Comments on: On Taxes and Recovery, A Primer

By: JaneRadriges

JaneRadriges — Sat, 13 Jun 2009 23:47:14 +0000

I really like your post. Does it copyright protected?

By: DelRioTango

DelRioTango — Tue, 09 Jun 2009 21:31:31 +0000

I agree, it was a rant of sorts. Obviously this blog is full of fresh from college knowledge and I know commentary without exclusive proof from the usual sources is tabboo, but I took a shot at it anyway. I do not consider my situation to be the end all, but it’s real time business, not a model from a text book so I do consider it my tested reality.
Theory moderated by reality is apot on if the theory is the more you make, the more they take and the reality is that they take and take they do while the leaches in society applaud the robbery. Owning a business makes it more personal to me and my employees for obvious reasons and I did not intend to imply that if you’re not a business owner, you wouldn’t understand. Maybe it was ill-concieved 500, and on that point thanks for the humble kick in the a**.

By: 500sheets

500sheets — Thu, 04 Jun 2009 23:44:12 +0000

While I think you’re on to something DelRioTango about first experience then talk, we’re discussing theory moderated by reality. Moreover, there needs to be a balance of both in the economic behavior of a individual if you ever want to clearly explain the relationship between taxes and income. I am certainly not meaning to bash you if it comes off that way, because I respect that you have a healthy business and you seem to realize the finer points of the structure of a business beyond the books; however, your main point: instead of the original intent to quash us with experience, it came off more like an ill-conceived rant, exclusively based on the idea that if you don’t own a business, we can’t discuss tax brackets or at least as effectively as you. I can’t help but think that may be a little naive.

By: DelRioTango

DelRioTango — Mon, 01 Jun 2009 23:19:40 +0000

Do any of you guys own your own business? I can tell you as a partner in a local business(over 2.1 million in sales for “08″)that if your business is healthy and you average decent growth annually, yes you can absorb tax increases without loosing sleep, to a degree. My caution here is in the thinking that just because a wealthy persons profits are good (which is the goal of good business right?) it doesn’t mean people should assume that the wealthy should just pay higher taxes “because they can afford it”. A good company that turns profits, and employs people and pays them well with benefits & bonus programs can do so BECAUSE they have decent profits. The more tax that’s laid on us, the more cuts we’ll make on pay raises, bonuses, health coverage, and impliment lay offs all of which directly affect the employee. You don’t go into business to barely make it and loose it all. Until someone takes the risk and puts all of their assets into a dream, works the very long hours for years, and builds it up from the ground, it’s hard for them to understand the core issue….until you’ve done it yourself, don’t assume what should be done with other people’s money, and I find it amazing that anyone can decide how much money is “too much” for someone to have. Next people will start deciding what other things in life we should limit…..how about limiting laziness, jealousy, and ignorant living. Sam Walton, the founder of Wal-Mart started in a little shack of a store, then built an empire. He gave tens of millions of dollars to charities in his lifetime, I guess he should have been taxed more as to limit his excess profits because he could afford it.

By: 500sheets

500sheets — Mon, 01 Jun 2009 19:46:18 +0000

Tribwarrior just illustrated what I tried to generalize: regardless of your tax bracket most people are going work longer and harder to earn that next dollar whether its taxed at higher rate or not; he is still making more than if he didn’t work those extra hours of overtime. I am not saying your wrong MikeM in theory because all else equal (like insatiable demand, the almighty dollar, and result of promotion, or in Tribwarrior’s case keeping your job by working harder, etc, they become constant) you will work less because the tax rate is the only parameter to effect the balance between leisure and work. However, in his case and certainly in mine, if the tax rate on my income goes up at any point in my life, by weight of other factors, it’s clearly close to last of the things to influence my behavior to work less.

By: Tribwarrior

Tribwarrior — Sat, 30 May 2009 05:50:24 +0000

What both of you (mikem & 500sheets) seem to overlook is that is in some, and I stress some, instances there is a few companies out there that will go out of business, there are ones whos higher taxes will effect the employees in lower tax brackets as some will be laid off, some will have their 401s and pensions revoked, some such as I will not get employer matching. It is not a matter of I can work more hours to make up for the extra lost wages of $112.00 per month in health care premiums, just for me alone, not for the family plan, they had to be dropped. I’m known as the overtime king, if there is any overtime to be had I volunteer, guess what, there is no overtime, and probably will not be untill the economy picks up. But I’m one of the lucky ones, after three rounds of layoffs, I still have a job and I didn’t have to take a ten percent cut in pay like those on salary in managerial positions. Do I still have the incentive to do a professional job and get as much work done in an 8 hour day as is humanly possible even though I can’t get any overtime which would put me in a higher tax bracket? Well I’m going to have to say- absolutly, why because if I screw around and the company doesn’t succeed, I don’t succeed, I’ll be the next one down at the unemployment line if the company goes out of business. These are known as old fashioned work ethics, taking pride in ones job and the work you’ve accomplished. Yes I like to get paid, but I will not slit my own throat because the company has fallen on hard times, and I didn’t get the size of raise I thought I should. Speaking of working more hours seems more people think that if you work overtime it’s a waste because the government just takes it all. Well if you take home an extra $250.00 for the same payperiod it’s still an extra $250.00 that you wouldn’t normally have for that same payperiod, duh. So if you think that people in lower tax brackets aren’t effected by higher taxes, guess again. I understand what you’re saying about investing in business and being taxed more after vesting into a higher tax bracket on your returns, this is just another side of the tax issue from the ground level. But as I always say “gotta eat!” thats why I go to work.

By: MikeM

MikeM — Fri, 29 May 2009 22:09:25 +0000

Hello 500, thank you for reading.

My point isn’t that every person who makes above the top marginal tax rate will work less once that rate goes up, it’s that enough of them will to negatively impact growth. Yes, some people will be willing to work the same amount at 35 or 40 or 50 percent, but more and more the incentive becomes more and more prominent to the decision. There’s a negative relationship between return on one hour of work and the quantity one is willing to work, that’s all the argument consists of. Willingness to take risky investments vs. consumption, or risky investments vs. safe investments at that level are another aspect of the impact.

Sorry I couldn’t be more thorough in this response, I’ll be writing another op-ed on Monday dealing with various arguments for increasing taxes, but I’ll be out of town for the weekend so I won’t address any further comment until then.

By: 500sheets

500sheets — Fri, 29 May 2009 20:03:54 +0000

While you may get the ‘A’ for paraphrasing theory, the economic behavior of an individual is influenced by more than just the parameter of the tax rate. Ceritus paribus, the increase in the tax rate to an individual will ultimately drive him to work less, however, theory in almost every economical sense is trumped by reality. The marginal return on my dollar after taxes may have diminished after this new tax rate over 200k, but will that really deter me from making more money? My answer is no for a couple reasons. First, while I may as much money as used to in the short term after this new tax rate, my capitalistic incentive never truly shuts down and in the long run I will ultimately accrue hard earned after tax income year after year. This example is evidenced by the millions of of Americans who have broken this ‘barrier to entry’ and have cleared higher tax rate after tax rate like they were small hurdles. Second, very rarely does my standard of living stay stagnant over time, my income may diminish after retirement but it’s supposed to be augmented by investment and will hopefully keep me afloat. That being said, when I reach two hundred grand, given enough time, it won’t be enough for my insatiable demand and I will always want more. However, you do bring up a good point about joint incomes and the possibility of other factors impeding you from working longer and harder, but in the strictest sense this is just another small hurdle to overcome in life. Tax rates to me separate the men from the boys. At a certain point you need to ask yourself, do I want to complain about taxes, excuse them as a socialist regiment to control my income, or do I work harder and slowly gain from it in the long run?

By: MikeM

MikeM — Tue, 26 May 2009 18:06:17 +0000

Thank you Alan, typos not withstanding, of course.

*Edited most of them out.

By: Alan Reynolds

Alan Reynolds — Tue, 26 May 2009 15:33:30 +0000

This should get an “A” in any graduate course in public finance, despite the controversial source you quoted.

The op ed below is about profits, not taxes, but may be of some interest:

http://www.cato.org/pub_display.php?pub_id=10244