, 02:07 PM
11,963 posts, read 9,636,818 times
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Originally Posted by SportyandMisty View Post

Arthur drew the now-famous curve on a napkin at a Diner to explain a very simple concept that is ineluctably self-evident:
  • At an income tax rate of zero, no tax dollars are collected. No one who passed Econ 101 disagrees with this.
  • At an income tax rate of 100% (or higher), no one has an incentive to work, thus no income is generated, and thus no income tax dollars are collected. No one who passed Econ 101 disagrees with this.
  • At every income tax rate greater than zero but less than 100%, some tax revenue is collected. No one who passed Econ 101 disagrees with this.
THEREFORE, as surely as night follows day, there exists at least one tax rate (possibly more than one) for which the total tax dollars collected will greatest. Anyone who passed geometry and calculus and econ 101 agrees.

That's it.
According to the Laffer Curve, the receipts represented on the y-axis reaches a maximum at some point on the x-axis which is the marginal tax rate. Tax rate schedules are never that simple. Tax codes are never that simple that only the tax rate is modified. Changes to fiscal policy are rarely limited to tax cuts and monetary policy is likely to have an even bigger effect on tax receipts due to the extreme skew in the income and wealth distributions.

Last edited by lchoro; 09-02-2018 at 02:21 PM..
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Old 09-02-2018, 03:50 PM
4,377 posts, read 5,124,504 times
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Originally Posted by SportyandMisty View Post
Taxes levied on businesses do not stay there. They flow through to a combination of:

a) consumers in the form of prices higher than they otherwise would be
b) employees in the form of total compensation and hours worked lower than they otherwise would be
c) business owners in the form of lower profits.

All taxes -- and hence all tax cuts and all tax increases -- are borne by actual people. The only question is which people? There is an old adage that goes "Don't tax me; don't tax thee; tax that fellow behind the tree."

However, there are great reasons for taxing business. Here is what I remember from my Economics classes from 40 years ago at Berkeley!!

First. Business is very efficient in collecting taxes.

Second: Tax business for activities that you want to discourage. Seattle and Philadelphia did with with sugar drinks. Lots of states including Washington do it with alcohol and tobacco.

If we were serious about global warming we would tax Boeing and airplane travel. We can easily reduce the number of climate changing flights by taxing the hell out of air travel. Instead Washington state gave Boeing nine billion in tax breaks!!!

Third: This was really popular in Washington state prior to the 1980's and the start of the corporate tax breaks by the same political party that supposedly doesn't like corporate tax breaks!! Washington state is an export state. We basically export everything of importance. So by placing taxes on products for export we essentially get the tax revenue without providing any taxpayer services.

Prior to the 1980's the Shah of Iran, the rich Arabs, rock stars, and airlines around the world paid Washington sales tax on the sale of Boeing aircraft. It was a great deal for the state of Washington, but that tax is now gone. I am sure every Washington resident that buys a 737 is glad for it!!

There were other tax changes that exempted the corporations in Washington state from paying taxes. The difference has been made up with sin taxes on alcohol and tobacco, increases in sales tax, and small business taxes.

That is the reason Washington tax structure is viewed as regressive.

Taxes bring us back to the Laffer Curve...it does work for business as well as individuals. All of it is a balancing act that I wish would have more fairness attached to it.

But taxing business. No brainer in many cases.
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