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How Do Taxes Destroy Productivity?

November 5th, 2008

Mark Cuban continually asserts that taxes have no effect on entrepreneurship, essentially spitting in the face of just about every economist from every school of economic thought, who has ever lived. Also, by framing it as a “taxes dont’ matter” argument, Cuban has conveniently avoided the real problem: taxation is theft, plain and simple.

While I prefer lower taxes, I can tell you that no entrepreneur or CEO worth a damn in this country gives up or works less because of a change in tax policy. .

There is an outside possibility that ├╝bermenschen CEOs and entrepreneurs aren’t affected by tax policy. I doubt it, but it’s not worth arguing that point. Since the world is not made up of capitalist-entrepreneurs, or CEO’s worth-a-damn, we can’t look solely at a handful of already rich sons-of-bitches who don’t lose their job when the economic SHTF, we need to look at the countless others who are affected by tax policy.

A real life example, you ask?

Government can’t create jobs, but it sure as hell can destroy them.

The imposition of a luxury tax on yachts all but destroyed the centuries-old shipbuilding industry in New Jersey. Making matters worse for the government, tax revenues diminished, because the feds were dumb enough to assume a perfectly inelastic demand for luxury yachts.

And the vig in this case was only about an additional 10%.

Ocean Yachts in Weekstown trimmed its workforce from 350 to 50. Egg Harbor Yachts entered Chapter Eleven bankruptcy, going from 200 employees to five. Viking Yachts dropped from 1,400 to 300 employees. According to a Congressional Joint Economic Committee Study, the boat industry nationwide lost 7,600 employees within one year.

The CEO’s of most of those New Jersey shipbuilders probably kept their jobs. They kept working hard.

But tax policy decimated the industry, and put thousands of others out of work.

The bottom line is that although taxes may not impact how any particular individual works, it simply is not debatable that taxes impact which individuals will be working at any given time.

Comments

6 Comments

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  • Brad G says on: November 6, 2008 at 2:21 pm

     

    Dammit. Do you think I can get that deposit back on the yacht I was going to buy if there is nobody to build it?
    http://www.youtube.com/watch?v=iMIF2GrdL28

  • RG says on: November 17, 2008 at 4:52 pm

     

    Is your argument about the NJ “vig” that NJ’s economy suffered as a result of this tax? That NJ experienced negative economic growth, or increased unemployment as a result of this policy? Also, since the boat industry lost 7,600 employees nationwide in a year, does your argument extend to the claim that a tax change in NJ caused job losses in other states?

    Are you aware that most jobs in the U.S. are created in states with relatively high tax rates? Or that the major new growth industries here (i.e. computers, media, biotech, finance) are all based in the highest tax states of CA, MA, NY, and NJ? Discuss.

    Out of curiosity, what would you consider to be an appropriate tax rate?

    Do you believe there is a connection between taxes and any services provided by the government? Another way, do our taxes get us anything, or are they solely a redistribution of wealth? Should we take the vig to 0% and have our military earn its money by operating businesses (as in Pakistan)?

  • David Z says on: November 17, 2008 at 5:05 pm

     

    RG – you’ve given me a number of questions here. I will respond to all of them within the next few days, check back occasionally.

    Thanks,
    dz

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