Tuesday, November 20, 2012

Incentives (white board lesson)

So what's so bad about the "fiscal cliff"? Well, it depends on your bent. If you're all about tax fairness, and you're focused on tax rates, as opposed to the distribution of taxes paid (the upper 25% of income earners pay 80+% of all income taxes), then you're all for the expiration of the "Bush Tax Cuts"—on families earning over $250k per year that is. That'll also stick it to those greedy investors who, in the pursuit of profits, promote the capital markets that support the enterprises that support the American workforce—as the top tax on capital gains goes to 23.8% and dividends to 43.4% (although I expect compromise on dividends). If, on the other hand, you happen to be one of those crazy people who believe resources are better allocated in the private sector, you're not at all excited about taxes going up for anyone, regardless of how much they earn.

As for government spending, if you're in the "fairness" camp, I suspect you're adamantly opposed to the sequester (automatic spending cuts). If you're in that crazy resources-better-allocated-in-the-private-sector camp, you know that lower government spending ultimately means more resources left where the incentives promote lasting economic growth, as opposed to where the incentives promote lasting political careers.

Here's what I'm getting at:

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