We know, from decades of economic modeling, and observing the revenue feedback when taxes are changed, that each added dollar Washington collects, then spends or gives away (for goods and services, entitlements or tax-transfers), costs the public about $2.50. That's a dollar in tax plus about $1.50 in lost output from the economic distortion caused on average by the tax system (even more in the case of the most damaging taxes on capital income).
So everything that the government buys or gives had better be worth a good deal more to the user or beneficiary than its apparent budget cost, or it will be a bad deal for the country. In particular, letting tax rates bounce back up on saving and investment, and on the labor income of middle and upper wage earners, would worsen the job and income prospects of people of all ages and family situations.
Originally from the pit at Tradesports(TM) (RIP 2008) ... on trading, risk, economics, politics, policy, sports, culture, entertainment, and whatever else might increase awareness, interest and liquidity of prediction markets
Wednesday, April 09, 2008
Tax strangulation
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