Let's start by simply looking at what taxes do. Simply put, they keep our government running. From the water, to the roads, to the salt trucks, taxes keep everything running smoothly and great. Sure, there might be some corruption every now and then, but generally, at least in America, we are getting exactly what we paid for. Taxes are the only reason that we have a functioning government, and they are one of the things that keeps our country strong. Without taxes, we would be a land dominated by monopolies, which, while they can be good, are usually bad to the average person.
No person can argue that taxes are a bad thing; the thing that we argue about is how much is too much. Sure, it is one thing to create a Communist nation, with each giving as they can. That is bullshit, and will not work in real life. On the other end, however, is the perfect capitalism, with dog-eat-dog. Again, that is bullshit, and will quickly result in a Hobbsian anarchy. The middle ground is the taxes, and that is where the argument is. Should we pay for a lot (health care, education, libraries, etc.) or just the needed (government, military, function)? This is where everything falls apart.
Well, I want to make this a very simple argument. If we can show that it is better for the economy (which, we can assume means that it is better for the country) to tax higher or lower, then we can show that that means that it is better to tax or not. We can ignore all other arguments, as they, simply, are of opinion and are not falsifiable.
So, is it better to tax or not to tax?
Now, basic logic would seem to dictate that the less money that you take out of a system (tax) then the more money is in the system to be spent and moved around. Basically, the lower the taxes, the higher the GDP. However, looking at this graph, you notice that the stereotypical lower taxes times (Reagan, Bush, Bush) are actually on average far lower in GDP change then during the high tax times (Carer, Clinton, JFK). Are these graphs wrong, or is common sense wrong?
Here, it seems, common sense is wrong.
Instead, think of it like this. Where does the tax money go, and what is it being taken from?
What is it from - Tax money is taken from profits, either a persons or a companies. When my company makes 100,000$ in profit, they tax it. If I go even, or lose money, it is not taxed. Same with people. Basically, the needs are already in the economy, so we can ignore them.
Where does it go - Tax money goes right back into the economy, guaranteeing an input of the profit made, even if the person wasn't going to spend it already. This guarantees that the economy will get more income then just straight up no taxing.
When you think about it like that, one quickly notices that the economy is actually better off with taxes, provided they are reasonable. As long as taxes allow the needed items, and leaves some for extra (growth), then the economy is much, much better under taxes.
Unless the two Bushes are major outliers, we will see in the next 4-8 years, that a higher taxing, larger spending, and big budgeted country has a higher GDP.
But does this work for Ohio?
Can one really assume that this same pattern will work for Ohio? Well, I suppose that if it works nationally, it should work within each and every location. Sure, various variables have been changed, but the overall concept is the same. However, the problem with Ohio is that it is a much smaller scale, which means that we would not have the same income level as the national scene. This, though, shouldn't make a problem in this equation.
The problem here, however, is the fact that the economies in one state are not tied only to that state. Not only does the national government effect it, but the actions out of state (say by Ford in MI) greatly effect it as well. Unless Ohio were to become isolated, I do not believe that we can use this model to show that taxes help or harm this state.
If you have graphs of Ohio's Tax rates and GDP, please send them to me (get my info in the contacts section). I would love to be able to talk about this sometime.
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