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Argument that lower tax rates would create jobs is full of holes

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Argument that lower tax rates would create jobs is full of holes The Nov. 18 letter by Don Cazer is refuted by Thomas Hungerford’s Sept. 14 report for the Congressional Research Service, “Taxes and the Economy.” In it, an in-depth analysis was done on tax rates on the top income brackets from 1945 to the present. What they found was no correlation between reduced tax rates for the wealthy and economic growth. “The top tax ...


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comments

janesjoys
November 26, 2012
4:19 a.m.

[ Flag Post ]

Re Tax Rates - Oh, Frank, if only the people that need to understand what you are saying would actually read your letter with some level of comprehension! Unfortunately, you will never convince them on economic matters any more than on the validity of President Obama's birth certificate or global warming and the presence of dinasaurs. However, we need to keep trying, so thanks!

wmarincic
November 26, 2012
12:17 p.m.

[ Flag Post ]

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20.” Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now paid $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

wmarincic
November 26, 2012
12:18 p.m.

[ Flag Post ]

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20,"declared the sixth man. He pointed to the tenth man, "but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!"
"That's true!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up because he wouldn't divide the money as fairly as they thought he should.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists, and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

justapto
November 26, 2012
5:51 p.m.

[ Flag Post ]

wmarincic your analogy is flawed. The tax code is NOT written to collect taxes. It is written to influence behavior.
Originally; the tax code was adopted to pay for wars. As the federal government grew, the tax code changed to a permanent one. Tax collection was regressive. Each person paid the same rate on the first $10,000 of income with each additional value of income being indexed. The next $100,000 or so,(as example), was taxed at a higher rate and the next $100,000 again at a higher rate. A man making $1 million does not pay 39% on the entire million only 39% on the amount above $1 million.
Then tax policy brought in a multitude of incentives to push for new investments in business, homes, energy upgrades, 'buy American cars', etc.
A simpler way: Tax on purchases. That eliminates tax shelters, special deductions, the underground economy from being tax free, drug money being taxed etc.
The more money you have the more you buy and the more expensive things you purchase.
I should pay 2% tax on my $100,000 home and you pay 2% on your $1 million one with the up grade furniture, cars, food, clothing etc generating increasing amounts of income. The more you make; the more you are taxed on the amount you have to enjoy from The Great American Dream.
My goal is to pay $1 million in tax.

wmarincic
November 28, 2012
12:03 p.m.

[ Flag Post ]

As we have seen after this election, many of the super rich are leaving America, that is not a surprise with what Obama and the dems have comming. BTW most are democrats, go figure.

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