Sunday, October 30, 2016

Common Sense Economics III

Primarily households use labor to accumulate money for goods and services they want. If the government raises taxes, the household must adjust to the lesser income. If government gives you a subsidy, it usually means you have more income to spend on things that are not subsidized. Taxes and subsidies are the basic way government decides what should be valuable to you. Get that. Not what you think is valuable, but what government wants you to have. If government gives you free electricity, you get rid of the gas stove and buy an electric stove. You also realize there is no incentive to save electricity so you buy more products that use way more electricity than you need. You may even have neighbors that think bigger than you and become electricity hogs.

Someone is going to have to pay for the necessary electricity and the excess electricity. Since the government pays the bill for the excess electricity, they need more money. The only way they can get your money is through taxes, so they raise your taxes. Now you have less money to spend on things you need. You are also in debt for the extra electric devices you bought because of free electricity. Free sounded great when they gave it to you, but now you are paying for it. You are also paying extra tax money to subsidize the electricity hogs.

You complain to your government contact that you are paying more of your fair share of taxes to subsidize your neighbor’s electricity usage. The government thinks you are right and hires a few bureaucrats to monitor individual household electrical usage. One day you wake up for a good night’s sleep and realize you were taken advantage of by the government again, because they thought they knew what you needed better than you did. Even worse than that, your tax money is now paying the exorbitant salaries for these people to make decisions that take advantage of you.

Everyone understands these concepts and ideas. Nothing is free. If your government wants you to have less of something they tax it. If the government wants you to have more of something they subsidize it. Either way the government is involved it requires more government bureaucrats, so not only do you pay for subsidies you pay more money for a bigger government you would not have needed if they would have stayed out of your household’s business. Anytime government is involved the cost goes up. It is a fact of life.

If we need more jobs, the best opportunity to get more jobs is to have more employers. When you raise taxes on employers do you get more jobs or fewer jobs? Remember the basic tenet. If you want less of something, you tax it. Raising taxes on employers reduces the number of employers.

Let us raise taxes on employers anyway and make up the job losses by funding government projects. Of course, government is going to have to raise your taxes to pay for the additional government services and even more taxes for the bureaucrats to monitor the additional workers providing the new services. As soon as government gets involved, the price goes up. There is never a time this does not happen. It is worth repeating. Anytime the government is involved, the price goes up. Government is almost never the best answer economically.

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