Taxation Thought Experiment

Gary Howland gary at systemics.com
Wed Nov 13 04:39:26 PST 1996


> o TAXES THOUGHT EXPERIMENT
> 
>  1) I generate $100 of productivity for my company
>  2) Company is taxed %30, $70 left
>  3) Company pay shareholders and costs, $30 is left
>  4) Company pays me
>  5) I pay 40% in taxes, so $18 left
>  6) With $18 I can buy a $16.82 object (%07 sales tax).
> 
> Results:
>  1) I see $16.82 realization from $100 productivity increase.
>  * Govt. gets $49.26 of my productivity, or nearly 3 times the amount I get.

The government gets $59.26, not $49.26 (30+16+12+1.26).
That leaves you with 16.74 (not 16.82) - they get nearly four
times as much.

In other countries the situation may be worse, not only due to different
rates of tax, but because of social security contributions, employers tax,
and the like.

Then if you spend your money on beer or fags, you may be paying even
more tax, due to taxes on alcohol and tobacco, leaving the government
with perhaps 10 times as much money as you.  Many imported goods also have
a tax on them (eg. motorcycle import tax is around 50% in the UK).


It is probably more fun to do these calculations without involving
the shareholders, since they are, after all, earning their "cut".

[ Crypto relevance? Assasination taxation? ]

Gary
--
"Of course the US Constitution isn't perfect; but it's a lot better
than what we have now."  -- Unknown.

pub  1024/C001D00D 1996/01/22  Gary Howland <gary at systemics.com>
Key fingerprint =  0C FB 60 61 4D 3B 24 7D  1C 89 1D BE 1F EE 09 06 






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