Soaking The Rich An Inconvenient Truth

Aug 07, 2009

 

As a B2B CFO I am heavily focused on making data more intelligible.  After all, running a business is lot easier when you have actionable intelligence to develop and grow without running into land mines. 

One of the more contentious public policy debates in recent years has been tax cuts and their effect on the economy.  For example, as the Health Care Reform debate rages, we have several clues as to how this will be paid for i.e. by increased taxes for the "rich".  While the definition of a rich person continues to slide up and down the scale, it is clear that politicians see the “rich” as a endless source of cash.  And maybe at the Warren Buffett end of the scale that might make sense.  But, let’s take a look at some real data.  Kurt Hauser is a San Francisco investment economist who, 15 years ago, published fresh and eye-opening data about the federal tax system.  In a recent Wall Street Journal article his data was brought up to date.

 




The conclusion here is very simple.  The federal tax "yield" (revenues divided by GDP) has remained close to 19.5%, even as the top tax bracket has varied from 91% to the present 35%.  As Mr. Hauser said: "Raising taxes encourages taxpayers to shift, hide and underreport income. . . . Higher taxes reduce the incentives to work, produce, invest and save, thereby dampening overall economic activity and job creation."  Thus, if you want more tax revenues - then you have to increase GDP - there are no short cuts.  Of course, increasing GDP is not as user-friendly for the government…after all, that’s more the domain of the entrepreneur.  Other studies show the exact same effect in individual states.  With globalization and increasingly tolerant tax regimes in other countries, this is a very important concept for government to grasp.  And don't hold your breath.  But it certainly adds some extra dimension to discussions of the deficit problem.

As you can see, having real data presented in ways that reveal trends can often upset deep seated convictions.  In a business this is critically important.  B2B CFO® partners can help the business owner make sure they have information, feedback, and a “tape that does not lie” to strengthen their company.    

To vote for more profitability and increased company value, check the box for David Kirkup, with the B2B CFO party, at 404 348 0326 or dkirkup@b2bcfo.com .

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