Thursday, August 02, 2012

Tax cuts

The politicians here in the U.S. seem to be having some difficulty deciding whether the Bush era tax cuts for the rich should be extended.  I think they're just being silly, and here's why.

First, not everyone that makes over $200,000 a year is a job creator, so why give the non-job-creators a tax break?

Second, I actually doubt the validity of the idea that these so-called job creators will create more jobs simply because their income tax rate is lower.

People like to point to how much the rich pay in taxes, and claim that this is more than their fair share.  Is it really?  I'm pretty sure that for most rich people, a rise in the income tax rate would not put a real dent in their lifestyles, and may not even actually have the effect of increasing their taxes.  And the fact that the rich pay such a large percentage of the total taxes paid is not really an indication of the hardship that is put on them by taxes; instead, it is more an indication of the disparity between what they make and what the average person makes.  And further, a tax rate that is a few percent higher shouldn't prove to be a hardship to the rich, unless they are living beyond their own means.

But, if we want to try to use taxes to encourage job creation, it really is simple: just give people a tax credit for creating jobs.  If taxes are going to have any effect on job creation, this seems to be the most direct way of influencing businesses to higher more.  But to give the rich a tax cut because it might lead to job creation is, well, stupid.