Because it may not be clear to some, I thought I might follow up on the previous post. What leftists do is look at who is paying how much taxes, and then make empirically invalid assumptions based upon this analysis. Let us say that all the millionaires put together made $100 billion, and paid $25 billion in taxes. Your typical Democrat looks at this and says, “hey, if we raise the tax rate to 60%, we will get $60 billion in taxes.” This is LITERALLY what they do. That is how they run their numbers.
But this ignores the obvious fact that what made financial sense at a tax rate of 25% does NOT make sense at 60%. Let’s say, as one example, you sell some stock and have some cash. Make it one million dollars even. Do you put it in bonds to earn a reliable 3% income, or invest it in a carwash? Running a carwash is a pain in the ass. All employers will tell you that having employees is a pain in the ass, but of course a necessary one if you want to make a lot of money.
Let’s say the carwash generates $100,000 in net income, and you pay $25,000 in taxes. You pocket $75,000.
If the tax rate is 60%, though, you only pocket $40,000, despite major headaches and a lot of work. So you put your money in bonds and wait for tax policy to become rational. You pay
At 25% taxation, it’s worth the risk. At 60% it isn’t. So in Scenario One the carwash is built, jobs are created, and taxes are paid on higher revenue. In this case the taxes collected are $25,000. In Scenario Two, you put your money into bonds. You make $30,000 in passive income, which is taxed at 60%. That generates $18,000 in taxes.
So in scenario one we collect more taxes, and generate more jobs (and of course the employees pay income taxes and FICA, so I am estimating on the low side). In Scenario Two we collect less taxes and generate NO jobs.
In a nutshell, this analysis is why California has been turned from the most prosperous State in the country into the one with the most poverty. I read a couple weeks ago that even prior to the bottom 60% of Californians voting for the top 40% to pay more in taxes, some 4,000 high net worth individuals were leaving PER WEEK. These are the people that spot opportunities to provide goods and services people want and need, and figure out ways to deliver them at prices they are willing and able to pay, and who is so doing generate both jobs and tax revenue.
Self evidently, if job creators leave, so too do jobs. Self evidently, if tax payers leave, all that will remain are tax takers.
And all of this is unnecessary. It is brought about by hate, and hate does not build.