Raising taxes will impair capitalism

Richard Healy, Las Vegas

Saturday, Aug. 15, 2009 | 2:03 a.m.

I studied economics for seven years in college. And I taught economics courses for 20 years. Every economics textbook that was thrust on me was largely oriented to socialism by way of the macroeconomic section. Each year, new textbooks would be given to me for review, usually having some new approach to government manipulation of the economy.

But the microeconomics sections of the texts remained relatively unchanged. They all covered the basic laws of supply and demand. If prices rise, producers will tend to increase production (including possible new products), and consumers will tend to consume less, tending to lead toward a new equilibrium price. If costs rise, producers will tend to produce less (including producers getting out of the business).

It should be obvious that raising income taxes only on those earning $250,000 or more, as President Barack Obama has suggested (or even $150,000, if that gets passed) will cause some producers to drastically change what they do, raise prices, produce less (or just quit), and potential new producers (foreign and domestic) to change their minds.

Therefore, I propose a completely different solution. All persons and businesses earning more than $250,000 (or $150,000) should be exempt from all taxes.

Just imagine the incentive for current businesses to expand, for new businesses to appear, for new foreign investment, for expansion of new and improved products, for lower prices and for the creation of jobs.

And imagine the increase in tax revenue from new workers hired by new and existing producers and by retail businesses.

Now imagine what the result will be from raising taxes on the producers of the goods we want and buy.

And keep your fingers crossed.