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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (27459)	4/7/2008 2:22:12 AM
From: Peter Dierks	Read Replies (1) \| Respond to of 71588

Don't forget that there are benefits to higher taxes. In high income tax regimes businesses are less likely to report profits. While intuitively this appears to be entirely bad, it also indicates that businesses will chose to purchase additional goods which they can expense. People will spend inside businesses on luxury expenditures that are expensible which would not have otherwise be spent. This stimulates the economy. In high income tax regimes when capital gains taxes are granted preferential tax rates businesses are more likely to invest in capital expenditures that will enhance the long term value of the company. They convert current profits into long term investments hoping to defer taxes and eventually pay capital gains rates instead of paying income tax now. This results in more capital goods purchases which multiplies through the economy. It is likely that a low tax environment would have produced a more robust economy, but even perverse incentives sometimes produce decent results.