Saturday, April 17, 2010

The tax man is coming

The one saving grace of the income tax is that there is a natural counterweight to excessive taxation. The more progressive the tax rate, the more you penalize the productive, the so called "rich", the more incentive you give these people to just stay home.

As a result, a progressive income tax is a very poor way to collect revenue. The marginal income which is taxed the most is also the very same income which can be most easily forgone. What's the difference really between $400,000 and $500,000, or better yet $1,000,000 and $1,100,000? People who earn these wages place a lower value on each marginal dollar and this means that they are more willing than most to give that dollar up, especially when the government takes a bigger and bigger bite out of it.

In order for government to raise a lot more revenue, it cannot do it by taxing those who are easily able to live on less (because they will); government must dip into the pockets of those who really need those dollars and cannot afford to just stay home (also known as the middle class). Excessive government spending means excessive taxes and anyone who thinks only the rich will finance it are sorely mistaken.


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