Taxes 101

What’s more effective and moral:

A parent who uses negative reinforcement to stop his child from acting out, or a parent who attempts to use positive reinforcement (though negative reinforcement will be needed at times)?

A boss who puts restrictions on his employees and adds rules, or a boss who gives bonuses and raises for employees who do more than is required of them?

A teacher who consistently marks down the grades of students for the smallest mishaps, or a teacher who adds points when the student does more than expected of him?

In most cases, though negative reinforcement is needed to “motivate” those who just don’t care, positive reinforcement works far better. When people realize they can get a deal for doing something, they’ll almost always do that “something.” So when it comes to health care, under a capitalistic system, doesn’t it make far more sense to offer substantial tax breaks to employers who offer health care for full time employees?

Doesn’t it make far more sense to offer even bigger tax breaks to those who give health insurance to part-time employees? Doesn’t it make sense to offer tax breaks to people who pay for their own insurance (which, by the way, contributes to the economy)? Doesn’t it make more sense to offer even bigger tax breaks for those who add supplemental insurance? Doesn’t it make more sense to offer a tax break to employers who pay double the minimum wage for their employees (and make sure the tax break supplements the money lost on payroll)?

Tax breaks (based on incentives) do a few things:

1) Encourage business owners to offer certain services and wages to their employees because in the long run it allows the employers to save money.

2) Keeps the cost of goods low because there is no increase cost to the business owner. Though he is paying more for wages and additional services, he’s not having to pay anything additional in taxes, meaning his product can remain at a relatively low cost (because keep in mind, business taxes are always passed on to the consumer).

3) Lower the amount of money needed for government services. People making $13 an hour at McDonald’s in a society where such wages earn a tax break for employers (thus, no raise in cost of production), don’t need to be on welfare, don’t need medicade, and don’t need additional government services. They’re (ideally) on health care, they’re making enough money, etc.

4) It frees up tax money to go to projects that the government should be funding, such as schools, roads, military, etc.

5) It shrinks the government and puts more responsibility on the individual. In all circumstances of life, whether it be the child in the nuclear family, the employer in the community, or any other community based event, the more independent a person is, the better. A big government inherently shrinks independence, which means people are never responsible, which hurts the nation. When the government is smaller, more responsibility is expected out of the individual. If the individual – after being given a fair opportunity – can’t hack it, tough. It’s his own fault.

Tax hikes do a few things:

1) Increase the cost of goods – business owners will always pass the taxes onto consumers, making any government aid to the consumer superfluous and inadequate. For instance, we’re hiking the minimum wage up to $7.65 an hour. By hiking the minimum wage AND business taxes, that #1 value meal that used to be $5 can easily increase up to $6 or even $7 – meaning the person making that hamburger for you would have to work one hour to earn that meal. Considering it used to be Americans had to work on average 10-20 minutes in order to earn a value meal at a fast food joint, we can see how negative reinforcement (you MUST do this) hurts the country when it comes to wages and taxes.

2) Increase the government, which subsequently lowers the chance for liberty. People begin to rely on the government, which is never good because it means people simply aren’t responsible. No government can last when the people aren’t responsible. Either it takes away all of their liberty (North Korea) or collapses (Soviet Union).

3) Tax hikes create a horrible cycle. Increased taxes lead to increased goods, which leads to a higher standard of living, which increases the poverty level, which requires more government services, which requires more taxes, which leads to increased goods, which leads to a higher standard of living, which increases the poverty level, which requires more government services, which requires more taxes…

Now, there are times where it is absolutely necessary to raise taxes. In a time of declared war, for instance, the government must raise taxes. Sometimes in a national emergency due to a natural disaster or some type of loss where the government must step in and needs the immediate funding, the government must raise taxes. Imagine if Iran attacked the United States today and the Congress declared war on Iran, with the goal being the total surrender of Iran (I know, not realistic given the current government, but humor me). Most Americans would willingly endure a tax hike in order to pay for the war effort. Though lowered taxes eventually bring more money to the government, such a process can take 5-10 years; war funding is needed immediately. Thus, tax hikes can be necessary in certain situations.

Likewise, cutting taxes can be a horrible idea in certain circumstances. Cutting taxes during a war, for instance, can bankrupt a nation. Or, cutting taxes without subsequently cutting the budgets of government programs will likewise hurt the economy. The “Compassionate Conservatism” of the Bush administration is a perfect example of this. You simply cannot cut taxes and continue to remain at the status quo for government budgets.

Rather, if you cut taxes, they should be incentive based so you can justify cutting the budgets on government programs. It’s justifiable because, due to the incentives, less people will need the government programs, thus the programs don’t need the increased budgets. This prevents deficit spending without sacrificing the country’s populace or increasing poverty.

There will always be the need for taxes and penalties. An employer that refuses to pay a livable wage for his employees must be punished. In an ideal world, the employees would simply leave the employer and go elsewhere, but as the late 19th century adequately displayed, if multiple employers get rid of a minimal living wage, then the unskilled employee is in trouble. Thus, it’s best to have penalties in place for those who are greedy.

But those should always be exceptions, not rules. We don’t hand out monthly bills of $300 to everyone who drives because we assume they’re all speeding. Instead, we penalize those who are caught doing so. Taxes should be used in a similar fashion. There should be a low amount with incentives, but when someone violates certain rules and regulations, that person should endure a tax hike as punishment. It should never be across the board.

It’s so simple that I sometimes wonder why politicians can’t figure it out. Maybe it’s because they’ve spent so much time trying to get elected that they’ve forgone studying basic economics or life in general.