ScandallB Wrote:
Oct 04, 2012 10:50 AM
This is a very difficult concept to understand because most people think of economics as being a linear or static concept. i.e. if the government takes a smaller percentage in income tax, then it must necessarily get less in income tax. WRONG When the government allows the people to keep more of their money, they will spend it. When more stuff is purchased, businesses make more profit. When businesses make more profit, businesses need to hire more people to work for them. Guess what those new employees do? They pay income taxes. Think of it this way: 1. Assume that you tax 100 people at 25%. 2. What if you had 150 people to tax at 20%? Which income stream would be higher?