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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsHow do you create more business investment? Raise taxes on businesses
I recently was talking to a friend who has a successful small business about his tax returns. He said his returns show very little (net) income from his business, even though it is thriving, because he invests most of its income into the business itself. It allows him to grow his business, while keeping his taxes low.
Which got me to thinking, that this is why the argument for lower business taxes is all wrong. Most times, supply siders will say that if you lower business taxes, businesses will have lots more money to invest in themselves, and you'll create growth and investment and the result will be jobs jobs jobs.
But that's exactly the opposite of what is true - if you crank up taxation rates, but allow businesses to avoid taxes by investing in their own growth, _that_ is how you drive more investment and build up your business economy and infrastructure.
It's just another example, once again, of how completely ass-backwards everything about trickle down economics is. They say something is true when the exact opposite is true, and then just shovel money at people who are already rich. It comes down to a bunch of lies and handwaving to just reward the already rich and powerful.
Wounded Bear
(58,765 posts)the fallacy is pretty simple. If you allow wealthy people and business owners to 'keep their own money' through low marginal tax rates, wealthy people tend to keep their own money and not necessarily re-invest it.
Human101948
(3,457 posts)while trying to dodge taxes.
Wounded Bear
(58,765 posts)especially when they are rewarded with lower taxes on those risky investments.
Fact, and I think you know this, some of our best years in terms of economic growth were when marginal tax rates were at their highest. Talking 1950-60's here. Not saying go back to 90% rates at the top, but should be more than 50% for everything over, say, $5-10 mill.
tonyt53
(5,737 posts)Small businesses usually do reinvest in their business. The larger mega-corps are sitting on an estimated $3 trillion in cash right now. Businesses can take advantage of reinvesting, and the resulting tax benefits, but they are simply not doing it.
yodermon
(6,143 posts)never hear it on CNBC for sure.
When top marginal tax rates were 91%, *of course* the ownership class would re-invest that money in their business instead of just paying it to the government.
Here's an article about it:
http://www.alternet.org/story/106979/why_the_economy_grows_like_crazy_amid_high_taxes
...
If we didn't really need the money, that was an incentive to keep it in the company and to find ways to spend it that took it out of the taxable profit column but increased the value of the company.
High taxes create an incentive to reinvest profits into long-term growth.
With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest.
The higher taxes are (and from 1940 to 1964 the top rates were around 90 percent), the more this is true.
This creates a bias toward long-term planning.
If a business is planning for the long term, it wants a happy, stable work force. It becomes worthwhile to pay good wages and offer decent benefits.
Low taxes create an incentive for profit taking.
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ProfessorPlum
(11,280 posts)even talks about externalities like infrastructure and the fact that taxes go right back into the economy.
Why are people fooled by all of this nonsense about giving the rich even more money? It's demonstrably a bad strategy.
BKH70041
(961 posts)I just paid for thousands of dollars worth of personal items and am going to make it a company expense. We'll call it "office supplies," that should work. Now, I can increase my assets while keeping my taxes low.
Thanks!