Thursday, November 15, 2012

Raising Taxes Lowers Total Income Collected: A Visual Walk Through

The following video provides a simple and easy visual walk through of American tax history showing that when taxes have been lowered a greater amount of total tax dollars have been collected. Please forward this to anyone who still believes that raising taxes will help balance the budge deficit.

I had the opportunity to listen to the weekend addition of the Financial Sense Newshour on my way down to Atlanta this past weekend for a wedding. In the third hour of the program the host told a story of a successful business owner living in Southern California on the beach. He loved to sail, loved the weather, and really enjoyed living close to his family.

He was very close to picking up and moving everything in 2010 when taxes were raised aggressively on businesses. After the most recent tax hikes in California, which now take over 50% of what he earns in order to pay the state's bloated pensions, he has decided to shut down operations and just move out of the state. He will have to lay off most of his employees.

I would imagine that many Californians, the "evil" Americans who make a lot of money, hire workers, and pay most of the taxes are now facing the same decision. As they pack their bags, lay off their employees, and take their tax dollars to a more tax friendly state (see Florida or Texas) it will decimate the revenue in California. The state will most likely comply by raising taxes further, running more business out of the state, and the process will repeat. This will insure that public workers continue to receive their $100k plus pensions annually.

Look for California to begin their bailout talks as early as next year as this process gains momentum. Perhaps Bernanke will step in and purchase California debt directly, instead of buying the debt from the federal government after the bailout.

You can download the audio story of the California businessman here: California Leaving - The Last Straw.

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