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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: TigerPaw who wrote (368217)	1/24/2008 3:52:17 PM
From: TimF	Read Replies (1) \| Respond to of 1577113

Taxes themselves create perverse incentives. This is esp. true about taxes that are targeted to politically favored groups, or taxes that are full of tons of loopholes and exeptions, but it even applies to broad based taxes, and it applies more and more as the rates get higher. Taxes on payroll provide a perverse incentive to higher less people (to the extent the cost falls on the employer), or an incentive against work (if it falls on the employee). They also provide an incentive to try to work off the books, even if both the employer and employee would otherwise not want to do so. Taxes on capital gains and dividends reduce the expected returns on investment and thus the incentives to make investments. Taxes on imports (tariffs) reduce trade. Taxes on income provide incentives to get compensation in forms other than income (even when this is less efficient or desired than the cash required to produce them would be absent taxes), and if they are high reduce the incentive to work and to invest. Sure lots of targeted taxes, and targeted tax breaks make things much worse, but even broad simple and relatively low taxes still provide perverse incentives, or create disincentives to do positive things. That doesn't mean you don't have the taxes, it just means their cost is higher than the dollar figure of the tax itself. And of course you have compliance costs. Reporting/filing/calculating your taxes can be a lot of work.