Why Raising Taxes is Not a Good Idea

One side affect of raising taxes on rich people is that people may not go to state run lotteries anymore. If you buy a ticket and strike it rich and then the federal government takes a big chunk out where's the incentive in that? It is mainly the poor and working class people who buy lottery tickets. The wealthy don't need too.

Raising taxes on corporations sends a signal to small businesses don't expand and grow or else the government will punish you. Where is the sense in that? Basically, you are crushing any dreams that a small business has of growing. When a company expands it usually hires more workers.

When you raise taxes on a business it does not absorb the tax increase. It first raises the price of its product or service. If that does not help then it reduces employee wages and/or benefits. If that does not help then it starts to let go some of its employees. This is the last resort because a business has to train new employees out of its own money. There is a cost to them to let an employee go. If all the above does not help then eventually it will go out of business. A business will do something just like a dog will do something if you beat it.

One commentator on a Fox Business show said that business will just pass the cost on to its stockholders. Nonsense. Stock is issued so a business can expand. It wants new investors to buy stock, and stockholders to keep on buying stock. I suppose the business could pass the tax on to its current stockholders by reducing the amount of the dividend. This would only lead to the stockholder selling the stock because he is not getting a return on his investment. The business could also issue new stock at a higher price to cover the tax. This would only work if there are investors willing to pay the high price. A company sets the price of its stock according to the company's book value. If its book value is high, the price of the stock will be higher. Also, shareholders are not the same as employees. A company cannot fire shareholders because they are part-owners of a company anymore than a partner can fire another partner in a partnership owned company.

One other thing. If a business does not have stockholders what does it do then if it gets taxed higher? Not all businesses have stock.. Especially small businesses or new businesses. For that answer I refer the reader to the third paragraph.