22 of 39

Yes

Write now Article Tools

To answer the question: "do lower taxes lead to increased economic health?", a great place to start is by looking at the real cost of taxes and see if they outweigh their benefit:

Currently, the government extracts $2 trillion in federal taxes. That money comes from you and me and business. The obvious cost of this is less money to meet our needs and business have less money to reinvest and build their businesses.

Another obvious cost is this huge extraction is the resultant excessive complexity of the federal tax code:

In 1976, Jimmy Carter called for a complete overhaul of our income tax system. I feel it's a disgrace to the human race.'' Since then, the number of tax rules have double leading former Treasury Secretary Paul O'Neill in 2001 to call the current tax system an abomination.'' For example, the current tax code requires a national compliance burden of 6 billion hours each year filling out tax forms (estimates reported by the Office of Management and Budget). The compliance cost is enormous, creating a huge third party public and private "tax industry" to keep up with keeping records and learning more and more increasing complex tax rules. The OMB estimates that on top of the 6 billion hours we spend each each, the cost of just complying with federal income taxes costs families and business over $200 billion dollars each April.

Despite the 6 billion hours $200 billion we spend in the compliance costs of filing returns and tax planning, the tax code causes us, the IRS, and tax experts to make frequent and costly errors. Money magazine's annual test of tax experts shows wide variations in experts' answers as a result of tax law complexity. Even the IRS itself makes mistakes in up to half the answers it gives to taxpayers in phone inquiries. These errors lead taxpayers to incur large costs responding to IRS audits, notices,liens, levies, and seizures. Because of the complexity of the tax system, many penalties are erroneous but they're too hard to fight, so people just pay.

Another cost is the well-known basis against saving and investment. Saving is a primary source of economic growth because it is the basis of reinvestment for both families and business. The current income tax system is biased against saving because the returns to saving can face high tax rates, whereas current consumption does not. In short, spending now is less costly than saving for tomorrow.

Finally, there's are the "deadweight losses," a way of measuring economic inefficiency. $1 dollar

• 1
• 2
• 3
• next page >>

Add your voice

Know something about Supply-side economics: Do lower taxes increase a country's economic health??
We want to hear your view. Write now!