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To raise taxes or not to raise taxes...that is the question.
At least it's one of the questions.
Suppose you have 10 small business that show a profit (after all other expenses) of $20,000 before taxes.
Then suppose you (just for the sake of simplicity) tax them in such a way that 40% of their profits must be used to pay taxes.
40% of $20,000 on 10 businesses will net the government $80,000 in tax revenues.
Suppose, on the other hand, you have 30 small businesses that show a profit (after all other expenses) of $15,000 before taxes and you tax them in such a way that 25% of their profits must go to taxes.
25% of $15,000 on 30 businesses will net the government $112,500.
So, which is bigger, $80,000 or $112,000?
Now, suppose you are a person contemplating starting a small business.
In which environment are you most likely to take the risk of starting a business, the one in which you will be taxed such that 40% of your profits (after all other expenses) must be used for taxes, or the one in which you will be taxed such that 25% of your profits (after all other expenses) must be used for taxes?
If you have half a brain, you would choose the latter.
Look, I know the example is simplistic, but true economics is just not that tough. If I have $10.00 to spend and you take $4.00 of it away, I only have $6.00 left to pour into the economy.
If I have the same $10.00 and you only take $1.50 of it away, I have $8.50 left to pour into the economy.
Multiply those examples by millions of workers and potential workers and you are no longer talking chump change.
One part of the answer to encouraging the establishment of small business is to keep taxes low.
Using the same line of reasoning, you can also encourage the establishment of small business by making it relatively easy for them to do what they do.
That means the fewest possible rules and regulations to restrict their ability to make that $15,000 profit.
When government wakes up to just these two factors, we will soar out of the recession.
If President BO (and congress, by the way) would adopt the principles that lead to the establishment of many more risk takers, we will have many more business paying taxes, thus increasing revenues.
With more business come more jobs.
More jobs equals more people paying taxes.
More people paying taxes means more revenue for the government.
And the same principles apply: more people, paying lower taxes, means more people with money in their pockets to spend on those small business, thus increasing their profits (after all other expenses) and more revenue for the government.
And the government does not have to earn its money...it gets it for free from us.
Want to heal the economy?
Take the appropriate steps to lower the total amount of money being confiscated in taxes and fees, and make it easier for people to go into business.
Everybody wins...even the governmnet.
Will it happen?
Not as long as we have people in power who believe that the government should have at least something to say about every aspect of American life.
Not as long as we have people in power who are in power for the sake of the power and not for the sake of the nation.
Liberal/progressives think the government's basic job is to gather as much money as they can in order to give it to as many people as they can, not realizing (or not caring) that such an approach kills incentive, distroys ambition and reduces the number of people willing to take the risks associated with building businesses and thus creating jobs.
President BO, in a recent interview, stated that he had
lowered taxes.
What he really did was to move them around, hurt those who took the biggest risks and provided the most jobs and rename them so they were no longer called taxes.
A rose by any other.....
The result was
still less money in individual and corporate pockets and therefore less money with which to do what Americans are best at doing: starting businesses and providing jobs.
Isn't it time to wake up?