It probably shouldn’t given the current educational environment, but it never ceases to amaze me how many people simply don’t Grok basic, common sense, time tested economic principles.
For example: Capital Gains taxes tax the profits on investments. Generally, those investments take the form of stock purchases and sales.
What is stock? It’s a tiny slice of ownership of a company.
People buy things when they perceive a potential benefit to the purchase. When someone buys a stock it’s because they believe the company has value and they will reap benefits from owning a tiny piece of it. Those benefits can come from dividends paid out (the company dividing up the year’s profits amongst the owners) or from increase of the company’s value which raises share prices.
When the potential profits from such investments are reduced, what, pray tell, do you imagine happens to the investments?
If you said “they decrease” you get an “A” on your basic economics quiz for today.
When the investments decrease, companies don’t have the capital needed to expand. I work for a company that sells large scale fleet products and software. The way it works, a potential customer asks for bids. We place a bid. If we win the bid we get the contract. At that point we have to start purchasing the physical resources and expending the man-hours needed to fulfill the contract. Note, we haven’t received a penny of money yet, but we’re already spending loads in production of the product.
How do we have the money to start the work before ever receiving a red cent? Either profits from previous completed contracts, or from investments.
So, what happens to companies when investment slows? They have less revenue with which to get going. The biggest expense for any company in the (free) world is payroll. Guess what that means: Fewer employees…i.e. fewer jobs.
Do you think it’s going to be CEOs and CFOs and COOs that lose their jobs as a result? Not on your life. It’s going to be the people working the production floor. So, is increasing the capital gains tax really going to impact the rich? Or is it going to impact the middle class as well as the upward mobility of the poor?
Let’s go a little deeper: For brand new companies known as “startups”, the ONLY source of the revenue they need to get things up and running is investments. We’ve already discovered that increases of the capital gains tax will decrease investments, so, since that’s the only source of revenue for startups, what does that mean? Does that mean that the chances of a startup company succeeding are better or worse? If you said “worse”, you get an “A” on your second basic economics quiz for the day.
So…whom does that benefit? It certainly doesn’t benefit the startup businesses or the entrepreneurs that start them. It certainly doesn’t benefit the people who were hired by the startups that fail, or were hoping for jobs with startups that never get off the ground. So, who benefits? Existing companies that would have had to compete with the startups. Big Business benefits.
Why do you think that big companies are often on the left when it comes to taxation…especially business taxes like capital gains taxes.
Established businesses have existing production lines and cash reserves and longstanding customers and established revenue streams that can help them offset any losses of investment income. They also have armies of lobbyists that basically bribe congress into creating loopholes in the laws and armies of lawyers to help them in exploiting those loopholes to avoid paying the taxes themselves.
Do you really think the US tax code is a complex and confusing as it is because it NEEDS to be? Or because someone profits from it being that way (some of which profits trickle down to the people who author those confusing laws and regulations)?
Anyway, that’s just a long way of saying that Biden’s plan to tax the rich to fund all of his pet projects is going to backfire…bigly.
The Rich are the most mobile people on the planet, especially the super-rich. They can move anywhere…and will if it means protecting their wealth and income. And when they do so, they take that wealth and income (and ALL the tax revenue the government could have gotten from it) with them.
Businesses close or move to more business friendly countries, jobs go away, salaries decrease as the supply of labor increasingly exceeds demand and tax revenue ultimately does the exact opposite of the intention: it goes down rather than up.
And that leads me back to the title of this piece…the end result is more and more middle class people becoming poor and more and more poor people becoming dependent on the government for their survival. Which may ultimately be the goal all along. People who are dependent on the government for their survival are a lot easier for the government to control. “Oh, you don’t agree with letting biological males ‘compete’ against women in sports? We’ll cut off your food money for a while and see if you change your mind then…how’s that sound? I thought you might have a change of heart…”
This article from a guy who “gets it” is what prompted this rant.
Like those looters in Portland, Seattle, and other U.S. cities, progressives in Washington think the property of others is theirs for the taking. They control a majority in both house of Congress and the presidency, so they believe they have the right to take whatever they wish.