How can an average salaried worker, who works the 9 to 5 day work harder? To begin with, 9 to 5 is a thing of the past. An average salaried employee works much longer hours, specially in a slowing economy when companies are cutting back their hiring, and even laying off people, thereby creating more work for those who are able to keep their jobs? So beyond the 8-10 hours of work on a given day, how can someone get a second job or work harder to earn more money and if someone is that desperate, would they really not work that second job because they would pay more taxes? In my opinion, this argument is made by people earning more money, who want to pay less taxes.
Second, unemployment is already high. People are finding it hard to keep their current jobs, let alone get a second one. Moreover, employers don't take kindly to employees working a second job, which could affect their performance at their primary job.
Am I missing something? This is the most ridiculous notion I've heard - that lowering income taxes will rsult in people getting second jobs or working longer hours.
--Faisal Laljee
2 comments:
Lowering income tax helps this way: You earn money and certain percentage goes to the Government. Now Government will not take that much of your ‘hard earned money’ by imposing lesser taxes. You get to find more of your income in your hand. This will induce you to work more since you are not parting away in the form of taxes and you have more of your income at your disposal.
John
India Investment Banking Jobs
The tax rate had a direct effect on the recognition on income. It has very little bearing on the McDonalds worker working 40 hrs per week. It does have tremendous effect on the millions of self employed. As one gets to a higher tax rate toward the end of the year, it makes more sense to hold off that income until January and place it into a lower tax rate than pay the incremental tax on it. The lower the tax on the next dollar, the lower that incentive. It also has the effect on work. why do a job now if the tax on those dollars is going to be 35% vs 20% two weeks from now (in Jan.)?
Lowering the capital gains tax causes more capital to be put to "work". It lowers the pre tax return needed on invested dollars to justify an expenditure. For instance, if an entrepreneur wants a 20% after tax return for a investment and cap gains are at 40%, he needs 60% pre tax for that. Lower cap gains to 15% and you only need 35%. Far more capital investments return that and because of that, more capital is put to work. The more capital put to work, more jobs are created etc...
For workers on the lower end of the spectrum, it is the after tax paycheck that determines what they earn, not the pre-tax hourly pay. Getting a job vs welfare comes down to that equation. Raise the after tax paycheck by lowering taxes and you increase the incentive to work vs welfare or unemployment. Current unemployment, depending on the state is 60% of the gross amount of pre-unemployment rate. That is the number a out or work worker looks at when looking for a new job. Lowering the taxes increases the after tax pay on that new job to over that 60% level, increasing the incentive to go back to work vs staying on unemployment.
Now, none of these are 100% rules (there are folks on both welfare and unemployment looking for work they cannot find) but the primary reason people give for bypassing a job vs staying on either is that the new job "does not pay as much as unemployment". Decrease taxes and that job pays more.
I recommend Steve Moore's new book "The End of Prosperity"...he goes into detail on it all
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