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I think this country looks at the tax burden in isolation and misses the bigger picture. Everything adjusts according to the tax system in place at any given time. I've jotted down a couple fairly obvious results of higher and lower taxes (well, obvious to me at least), and I'm wondering if anyone wants to add, or try to convince me I'm wrong.
For businesses: high taxes on net income = high-value deductions for investments in equipment. Low taxes on net income = high incentive to maximize the bottom line (by putting off investments, cutting workforce, etc.).
For low to moderate income individuals: high taxes means less to spend on food, housing, etc. While this may sound like a bad thing, higher taxes necessarily result in downward pressure on costs of food, housing, etc. as people have less to spend. Lower taxes on income lead to the opposite: upward pressure on goods and services. Any landlord can do a quick calculation and figure out that he can charge his renters another $100 per month if he knows their tax burden is that much less. (The problem is that this calculation is made across the board, resulting in costs rising more than the taxes were lowered).
For high income individuals: high taxes means less money to spend on toys, and it also means deductions for investment losses have a larger value, which should lead to greater risk-taking (i.e., starting a new business or investing in new technology that could improve our lives). Necessities of life are pretty much taken care of at some income level (I would say a good metric would be $250,000), so why do rich people need a tax cut again?
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