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Tuesday, October 21, 2008

Fighting Against the Current

Economics is pretty complicated, but there are a few fundamental rules that are nearly universally true. One of those is that if you want less of something, tax it (or increase the taxes on it).

Therefore, if you increase the taxes on working, you will get less work (i.e., people will work fewer hours). If people work fewer hours, fewer goods and services will be produced. If fewer goods and services are produced, our country will be less wealthy overall.

Can a poorer country make the poor better off? It's at best tricky because you have to give the poor an even larger slice of the smaller pie to do that. It's like swimming upstream and fighting against the current. It may be possible to funnel enough of the limited extra taxes efficiently enough to the poor to make them better off, but it's a bad bet in my opinion.

1 comment:

Howard said...

The best one can say about redistribution is that it might provide some slight relief from hardship although at the cost of dependency. As a prescription for longerterm prosperity, beyond very modest levels it is counterproductive.