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7 Reasons Why Raising Taxes Will Not Help The Economic Recovery

By: Steve Johnson

7/24/2009 - 23 Comments

Obama and congress want to increase the taxes on the rich to pay for healthcare reform and several others new government programs.

Increasing taxes on the poor or the middle class or the rich is not a good idea at this time.  The debate about raising taxes is heating up as several states including California, have tried to resist the temptation because of the negative effects on the economy.

Taxing the rich is not the answer and here is why;

Reduced Investments

The rich will not invest in new US businesses and instead will move their money to foreign markets. That will cause fewer jobs to be created.

Delay Income

The rich will wait for taxes to go down before claiming their income by delaying the sale of their assets.  This is cause less taxes to be raised and reduce the liquidity of money as money is tied up for longer periods of time.

Political Turnover

The rich will get more involved in politics and gain more influence to change monetary policies to protect their wealth.

Money Will Disappear

The rich will consider leaving the country or using foreign assets to protect their money from higher taxes.  More money will begin leaving the country to end up in foreign banks.

Small Business Owners Will Stall

The rich that personally own small businesses will have no encouragement to grow, resulting in less hiring and perhaps more layoffs.

Lending To Slow

The rich will reduce their lending because they have no incentive to grow their business, causing banks to lose more money and further deepening the recession.

Buy Up Commodities

The rich will buy up commodities instead of growing their businesses, which will increase the cost of raw material, adding to the increase in prices and driving up inflation.

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