More Tax Theory

I heard echos from the ether about why Taxes cannot incite Recessions, unless and until they are higher than Resource/Utilities Costs. One must first be skilled in Double-Entry Accounting procedures to get the basic understanding of the Issue. Government Spending is the expenditure of Resources and Labor from the general pool of economic assets granted to the national economy. All of this Expenditure must be paid for by the greater Economy, as assets must be redirected from the Private Sector to the Public Sector. Government labor forces must also be maintained over the same Interval, without raising the inherent Costs of Labor in the Private Sector (Judge Posner presents an excellent Case for Judges holding down overall Compensation for lawyers–why don’t I feel sorry for them)

Back to the original Argument: Resources, Utilities, and Skills used by Government cannot be used by the Private Sector to increase economic performance; while at the same time, no pressure can be placed upon Wages, without Business Profit margins being unduly impacted. Increased Production Costs without increased Wages, leads to overall Price increases; allowing for simultaneous maintenance of Business Profit margins. Taxes of limited impact can be beneficial to the Economy by paying for Government Expenditures (remember that they exceed 20% of the economy) which would otherwise be covered by increased Debt. Actual Business taxes could be much higher than at present; but also, Government Expenditures could be much less in terms of actual resource consumption (fact: Welfare payments are good for Business, as they increase Consumer consumption without consuming Resources, except through the medium of Business purchases generating Business Profits).

Business and Labor must pay for Government Expenditures in the Private Sector Production, if they are to be paid instead of Debt accumulation (again, Debt Service effectively triples the actual Cost to Taxpayers, with Interest and the heightened Resource Pricing). Labor basically pay all social welfare payments, and increased taxation of Business above payment of Government consumption of Resources places pressure for Wage increases; making Business Profit margins unstable. Labor need understand that Government Expenditures raises Consumer Pricing above normal at a predictable rate, Labor facing a sticky Wage Schedule. Business should understand that trying to shove further taxation off on Consumers will destabilize Wage Schedules, and over the long-term, adversely affect their Profit margins. Government should understand deficit Spending is Inflationary, and any Spending above 14% of GDP simply curtails long-term economic performance (except social welfare payments paid for by Labor; do not spend Social Security funds for Government consumption purposes). lgl