Having known some people who have lost businesses to taxes and having to liquidate, Hillary’s plan will be a disaster. The problem is that with all the other stresses on the economy and the loss of services and products that all those small companies now do, mostly for other businesses, at some point things are going to really start breaking down. It’s like a forest, cut down enough trees and before too long, the ecosystem dies.
What’s the worst possible tax hike, the one that would do the most economic damage?
Raising income tax rates is never a good idea, and there’s powerful evidence from the 1980s about how upper-income taxpayers have considerable ability to change their behavior in response to changes in incentives.
But if you want to know the tax hikes that do the most damage, on a per-dollar raised basis, it’s probably best to focus on levies that boost double taxation of saving and investment.
The Tax Foundation ran some estimates on five different tax increases, for instance, and found that worsening depreciation rules (an arcane part of the tax code dealing with the degree to which new investment is taxed) would do the most damage, followed by a higher corporate tax rate, and then higher individual income tax rates.
But I wonder what they would have found if they also…
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