So, I was taking an accounting class, and we just finished covering capital budgeting. For those who don't know, that's where you take the financials of a project and do a bit of calculation to find out if it's a good financial deal to start a project. So, anyway, I found that the tax rate and the acceptable rate of return have a big impact on whether a project is financially acceptable or not. More to the point, private companies might not do everything they would do with lower tax rates. Over the years, I have come to believe that tax cuts don't work (to pay for themselves), and plenty of stories back that up. But I didn't consider that we would be getting fewer services from the businesses we interact with each day because of higher taxes or needing a higher rate of return to find whether a project is financially acceptable. This has major implications regarding the tax rate issue that we face as a nation.
This might be one of the reasons Progressives don't seem to be anxious to teach the public at large these basic accounting principles. Despite their endless enthusiasm for all sorts of other types of education. What you describe is really rather basic. People would have to be incredibly stupid and ignorant not to know. These sorts of things are essential to be able to accurately form any economic or political opinion. It's a very basic tenet of economics that tax rates create disincentives and reduce economic activity (or at least causes that as a direct effect. we can argue about other indirect effects). Usually the trade-off is small but starts increasing as tax rates reach higher levels. What many people don't understand is that a business is usually not going to make an investment if the return is only 1 or 2 percent. That does not really justify all the risk they have to take (there's a chance the business may not work and they could lose all their money) or the huge amount of work it takes to make the investment, trying to do it right.
It worked after the Gingrich/Kasich tax rate cuts and then again after the Bush43/Rep Congress tax rate cuts. Clinton's tax rate increase slowed the growth rate of tax revenues, it took him signing those Rep budgets and tax rate cuts to get the economy back on track.
One can only look at the historical capital gains rates and resulting realizations, activity, and revenues. We got almost 4 times the realizations and double the revenues at the Bush 15% rate than at the Clinton 29% rate. Biden wants to go 39.6%. THIRTY-NINE POINT SIX. What is Jill telling him at night?
There are lots of factors that go into these decisions. Amazon didn't set out to build the split HQ2 in two of the most expensive areas on the east coast--DC Metro and NYC--because taxes were their concern.
You're talking about people that can't understand why Dollar Tree can't pay people $30 an hour for unskilled labor. They're certainly not going to grasp something harder to understand.
