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<blockquote data-quote="dmac1" data-source="post: 3276980" data-attributes="member: 60252">You may or may not understand tax deductions for business, so I will give you a simple answer.If a business has $100,000 profit, but invests $80,000 in new equipment, or hires more workers and salespeople, they will only owe taxes on $20,000. The business will increase in value with new equipment, or another location, or with more sales, so the money doesn&#039;t &#039;disappear&#039; for the owner.Take that same business, where the owner takes out all of that $100,000 in profit, and he will owe income tax on all of it. If the tax rate is higher, there is more incentive to re-invest in the business. If the tax rate is low, the owner can more easily and cheaply take the profit out, and sit on it, or drive the stock market up by investing it in stocks, or simply spend it in Paris.The high tax rates encourage hiring even if it is hiring a company to build labor saving production equipment. Lower production costs makes products more available at lower costs. Where the point of diminishing returns on lower rates starts and ends is arguable, but in todays world, we don&#039;t have family businesses growing and expanding in the same way as when the tax rates were much higher. It used to be that someone would own a business bringing in $10 million a year and the owner would be relatively cash poor because paying a 90% tax rate on taking profit didn&#039;t make sense.&nbsp; Now with low rates, the owner can take $6 million out and by a McMansion, putting only a one time stimulus into the economy. High rates almost force a long term outlook. Employees were never, or nearly never subject to the high rates because they didn&#039;t earn enough to pay high rates. Low rates on the top 10% who own 50% of the country just exacerbates the difference. The high tax rates used to force them to spend that money, improving the economy.I shouldn&#039;t have even had to explain this at all, except many have no idea how and why high tax rates ever happened to start with. People like floridays cry about crickets when even a simplistic explanation takes more that a 2 sentence answer.</blockquote>

[QUOTE="dmac1, post: 3276980, member: 60252"] You may or may not understand tax deductions for business, so I will give you a simple answer. If a business has $100,000 profit, but invests $80,000 in new equipment, or hires more workers and salespeople, they will only owe taxes on $20,000. The business will increase in value with new equipment, or another location, or with more sales, so the money doesn't 'disappear' for the owner. Take that same business, where the owner takes out all of that $100,000 in profit, and he will owe income tax on all of it. If the tax rate is higher, there is more incentive to re-invest in the business. If the tax rate is low, the owner can more easily and cheaply take the profit out, and sit on it, or drive the stock market up by investing it in stocks, or simply spend it in Paris. The high tax rates encourage hiring even if it is hiring a company to build labor saving production equipment. Lower production costs makes products more available at lower costs. Where the point of diminishing returns on lower rates starts and ends is arguable, but in todays world, we don't have family businesses growing and expanding in the same way as when the tax rates were much higher. It used to be that someone would own a business bringing in $10 million a year and the owner would be relatively cash poor because paying a 90% tax rate on taking profit didn't make sense. Now with low rates, the owner can take $6 million out and by a McMansion, putting only a one time stimulus into the economy. High rates almost force a long term outlook. Employees were never, or nearly never subject to the high rates because they didn't earn enough to pay high rates. Low rates on the top 10% who own 50% of the country just exacerbates the difference. The high tax rates used to force them to spend that money, improving the economy. I shouldn't have even had to explain this at all, except many have no idea how and why high tax rates ever happened to start with. People like floridays cry about crickets when even a simplistic explanation takes more that a 2 sentence answer. [/QUOTE]

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