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View Diary: The Double Taxation of Labor (11 comments)

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  •  no, i don't think it works that way (1+ / 0-)
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    Neuroptimalian

    if you cut his taxes, he'd have more takehome pay.

    If you cut her taxes, she has more takehome pay, but he doesn't get anymore takehome pay. It doesn't change what he charges her.

    •  Actually it does (0+ / 0-)

      To make our calculation easier, let us assume that our PA is indifferent between working on her deck and going to the office, and that she is just as efficient at deck painting as the painter.

      Say she makes $50/hour. With a 30% tax rate, she comes out ahead in this scenario if the painter charges less than $35/hour for his labor. If the painter charges any more, then it pays for her to take time off and do it herself.

      If we jack up her tax rate, the painter has to charge less or lose her business.

      This taxation of labor falls harder on someone like a painter than a PA. Do it yourself house painting is far more viable than do it yourself medicine. Doctors and lawyers have customers with inelastic demand, so taxes on the professional-client transaction fall mostly on the client.

      •  your assumptions (0+ / 0-)

        will rarely be true so i don't think you can generalize from them.

      •  You forgot to include the taxation of the income (0+ / 0-)

        the PA's employer paid (if any) on the funds it used to pay the PA, the taxation of the person/entity above them in this pyramid, etc., etc., etc., all the way back in time, not to mention the taxation going forward vis-a-vis those whom the painter pays with the income he receives from the PA.

        "Two things are infinite: the universe and human stupidity, and I am not sure about the universe." -- Albert Einstein

        by Neuroptimalian on Fri Mar 07, 2014 at 01:05:26 PM PST

        [ Parent ]

        •  Yep (0+ / 0-)

          Is it any wonder why our economy does everything to minimize the amount of labor? Wherever possible, craftsmanship has been squeezed out of the economy. Where it remains, we see huge price surges compared to the rest of the economy (medicine, college education).

          If you want to bring back good jobs, it might be time to put more of the tax burden on land ownership and natural resource use (as in a carbon tax).

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