Tuesday, December 28, 2010
My feeble brain is tired as we prepare to close out the year, and I need your help with two issues from the lame duck Congress.
First, Congress recently extended the Bush tax cuts for everyone including the highest earning Americans on the grounds that many of these "wealthy" Americans are small business owners who will react to higher taxes by not hiring and expanding their businesses. But, wouldn't higher taxes likely have the opposite effect on small businesses? I am not advocating higher taxes for anyone, but I am puzzled by this rationale. With higher taxes the small business person has two options - give more of their earnings to the government or invest in the small business by hiring and expanding. The third possibility - taking that money home is not an option with higher taxes. Am I wrong in my analysis?
Second, the estate tax. Doesn't the existence of an estate tax provide incentive to wealthy people to dispose of their assets in their life times? And, might this be a good thing? Again, I am not arguing for an estate tax, but I would like to hear arguments about why it is a bad idea?
Thank you in advance for your thoughts.