bepah

His comments, which mean little now, as he did not win, were on the topic of capital gain tax rates.

Classic economic theory supports the view that an increase in a tax on an activity will decrease the level of that actvity resulting in a lower total revenue.

For example, and using an extreme example, if a tax rate on, for example, buying firearms was 100%, the number of (legal) firearms purchases would drop precipitously. The result would be a severe reduction in revenues to the taxing authority. It may not result in the number of total transactions, as most people who want guns would find an underground/illegal/barter/black market means to obtain them.

The problem that most, if not all, politicians have regarding taxes is that they seem to think that an increase or decrease will not cause a change in peoples behavior.

But they are not as dumb as you may think. Productivity is related to tax rates. Countries with exceptionally high tax rates have exceptionally low productivity rates with respect of capital resources used to produce goods. With low productivity rates (the US has one of the highest prodcutivity rates, but is slipping, probably due to the threat of higher taxes) the govenment must provide income via 'infrastructure' jobs, welfare, or unemployment. Since many more people will be moving toward these options, they are more dependent on the government to provide that source on income. If the politician promises more govenrment jobs, extended unemployment, or assistance to the poor, they are more likely to vote him or her in, again and again.

We may have hit the tipping point in this country as this is being written. There may be more people working for the public sector (at all levels), on unemployment, or on welfare than there are people working in the private sector to provide tax revenue to support these programs.

Of course, corporate America does not get a vote, yet supplies most of the revenue that government receives each year.

There are other theoretic models on tax levels, the most descriptive being the Laffer Curve. There are lots of discussions on the internet about this and is my favorite description of 'proper' taxation levels.

Nonetheless, raising rates or allowing tax cuts to expire is not a move to increase revenue to the governemnt, but to make the population more dependent upon the government to survive. NAFTA was not the major reason that companies go overseas, Gramm/Oxley is. More discussion if anyone is interested.

As this country moves more and more to a socialist economic system, incentive to innovate and excel will disappear from this country. For most, it will not matter, as the nanny government will provide the needs of the masses. For the few remaining innovators and entrepreneurs, they will look for opportunities in other countries.

There may be a parallel to what is happening here today and the fall of the Roman Empire. (another long discussion)

If you care about the personal responsibility of the individual, you should be very worried.

__________________
John Case
Rookie Gardener, Veteran Drinker