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"I have NEVER met a motivated person who has said they would not chase their goals because of tax rates" This is a common mistake that Cuban makes. The probl
by cjy 15y ago
"I have NEVER met a motivated person who has said they would not chase their goals because of tax rates"
This is a common mistake that Cuban makes. The problem with taxes is that they affect marginal behavior. The doctor works a little less, and entrepreneur sells out a little earlier, the medium business hires one less worker than they otherwise would have. These decisions are invisible because they are small and we can't compare what is to what would have been. But, the costs of taxes on economic efficiency are real. We need taxes for to pay for government. And, we can debate how big magnitude of the distortionary effect of taxes. But this should be done with data not based on anecdotal feelings.
- AndrewMoffat 15y ago> But this should be done with data not based on anecdotal feelings. This last line has me confused about the first part of your reply
- david927 15y agoSorry for the meta-comment, but that's a brilliant response.
- guelo 15y agoOf course getting hard data in economics is close to impossible since you can't run controlled experiments. The closest you can get is looking at historical data such as comparing what happened after Clinton's 93 tax increase and after Bush's 01 and 03 tax cuts. Or comparing similar countries with different tax rates. But there are just too many variables to really isolate the data and reach a firm conclusion. I do remember reading about some economist's study that tried to look at the data and came to the semi-conclusion that it doesn't seem that tax rates have much an effect on GDP at all (sorry I can't find source right now).
- 5teev 15y ago> we can debate how big magnitude of the distortionary effect of taxes. But this should be done with data not based on anecdotal feelings. This is true enough for the Tax-Me-More rich folks, but much more so for the Tax-Me-Not crowd who oppose just about any taxation--a belief often supported by little more than "anecdotal feelings" itself.
- dgrant 15y agoThis makes no sense. If my tax rate goes up, why would I work less? All other things considered equal, getting taxed more and working less is a double-whammy. If anything I think I would work more.
- yummyfajitas 15y agoSuppose your marginal utility from an hour of leisure is 1.0, and your marginal take home income is $100/hour (yielding 1.1 units of utility). In this situation you choose to work, since this maximizes your utility (1.1 > 1.0). Now suppose tax hikes reduce your marginal take home income to $80, which only yields you 0.9 units of utility. Now you choose leisure, since 1.0 > 0.9.
- Hyena 15y agoThe issue with these examples is that they presume people can actually trade additional work for additional leisure. What has been pointed out is that if I raise your taxes, you have that much less income with which to maintain your lifestyle, the same as any price increase. If people stop working because of taxes, we should see them stop working because of other tax-like behavior, e.g., increases in house prices or energy costs.
- thewileyone 15y agoI'm sorry but this is a load of tripe. I consider myself a success and I have many successful friends as well. Some work for corporations, some run their own businesses. Everyone complains about taxes. NO ONE WORKS LESS SO THEY PAY LESS TAXES. NO ONE IS DEMOTIVATED FROM SUCCEEDING BECAUSE THEY PAY MORE TAXES. "These decisions are invisible ... ", no, they are non-existent. People who want to work less to pay less taxes must be idiotic by nature because that's a zero-gain move.
- deleted 15y ago[deleted]
- gte910h 15y ago>the medium business hires one less worker than they otherwise would have No they don't. Businesses have more to stand from capital gains (one mechanism of gaining that is growth via hiring) than owner salaries when the marginal:capgains ratio is high.