I was resently on a message board and someone didn’t understand what raising taxes would mean. So I try to explain:

What about taxes do you not understand? Businesses, and this is really true with small businesses, view taxes as an expense. To off-set a raising expense, they have to do one of two things: Raise the cost of their goods or services and/or cut other expenses.

Raising the price of products/services is pretty straight forward and is the likely result of tax increase. We all lose when that happens.

In a cash flow statement, expenses are divided into operating (salary for employees, bills, and taxes), investing (equipment and supplies), and financing (interest expenses for loans and bonds).

Unlike the federal government, a business can’t go into infinite debt. In the real world of small businesses, the federal government is not going to bail you out if you can’t pay your expenses. If a small business taxes are raised, then they will have to cut buying new equipment and/or cut employee benefits (because the rest can’t really be cut).

Sure, you can delude yourself into thinking taxing people making $250K or more is good idea. We will see.

Then he response was:

Your theory has been applied for a long time without ever proving it’s better than Keynesianist economy. It has proven recently it’s worse, though.

We won’t see. It’s already seen.

“That corruption works?” I wanted to say in retort, but you can’t aruge with stupid. You just can’t…