Incentives Chuck Grassley will work for
I was flipping through the channels this evening and happenned upon Senator Chuck Grassley making comments about how allowing the tax cuts that he passed for Bush would cause rich people to be less productive. Dude has been in the Senate too long to understand what really motivates workers and business owners. Then it hit me, what motivates Senators?
Campaign contributions - and in Grassley's case, seemingly contributions from people who want lower taxes. This makes it easy to devise an example that Grassley can understand.
Let's suppose that in our example, Virginia did not have fixed conformity (meaning that what's taxable here is what's taxable federally). Instead, imagine that Maryland, the District of Columbia and Virginia all passed legislation making contributions to members of the Senate taxable at a rate of 30%. I say all three jurisdictions so that no one can simply cross the border to evade the tax with their grip and grin. Assume also that they considered contributions raised in the home state taxable income for Senators living part year in the national capital area - closing all loopholes.
What would most Senators do? Would they decide that they don't need the extra money for their campaigns because it is being taxed? Buying Grassley's logic, you would think that would be the case. (Obviously he has not asked either his wife or my wife about the acceptability of working less when your income goes down.) The reverse is actually true. If the tax man taketh, the Senator will lean harder on more donors to make up the loss. So do small businessmen and households. The amount of money anyone wants is not a function of the tax rate they pay to get it, but rather on what ones wants to spend. If you raise the tax rate, people will work harder to make up the difference.
This is why when Clinton raised taxes on the rich, the economy improved, revenue increased over and above the tax effect and the budget was balanced.
Somebody needs to share this with Obama, so that he does not wimp out on letting tax rates for the wealthy expire when the ball drops on New Years Eve. Indeed, he would be dropping the ball if he buys Grassley's nonsense.
Campaign contributions - and in Grassley's case, seemingly contributions from people who want lower taxes. This makes it easy to devise an example that Grassley can understand.
Let's suppose that in our example, Virginia did not have fixed conformity (meaning that what's taxable here is what's taxable federally). Instead, imagine that Maryland, the District of Columbia and Virginia all passed legislation making contributions to members of the Senate taxable at a rate of 30%. I say all three jurisdictions so that no one can simply cross the border to evade the tax with their grip and grin. Assume also that they considered contributions raised in the home state taxable income for Senators living part year in the national capital area - closing all loopholes.
What would most Senators do? Would they decide that they don't need the extra money for their campaigns because it is being taxed? Buying Grassley's logic, you would think that would be the case. (Obviously he has not asked either his wife or my wife about the acceptability of working less when your income goes down.) The reverse is actually true. If the tax man taketh, the Senator will lean harder on more donors to make up the loss. So do small businessmen and households. The amount of money anyone wants is not a function of the tax rate they pay to get it, but rather on what ones wants to spend. If you raise the tax rate, people will work harder to make up the difference.
This is why when Clinton raised taxes on the rich, the economy improved, revenue increased over and above the tax effect and the budget was balanced.
Somebody needs to share this with Obama, so that he does not wimp out on letting tax rates for the wealthy expire when the ball drops on New Years Eve. Indeed, he would be dropping the ball if he buys Grassley's nonsense.
posted by Michael Bindner at 11:03 PM
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