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Fairness Tax

Discussion in 'Political Zone' started by ABQCOWBOY, Feb 2, 2009.


    ABQCOWBOY Moderator Staff Member

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    Folks, this is a very long read but I encourage all of you to look at it. This is a great piece for any who wonder how the American Tax system works or doesn't work. This really is exceptional IMO.

    I hope you take the opportunity to read this.

  2. Cajuncowboy

    Cajuncowboy Preacher From The Black Lagoon

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    I started reading then got ill.

    But will try again on an empty stomach.

    BTW, They are dead on with the initial figures.

    ABQCOWBOY Moderator Staff Member

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    Lots of very good information contained in this read but here is a excerpt from this piece that is very relative to what we are trying to do as a country right now.

    Lower Supply Reduces Labor Income. In the current policy debates over "tax fairness," proponents of higher taxes on capital income imply that wage earners will somehow gain, or at least be unaffected, by the higher tax rates. In fact, almost every proposal to tax capital is an indirect attempt to tax labor.

    "It's simple: the more investors invest, the more wage earners earn."

    Since 98 percent of the variation in the wage rate over more than four decades is directly due to changes in the size of the capital stock, any proposal that would reduce the size of the capital stock will also reduce labor income.

    Moreover, for every dollar of extra aftertax income to investors, there are $12 of additional aftertax income for wage earners -- a relationship that has been fairly constant over time.

    Thus more than 90 percent of any new taxes on capital will be paid by wage earners rather than recipients of capital income.

    The reverse is also true: more than 90 percent of the benefit of any reduction in taxes on capital will flow to wage earners rather than to investors.

    Proponents of high taxes on capital also argue that a reduction in taxes on investment income will cause a larger federal deficit. In fact, almost any cut in capital taxes will produce a substantial profit for the tax collectors. In general:

    Every $1 billion reduction in annual taxes on capital income will ultimately lead to a $25 billion increase in the nation's output of goods and services.

    Government will receive about $12 billion in new tax revenues as a result of the higher output, and wage earners will receive an additional $12 billion in aftertax wages.

    Because the United States overtaxes capital relative to labor, we have less capital than we otherwise could have -- given the same government revenue. The lower level of capital results in less output and a lower national income.

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