Saturday, December 03, 2005

 

Why high taxes don't make people work less hard

Douwe Osinga argues that higher taxes can in fact make people work harder.

In the end people don't care about taxes and all that. They only care about how much money they make. And when it comes to money, it is just like anything else. The more you have of it, the less extra happy another dollar will make you. If you are starving then you'll gladly work long long hours to make enough not to starve. If you are quite affluent already, you need quite big incentive to start working more (luckily enough are society comes build in with all kinds of tricks to make us work harder anyway).

So what happens if we increase taxes to say 90%? It just means that people have only one tenth of the money, so they are a lot poorer and will suddenly have to work again for a car instead of getting one anyway.

The problem of course is with the other side of equation; governments have a tendency to spend money more wasteful than average people. If you raise taxes you put more money in the hand of the government and if then that money is wasted, the economy suffers. But it is not the low taxes for the rich that make the rich work so much harder that in the end everybody profits.

Original post by Douwe Osinga

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