Let us count the taxes
April 15th is a date that looms large every year and for good reason – its the day our federal and state income taxes for the previous year are due. People who owe additional taxes wait for that day to file and pay and those receiving a refund hope to have spent their refund by then.
However, this is not the only tax day of the year. In fact, it is 1/365th of the tax days available for that year (you get to add one more day during Leap Year). Most people pay taxes nearly every day. They pay:
- Special district sales taxes
- Property taxes, usually through an escrow account associated with their mortgage
- Ownership taxes for their personal and recreational vehicles
- Federal and state gas taxes
- Cell phone 911 fees
- Landline phone fees
- Fees and taxes for electricity, natural gas, water, and sewer
- Corporate and businesses taxes
- Dozens if not hundreds of other miscellaneous taxes and government fees
Who pays the taxes?
The odd thing about taxes is that in the final analysis: all taxes are paid by us – the consumers.
Corporate and business taxes are added to the price we pay for goods and services. Raw material suppliers pay corporate taxes and pass these costs on to car part suppliers. Car part suppliers pay corporate taxes and pass these costs on to car makers. Shipping companies who ship car parts and finished cars pay corporate taxes and pass them on to the customers. Energy companies who supply power to the factories and transporters pay corporate taxes and pass them on to the customers. Car makers pay corporate taxes and pass these costs on to the car buyer. By the time a costumer buys a car several layers of corporate taxes are accumulated. The bad news is that you have to pay local sales tax on the accumulated corporate tax included in the price of the car. That’s adding insult to injury.
In fact there is precious little governments wont tax at least once and more if they can get away with it. Look at it this way, if your name has either a vowel or a consonant you pay corporate and business taxes. The good news is that you only pay them on days that end in the letter “y”.
Taxes as rewards and penalties
If you wanted to use taxes as a way to effect an industry, a product, consumption rates, spending, saving, etc. how would you do it? The rule of thumb is that “an increase in taxes will reduce use and a decrease in taxes will increase use”.
If you want fewer people to smoke you increase taxes on cigarettes. If you want people to use less gasoline you increase taxes on gasoline. If you want people to fly airlines more you reduce taxes on airlines. If you want power companies to produce more electricity from wind farms you subsidize wind turbines (subsidies are also a form of tax reduction).
It does not matter whether the intent is good, bad, or indifferent. The effect is the same. All taxes act like “sin” taxes in that they effect behavior. Increasing taxes on investment profits (called capital gains taxes) decrease investments. Increasing taxes on income reduces personal spending. Increasing taxes on businesses reduces employment, wage increases, equipment purchases, research and development, employee benefits, etc.
Does taxing the “rich” hurt them more than it hurts us?
Tax increases on the “rich” leads to higher unemployment.
I worked for a firm owned and operated by a husband and wife. They both earned a salary for their own work and made a profit on their employees – to a point. One of the owners told me that they made a profit on each employee up to seven and made no additional money on any employee after that. Apparently employees eight and up made them jump to a higher tax bracket, increased their expenses, or both. The extra income they made all went out in taxes and expenses. When times were good they usually had a staff of ten. Each owner worked about 70 hours a week to find the work, do the work, manage the office, handle the finances, etc. When times were lean things changed. The owners could either: A) put in even more hours each week trying to find work to keep three unprofitable people employed; or B) let three people go and reduce their work load and still make the same income. This no-brainer is why I was unemployed one year after 9/11. This scenario was played out thousands of times during that recession.
Tax hikes on the wealthy have the same affect since the ratio of income to employees is adjusted down when taxes are increased.
A large number of people making in the neighborhood of $250,000 a year are hard working small business owners. If the measure of the wealthy is $250,000 and that marks the level at which tax rates increase there is less incentive to make $250,000 and more. It is easier, as described above, to reduce employees or reduce personal productivity and keep a greater share of their income. One doesn’t have to be a financial genius to see that the progressive tax codes in our country (where the rich pay proportionally higher taxes) has a negative affect on productivity and employment. Ask yourself this, “If they called it taxing the job providers would it still sound like a good plan?”.
Maybe we should tax politicians, then we’d have fewer of them!
As a clarifying comment – none of the AJTT founders is in any danger of reaching the definition of “rich” any time soon. Though we’d certainly welcome financial donations from the “rich” so that we can offer the best website for common sense political thinking and candidate support.