Saturday, May 21, 2011

Politicians Who Increase Taxes Seem Ignorant of Basic Economics

May 21st, 2011

It would seem to me that any politician who supports increased taxes knows little – if anything – about the basic models of macroeconomics. As I recall, nearly the first week of any economics course teaches of what is called a “deadweight tax loss.” An increase in taxes creates what is called a “deadweight tax loss” to the overall economy – a loss which represents both a loss to suppliers/producers and a loss to consumers as well. Conversely, when taxes are decreased/lowered, whatever deadweight loss was associated with the difference in the lower tax is returned to the economy. As such, any politician who supports increased taxes then surely knows nothing of the basic models of macroeconomics, or the politicians simply don’t care about taking the consumers’ taxdollars to support the politicians’ political ‘rice bowls.’ The American politicians’ continued selling/prostitution of our American birthright to bankers and the politicians’ never-ending support for the off-shoring of our industries – which thereby also decreased tax revenues – does not justify any politicians’ continued devastation our economy by creating increased deadweight tax losses.

Adam Trotter, P.E. / AVT

PS. Additionally worth noting, the average/typical ‘corporate tax’ is just another way to tax the consumer, as any taxed corporation merely passes the tax on to its customers.

Tax and Deadweight Loss (note: Deadweight Loss and Tax Revenue at bottom)

Deadweight Loss

Deadweight Loss With A Tax for economics

Dead Weight Loss due to tax

Tax Avoidance and the Deadweight Loss of the Income Tax (Feldstein, 1995; interesting abstract – I didn’t read the paper)

Deadweight Loss (Remember, what I have said about avoiding any blind trust in Wikipedia)

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