Wednesday, February 9, 2011


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 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?


WomanHonorThyself said...

the radical ideologues are destroying this nation Joe..what a travesty.

Mark said...

It really is simple. I understand how it works and I'm an economic moron. Why can't the Democrats?

cary said...

The government insists on being a silent, overpaid partner in ANY business that operates in the US. No matter what you do, the government is there to make sure it gets it's share of YOUR hard work, before you get to touch it, including your paycheck.

How about this: eliminate the taxes that are paid out of profits (corporate or personal[paycheck]). Place a 1% tax on non-food items. Everyone pays that tax - companies buying raw goods, people buying finished products. That one percent of the economy is more than enough to fund the government, albeit in a much smaller iteration than what we have now. Of course, with the elimination of the IRS and all the printing involved with that branch alone, we probably wouldn't need to eliminate much else.

Why will this work? Because if people have money to spend they will spend it on things they want, thereby creating a demand for products and services that will only grow.

Oh, and we would need to drain the swamp in DC the right way, too.

Lisa said...

they know how it works they just don't want it to work.

Fredd said...

You've just described Art Laffer's famous 'Laffer Curve'. Liberals and Conservatives just differ on where our economy sits on the curve.

Of course, every tax rate reduction has proven where we are on the curve, but the liberals refuse to believe it. Or are too stupid to believe it.

Which would subsequently illustrate another difference between libs and Conservatives: in the amount of brain material present.

Z said...

Hi, JOe, it was "time to wake up" a few years back.
I'm with Mark.

A Foriegn Anonymous Person said...

thank you for being asane person, the internet is so full of crazy liberals that you are a breath of fresh air to read.

Ducky's here said...

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.

Government spending doesn't go into the economy?

Joe said...

Ducky: Nope.

Joe said...

Ducky: government spending is a net loss because it produces nothing and mearly moves money around.

A government project may "put people to work," but it does so with non productive that was not earned but confiscated from citizens. Thus when it "reenters the econonmy" there is no net gain.

cary said...

A government project could be looked at as an economic loss, since the government needs to confiscate more dollars than needed in order to pay for the bureaucracy that is "overseeing" the "project" - thereby costing us more money than it would take if a private entity took on the project.

shoprat said...

It's simple really. A nickle in your pocket isn't in his.

Barry O said...

I saw that headline, and thought "Thank God for something I can read"

Ducky's here said...

You are evidently no Keynesian, Joe.

Joe said...

Ducky: What gave you the first clue?

Ducky's here said...

Let's see, the government never creates anything: the internet, GPS.

Those are my two, Joe. I bet you have some of your own.

For extra credit you can give us your reaction to the thesis that government handles high cost, low initial profit projects like the transportation system that private industry uses for profit.

Then you can tell us why, other than being more efficient, Medicare is any different than a private insurer.

Joe said...

Ducky: I understand that it is difficutl for someone educated by rank liberal/progressives to know the difference, but "create" and "produce" are two different things.

The government produces nothing.

And they spend trillions doing it.

The things they subsidize all turn out to be net losers, not gainers, including the Interstate Highway system, Medicare, etc.

The Internet was "created" by the government, but quickly taken over by capitalists who saw it as a way to make money.

That's why it is now useful to society, no thanks whatsoever to the government, which tried to stop citizens from using it.