What taxes do to entrepreneurialship and hardwork…

It is often said that higher taxer rates and more strictly related to the progressive tax rate does not decrease the incentive to work. The common argument is “who doesn’t want to make more money?” Well ABC News reports these people do not:

President Barack Obama’s tax proposal – which promises to increase taxes for those families with incomes of $250,000 or more — has some Americans brainstorming ways to decrease their pay, even if it’s just by a dollar.

63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark.

“We have to find a way out where we can make just what we need to be just under the line so we can benefit from Obama’s tax plan,” she added. “Why kill yourself working if you’re going to give it all away to people who aren’t working as hard?”

Dr. Sharon Poczatek, who runs her own dental practice in Boulder, Colo., said that she too is trying to figure out ways to get out of paying the taxes proposed in Obama’s plan.

“I’ve put thought into how to get under $250,000,” said Poczatek. “It would mean working fewer days which means having fewer employees, seeing fewer patients and taking time off.”

“The motivation for a lot of people like me — dentists, entrepreneurs, lawyers – is that the more you work the more money you make,” said Poczatek. “But if I’m going to be working just to give it back to the government — it’s de-motivating and demoralizing.”

The idea of a progressive tax will not only decrease the incentives for people to work, but it will also increase the incentive to go around the tax codes. These are both in relations to the Laffer curve. Of course, the problem with the Laffer curve is we do not know where we are on it. Either way a flat tax would solve most of these problems.

ABC even ran a poll here are the results as of 10:08pm March 2nd:

Is it fair for people to reduce high salaries to sidestep President Obama’s tax proposal?

Yes. I also would find ways to decrease my salary to avoid taxes.


Yes. Why should ordinary folks, even those making $250K, pay when big corporations get bailed out.


No. The rich have had too many tax breaks. They should be ashamed for finagling the system.


No. I have to pay high taxes and so should that high-income bracket. They can afford it.


Total Vote: 2,430

The ABC News story is here and the hattip for CATO is here.


Published in: on March 3, 2009 at 2:00 pm  Leave a Comment  
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