Why Taxing the Rich Hurts the Rest of Us

In tonight’s State of the Union address, Pres. Obama called on Congress to raise taxes on the wealthy.  He wants them to “pay their fair share.”  Set aside the moral issues of redistributive taxes (it is a form of slavery to assert ownership over the value of someone else’s economic output - but that’s for another day), let’s look at the economics involved.

Taxing the rich reduces innovation, jobs and economic growth.  How?  Look at a company that started small and got big - Facebook.

When Facebook began it was just a couple people.  But once it got going, that didn’t last long.  They needed programmers.  The programmers needed computers, desks, offices, and office supplies.  The programmers’ computers had operating systems and development tools and databases.  Facebook also needed servers, data centers, back up power sources, server racks and cooling systems.

Facebook could buy those things because rich people had the money to invest in a risky start up.  Those things were available for Facebook to buy because other people previously invested in capital-intensive companies to make those things.  Computers, software, desks, lamps, servers, data centers, office buildings, etc. don’t build themselves.  They require allocation of existing capital.

When government raises taxes (on any group, but particularly the wealthy), it reduces the pool of money available to build computers, software, desks, and lamps, or to invest in new, innovative ideas like Facebook.  That means goods that are never built, innovative companies that die for lack of investment and jobs that are never created.

Of course the rich have the money to pay higher taxes.  But it’s the rest of us that pay the price.

5 Responses

  1. Mark, I hope you don’t mind, but I have a bleg for your readers….One of the thgnis that I’d really like to do, but can’t since I can’t find an online application to make one, would be to make a county-by-county gas price cartogram (like the second picture), but one that subtracts state gas taxes from the price per gallon.I can find tools that are set up to make unique state-by-state cartograms, but not for the county-by-county maps. If anyone out there might know of such an application, please post a link!

  2. Economists got on McCain and Hillary for their gas tax holiday, yet eniablleyg the images there seems to be a relationship (in most, but not all states) between taxes and prices.Why, then, would a gas tax holiday not lower retail pump prices? I’m assuming the tax is applied at the pump; if it’s applied further up the chain, then I’d fully understand. Pump prices, though, are highly competitive. If it is charged higher up, then nevermind.

  3. This article is a home run, pure and simple!

  4. Monica, Jefferson was from Wonderland, which was a whole different world from FTL, and the curse afcefted him differently than it did anyone else. He always remembered who he was. So maybe his daughter might not have been afcefted in the same way everyone else was maybe she didn’t wake up when the curse was broken??The scene with Jefferson left a lot of unanswered questions. Why did his car turn over? Where was he going when he crashed? Why did he have the tea set and the stuffed bunny? Why did he run away from David? I’m leaning towards thinking that someone kidnapped Pinocchio while he was still immobilized though he may have turned all the way back into a man and walked out himself.Robin, I agree the episode was creepy, but I thought it was good kind of creepy. Tara and Princess Donna I’m going to agree more with Tara here. I think that David/Prince Charming is a relatively bland character. I think the evil characters Rumpel and Regina are the most vivid in the show, followed by the kick-ass Snow. I do find the new, feistier David more interesting than the pre-curse-breaking David the new David is not as swashbuckling as the FTL Prince and not as cowardly as the old David, but something of a combination of the two. I also like the way he’s become a reluctant leader which reminds me of some aspects of LOST (I may write more about that later). But even the new David is not as fascinating to me as Rumpel, Regina, and Snow and that may have something to do with the acting, I think Josh Dallas is doing a good job, but Robert Carlyle, Lana Parrilla, and Ginnifer Goodwin take it to a whole other level.

  5. I have a printer hooked up to the computer in my room. My daughter has a computer in her room and no printer. How can she do her homework on her computer, but have it print out on the printer in my room? Do I need the internet on one computer or both? Maybe not at all?.

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