Fools at the helm? Taxing downloads - Page 1
Forum section: electronics / general

author: VK3DRB
author_rank: Super Contributor
timestamp: May 11, 2015, 07:52:17 am
content: Our Australian government plans to tax digital downloads. Where does it end... music, video, Eagle PCB design software etc. How on earth do they think they are going to police it? Can I buy a "digital download" off eBay to avoid this tax? Why only target 30 companies? What about the thousands of other companies and individuals that sell "digital downloads"? How are they going to police a copy of CodeVision AVR that I can buy from Romania?http://www.theage.com.au/business/federal-budget/joe-hockey-unveils-gst-on-digital-downloads-and-crackdown-on-big-companies-avoiding-tax-20150511-ggyv3w.htmlIt sounds like politicians messing around with stuff they know nothing about, like technology.Anyone else feel this brainchild of our politicians is doomed to fail?

author: Jeroen3
author_rank: Super Contributor
timestamp: May 11, 2015, 08:10:44 am
content: There are no customs on the internet.So if you buy something with digital delivery abroad (pay euro's in your case), you do not pay any local tax.I can imagine this is something they want to discourage. But you cannot manage it at the end user level without great firewall (of China). Leaving only the option to apply pressure on companies to sell through local offices or local distributors. (that's why there are 30 companies selected right now)Let's hope this does not blow over the pond.

author: matseng
author_rank: Frequent Contributor
timestamp: May 11, 2015, 08:27:53 am
content: Quote from: Jeroen3 on May 11, 2015, 08:10:44 amSay what? No taxes and customs on internet? You must be joking or be severely misinformed. Excerpt fromhttp://en.wikipedia.org/wiki/Taxation_of_digital_goodsSelling e-services within the EUIf a business is located within an EU member state and supplies e-services to an individual who is not VAT registered in another EU member state then VAT rules of the state where the business is located apply. If the business supplies e-services to a VAT-registered individual in another state then the business is not obliged to pay VAT in its state and thus the individual must pay VAT in its state. If the business supplies e-services to a VAT-registered individual yet the individual receives the e-services in a state where neither the business nor the individual has their establishment then the business is obliged to register for VAT in the state where the e-services are delivered to. The 2015 EU VAT legislation requires two non-conflicting pieces of evidence to be produced so as to determine what VAT rate should be applied to these digital goods sales.

author: AndreasF
author_rank: Frequent Contributor
timestamp: May 11, 2015, 09:17:04 am
content: I assume "digital download" is a bit of a misnomer. I assume what is meant arepaidproducts and services that are delivered via electronic means. Many of those are currently flying under the tax radar and I don't necessarily have a problem with them being taxed, as long as it's done fairly (whatever that means) and simple. I'm already paying VAT on my Kindle ebooks from Amazon (and other things I'm sure), so this isn't completely new.The border free nature of the internet makes policing this a bit tricky, but AFAIK there are already plans to solve this. The new EU rules that matseng posted are one example (see e.g."digital single market"). Currently that's still a huge mess, but they do seem to be working on it.

author: Jeroen3
author_rank: Super Contributor
timestamp: May 11, 2015, 10:50:31 am
content: You are right.Quote from: matseng on May 11, 2015, 08:27:53 amI've highlighted the issues. Please suggest how those should be enforced.With physical items they can intercept the package. With digital products, this is a whole lot more difficult. That is why I said that there are no customs on the internet.

author: EEVblog
author_rank: Unknown
timestamp: May 11, 2015, 10:53:08 am
content: Quote from: VK3DRB on May 11, 2015, 07:52:17 amThey can't.

author: Mechanical Menace
author_rank: Super Contributor
timestamp: May 11, 2015, 10:59:13 am
content: Quote from: AndreasF on May 11, 2015, 09:17:04 amThere's 0% VAT in the UK on books, they aren't classed as a luxury item. I don't understand why ebooks are different...

author: matseng
author_rank: Frequent Contributor
timestamp: May 11, 2015, 11:18:05 am
content: Quote from: Jeroen3 on May 11, 2015, 10:50:31 amWell, there are no "customs" inside a country either - still you have to/should pay taxes for goods and services domestically, but if the seller is dishonest the tax can be avoided.Same thing with cross border purchases over internet, no real "customs" there either, but you (or the seller) have to pay taxes anyways. But with dishonest people the taxes will be avoided here as well.So in reality you are right when it comes to dishonest people, but for the bigger players that actually follow the law they report and pay the taxes for digital goods wherever applicable.

author: VK3DRB
author_rank: Super Contributor
timestamp: May 11, 2015, 12:54:15 pm
content: Apparently Australia will be the first country in the world to try this tax, and other governments will be looking on its outcome with keen interest.This is what I think might happen:1. People will see a way around it, either legally or illegally. The government will lose, and like the mining tax, be turned into a laughing stock.2. In this country, we pay a premium on software and music by price gouging by companies like Apple and Microsoft. The tax will just make piracy more attractive.3. The cost of enforcing it will be excessive, both in dollar terms and politically. Our government's CB radio licensing scheme in the late 70's and early 80's was canned only because the knew they were not profiting from the scheme. This may well happen with their tax on software.4. The system will leak like a sieve, allowing plenty of creative tax dodging opportunities to spring up. Third party providers in zero software tax countries will act as intermediaries.5. Software will be offered on line through eBay, and the vendor won't have to pay the tax. They buy the legal software, music or video, and resell it - tax free.6. Very few, in any, politicians would have even heard of proxy servers, let alone know what they do. Proxy servers are used by 200,000 Aussies already to get the US Netflix rather than the second-class offerings from Australia. Smart people will just use proxies more to dodgy the tax. Maybe even proxy bank accounts.7. The government might try to circumvent people avoiding the tax by hacking into bank accounts or getting transaction details on software from transaction houses like eBay. If you think this is crazy, consider this...http://www.smh.com.au/national/canberra-reaps-360m-from-inactive-bank-accounts-20140609-39t8p.html. It is true. The government can steal money from your bank account and leave you to fight to get it back.What the government should be doing to forgetting the end-user's tax on software, but instead forcing bad corporate citizens like like Microsoft, Apple and Google to pay their fair share of COMPANY TAX, rather than openly ripping us all off by funnelling money through Ireland, Singapore or Bermuda. The tax on "digital downloads" will be only 10%, but they will reap a lot more by forcing these these rogue companies to pay their 30% company tax rate like every other law abiding and decent company does.

author: EEVblog
author_rank: Unknown
timestamp: May 11, 2015, 02:02:32 pm
content: Quote from: VK3DRB on May 11, 2015, 12:54:15 pmWhile they are at it, get churches to pay their tax just like every other profit making business. $30BN a year on offer right there.

author: VK3DRB
author_rank: Super Contributor
timestamp: May 11, 2015, 11:25:34 pm
content: Quote from: EEVblog on May 11, 2015, 02:02:32 pm$30BN is questionable.If the churches handed over the huge amount of good social services they perform (eg: foodbank, counseling, charity, overseas aid etc) back to their governments, taxes for all will go up rather significantly. Governments need churches.Churches should not be profit making businesses. Most corner churches struggle to balance their books and don't own massive amounts of priceless real estate, so the tax they would have to pay would be negligible. Furthermore, the salaries of clergy and administration people is fully taxed like the rest of us.

author: iampoor
author_rank: Frequent Contributor
timestamp: May 12, 2015, 01:06:17 am
content: Quote from: VK3DRB on May 11, 2015, 11:25:34 pmMaybe they should tax the mega-churches that offer "wealth and prosperity" if the followers "plant a seed" (Give 100-1000$)

author: Someone
author_rank: Super Contributor
timestamp: May 12, 2015, 01:32:58 am
content: Quote from: EEVblog on May 11, 2015, 10:53:08 amYears ago it was still cheaper to buy it locally in AUD + GST, but the international exchange rates have been rather unstable recently.

author: Someone
author_rank: Super Contributor
timestamp: May 12, 2015, 01:38:00 am
content: Quote from: VK3DRB on May 11, 2015, 11:25:34 pmBut then we won't get cheap industrial furniture:http://www.bacsystems.com.auWho are very upfront about their work:http://www.bacaustralia.com.auTheir sales people sure are friendly.Or the easy target:http://en.wikipedia.org/wiki/Sanitarium_Health_and_Wellbeing_Company

author: VK3DRB
author_rank: Super Contributor
timestamp: May 12, 2015, 01:17:40 pm
content: Quote from: iampoor on May 12, 2015, 01:06:17 amSome mega-churches are very dodgy. In the US, many of the big name televangelists or faith healers who preach the prosperity religion behind them are modern day charlatans, gouging money out of poor people to feed their lavish lifestyles. If churches won't disclose their auditable finances to members, it is a cause for alarm. Simply put: Disclosing finances publicly should be a requirement to classed as tax exempt by the government.However the vast majority of church ministers are good, faithful and honest people. They work long hours on effectively a low hourly rate and pay their taxes like anyone else. Most parishioners work hard too for the communities they serve, without financial reward or recognition. Many of the churches are struggling financially for one reason or another. It would be unjust to tax churches in general and on the whole, society would suffer for it. Another point is that if churches were taxed, then those placing money as donations in the offering plate could claim the money as tax deductions and the net benefit to the government could be negligible and it would be an administrative nightmare.Even the Roman Catholic Church should not be taxed. Instead, governments around the world should fine the Church some serious money and give that money to the victims and their families whose lives have been destroyed by the paedophiles, rapists and those who conspired to cover it up. If the Church has to sell just a small percentage of their real estate, funding would be plentiful. But it is quite unfair that the offering plate is used to pay compensation, because the parishioners and most of the clergy are clearly not to blame and are decent people.Back on the subject... tonight the government announced the "digital download tax"in the Australian Budget. It won't work! They are fools to believe it will.

author: Mechanical Menace
author_rank: Super Contributor
timestamp: May 12, 2015, 01:44:25 pm
content: Quote from: VK3DRB on May 12, 2015, 01:17:40 pmFaithful is irrelevant and unquantifiable. The only "evidence" you have of someone's faithfulness is self reporting. I do agree with the rest of that sentence though.QuoteI disagree, the only impact the churches, mosques, synagogues, gurdwarras, and temples etc... have on society is weekly entertainment for an ever dwindling handful of people. Most of the charity work that goes on from the churches etc... isn't done by the church but by independent charitiesrentingthe space, me and my group stopped using them when we realised they were making out it was their programme to get more "*donations." Other parts of the entertainment industry pay tax and do charity work, why can't religions?*Actually, could religious collecting of tithes and donations be counted as the original Kickstarter?

author: Tandy
author_rank: Frequent Contributor
timestamp: May 12, 2015, 02:25:31 pm
content: It is a bit of a crazy idea, here in the UK we all used to order CDs an DVDs from Jersey because there was no VAT on them and yet the postal service from Jersey cost the same as domestic post.Exactly the same thing will happen, people will order their software using a US server or some other country where there is no sales tax. Also how long before the software is given away free and you pay for a 1 year support agreement. Clearly there is no digital download being sold so therefore no tax. It has taken me 30 seconds to work out how to avoid such a tax, surely the accountants whose job it is to reduce tax liabilities will find other ways.Regarding religious institutions and tax, personally I don't mind churches getting tax breaks if they can show that they are legitimately providing services such as schooling and heath care to the wider community without prejudice. As long as the same tax breaks are available to non-religious institutions providing the same services. What I object to is the automatic nature of such tax benefits. It does not necessarily follow that a church or other religious institution offers any services. For example a church that just holds services for their members and goes out trying to attract more members only benefits its own members, not the community at large. Some would also argue that recruiting people to a religion is a disservice to the community.So I would propose that the automatic benefits to religious institutions should stop. Instead they should have to apply for charitable status based on the same criteria as all other charities.

author: rsjsouza
author_rank: Super Contributor
timestamp: May 12, 2015, 02:45:38 pm
content: Interesting. Brazil solved this by using the shotgun approach: tax every credit card foreign transaction and foreign currency purchases. Not much can be done to workaround this for internet purchases, unless you have a foreign bank account and use paypal...For purchasing of foreign currency there is a solution: use a "doleiro" - a broker that crosses borders with undeclared foreign currency on their underwear...

author: matseng
author_rank: Frequent Contributor
timestamp: May 13, 2015, 02:35:25 am
content: Quote from: Tandy on May 12, 2015, 02:25:31 pmWhy do you think that a support agreement wouldn't be subject to taxes? Many, if not most, countries have GST or something equivalent. The S in GST stands for Services and a support agreement is really nothing more than a prepaid service.

author: HackedFridgeMagnet
author_rank: Super Contributor
timestamp: May 13, 2015, 03:07:59 am
content: We may have fools at the helm, but at least the people now know what metadata is.Via this informative graphic.source:http://www.budget.gov.au/2015-16/content/overview/html/overview-19.htm

author: ivan747
author_rank: Super Contributor
timestamp: May 13, 2015, 03:36:28 am
content: Quote from: HackedFridgeMagnet on May 13, 2015, 03:07:59 amI didn't quite get that.

author: VK3DRB
author_rank: Super Contributor
timestamp: May 13, 2015, 04:08:37 am
content: Quote from: ivan747 on May 13, 2015, 03:36:28 amSimple. The Australian government has also passed legislation to force ISPs to collect and save metadata for the internet activity on each of its citizens who use the internet. George Orwell was right.

author: HackedFridgeMagnet
author_rank: Super Contributor
timestamp: May 13, 2015, 06:03:57 am
content: QuoteSorry, I was being sarcastic.Our politicians (and graphic artists) don't really understand what metadata is.Yet they are creating legislation for it and funding its collection.This money is for our inept secret services who are probably going to use use the money and legislation to collect any data they want.

author: VK3DRB
author_rank: Super Contributor
timestamp: May 13, 2015, 02:27:02 pm
content: Quote from: HackedFridgeMagnet on May 13, 2015, 06:03:57 amMate, most politicians have less knowledge about technology that a 10 year old. Tony Abboty even boasted he does not know how to use a laptop. Like Helen Coonan, he would have little idea what he is talking about when it comes to technology.What was missing from the budget? Not even a mention of axing negative gearing, banning foreigners from buying our houses, and increasing capital gains tax on housing investors; thereby popping the bubble and allowing young first home buyers to get a roof over their heads. Politicians and senior public servants dare not touch this ponzi scheme they created because they are into it up to their necks, lining their own pockets. I don't believe any decent Aussie wants foreigners buying our houses, except for those so-called Australians with vested interests.If a frist home buyer is a bloke on $50K per annum, with a wife at home raising three kids, there is no way they will ever be able to afford a home in Melbourne or Sydney. They will most likely caught in the rent trap for their entire lives.

author: CatalinaWOW
author_rank: Super Contributor
timestamp: May 13, 2015, 05:11:49 pm
content: The power to tax is the power to destroy. Much of the discussion here is a veiled preference to destroy churches instead of something that is important to the poster.The more fundamental questions are:1. Are there government services that benefit buyers of software and sellers of software? Such things might include a legal system to redress wrongs, funding of R&D that might have contributed to the software and so on.2. Are buyers and sellers of software paying their fair share for such services, or are they expecting some other segment of society to carry the load.3. If there are any services provided by the government, are they being provided efficiently, or is the benefit not proportional to the cost.I suspect that the answer to 1 is a yes, and if no taxes are currently collected the answer to 2 is no. It is a long and difficult quest to get good answers for these three questions. The answers are never perfect, and that leads to a fourth question. How much toil, blood and fortune are you willing to spend to improve the situation?

author: Leiothrix
author_rank: Regular Contributor
timestamp: May 13, 2015, 10:29:20 pm
content: I don't understand what people's problem is with this.They're wanting to tax businesses that have a presence in Australia and do business in Australia.The online part is irrelevant.The hate against negative gearing is also kinda silly. Most countries have negative gearing, they just don't have a special word for it.Getting rid of it won't change house prices, because people will still "positive gear".

author: VK3DRB
author_rank: Super Contributor
timestamp: May 13, 2015, 11:10:42 pm
content: Quote from: Leiothrix on May 13, 2015, 10:29:20 pmIf there is no effect on the market by getting rid of negative gearing, why don't they get rid of it then? More than half housing purchases are made by investors who use it to avoid paying income tax and for profiteering.

author: Leiothrix
author_rank: Regular Contributor
timestamp: May 13, 2015, 11:28:29 pm
content: Quote from: VK3DRB on May 13, 2015, 11:10:42 pmWhat makes property so different that it should be treated differently to any other asset class?All it is is offsetting your losses against your gains. In the case of property it is interest and operating expenses versus rental income.What's the difference between residential property, commercial property, shares, bonds, or a business?Remember if you're "negative gearing" you're losing money. The ATO is just being nice in not taxing you on your loss.

author: iampoor
author_rank: Frequent Contributor
timestamp: May 13, 2015, 11:45:58 pm
content: Quote from: VK3DRB on May 12, 2015, 01:17:40 pmI totally agree. I have served in many smaller churches and found exactly what you said to be the case. Its unfortunate that some very big organizations have spoiled the reputation of so many smaller churches in many peoples eyes!

author: Delta
author_rank: Super Contributor
timestamp: May 14, 2015, 12:45:08 am
content: Quote from: iampoor on May 13, 2015, 11:45:58 pmI can't think of a single religious organisation that has a good reputation...

author: iampoor
author_rank: Frequent Contributor
timestamp: May 14, 2015, 12:50:10 am
content: Quote from: Delta on May 14, 2015, 12:45:08 amI think a lot of that depends on how involved you are. I have had the opportunity to be "on the inside" of some smaller groups, and they were outstanding.On a global level, yeah, I think engineering types don't really care of what they know about most.

author: VK3DRB
author_rank: Super Contributor
timestamp: May 14, 2015, 01:51:16 pm
content: Quote from: Leiothrix on May 13, 2015, 11:28:29 pmYou seem to miss the point. Why do we demonise football ticket scalpers and yet admire greedy house scalpers? The difference is football is a want, but having a roof over your head is a need. In both cases the scalpers are exploiting consumers due to limited supply and strong demand.Consider this:Young man studies to become an electronic engineer.4 years income plus a $50K loan for study.Car and incidentals loan $30K.Has to save for a deposit and borrow $700K for a meagre home reasonably near work.Has to pay $30K stamp duty.Gets married, wife gets pregnant. 3 kids.He earns $70K per annum - and hopes like hell he doesn't get retrenched.So he has debts of over $800K. Interest rate is 5%. That is $40K in annual interest AFTER tax. He cannot service the principle on the loan. No bank will lend him the money for the house because he simply cannot afford it. But if he did get a loan, his wife is forced to work to make ends meet. Kids suffer as a result. If interest rates rise and house prices plummet, he and his family will be out on the streets or even declared bankrupt. Now imagine if he were a clerk on $35K per annum... he cannot even afford to have kids let alone ever hope to buy a home.So there is a BIG difference between the asset classes you mention and getting a roof over your head.

author: Leiothrix
author_rank: Regular Contributor
timestamp: May 14, 2015, 10:25:43 pm
content: If you want property near the middle of a city, it will be expensive. Both to buy or to rent.I'm really not sure what you're suggesting. Your example is of someone who has no concept of living within their means, nor realistic expectations of what they can afford, nor a sense of personal responsibility for their own situation.Perhaps you're suggesting we should just give people houses?And why shouldn't the wife be working? This isn't the '50s.

author: Ecklar
author_rank: Regular Contributor
timestamp: May 15, 2015, 01:29:42 am
content: Quote from: VK3DRB on May 11, 2015, 12:54:15 pmYou might laugh at first, but, if they are intent on taxing downloads they will get better at collecting, better at enforcing and ultimately better at punishing anyone who thinks they can circumvent authority. There is no government in history that has ever taxed a society to wealth. But there are countless examples of societies that have been competitively hobbled or destroyed by his bloat.

author: VK3DRB
author_rank: Super Contributor
timestamp: May 15, 2015, 11:11:49 am
content: Quote from: Leiothrix on May 14, 2015, 10:25:43 pmTry middle to out suburbia here. Go towww.realestate.com.auand check it out for yourself. Just pick a suburb. Even in poorer outer suburbs far far away from employment you are looking at $500K for a basic house, and $400K for a flat. Then you have to fight traffic for 3 or more hours per day. A better idea would be to close the immigration doors, cancel negative gearing and ban foreigners (ie: those who don't live here but a hiding money) buying our homes.Quote from: Leiothrix on May 14, 2015, 10:25:43 pmOK, he could go without the education, the wife and kids, or the car or the house and live on the streets as a homeless person.Quote from: Leiothrix on May 14, 2015, 10:25:43 pmToo bad it isn't the 50's and 60's. People were a lot happier, less stressed, less greedy and there were no foreigners to contend with. Jobs for everyone. And a single income family could survive quite well. As loyal servants to the god of stuff, we have brought this mess of having to have dual incomes just to survive on ourselves.

author: Leiothrix
author_rank: Regular Contributor
timestamp: May 15, 2015, 12:19:49 pm
content: Quote from: VK3DRB on May 15, 2015, 11:11:49 amMember of One Nation? How many immigrants do we get a year, and how much is their average salary? How much of that actually affects housing prices? And in which direction? Think a bit instead of just watching ACA.Housing prices in the city are expensive because they are desirable and they are set at what the market will bear. Same as the suburbs, same as rural towns. An inner city apartment isn't going to magically be "affordable" just because you remove a tax incentive. Or immigrants.Quote from: VK3DRB on May 15, 2015, 11:11:49 amThat's a whole optometrist shop's worth of rose coloured glasses right there, and in no way in touch with reality at all. We've got it better now than anyone else in any point in history. People were always greedy, it's just human nature.And really? Are you saying women shouldn't be allowed to work? The reason houses cost two people's worth of wages is because on average, when buying a house you have two people's worth of wages. To bring the prices down, you need to bring down the money available. Which, in context, means kicking women back out of the workforce.

author: VK3DRB
author_rank: Super Contributor
timestamp: May 16, 2015, 01:03:40 am
content: Quote from: Leiothrix on May 15, 2015, 12:19:49 pm190,000 per annum, the highest number on record and growing. The government shares Rudd's "Big Australia" dream that the population do not want. I have nothing against most immigrants at all. Foreigners are not immigrants. Foreigners are those who don't live here buy our houses (demolishing them and building new ones) and locking them up to hide their cash. Net effect... less land available. In excess of 64,000 houses and flats are left empty in Melbourne and yet there are not enough rental properties available. Some foreign property developers build illegal dog boxes in the city of Melbourne (living area much smaller than the minimum allowed) but the city council and state government turn a blind eye to it for some strange reason.Remember, the average politician owns 2.5 properties. They don't want to stop the "boom times" rolling and quite frankly, they don't give a rats arse about making housing affordable to young first home buyers, as is evident by them avoiding the topic or skirting around it. Abbott is clear that he supports foreign property investment here. Maybe one solution to this is to make investment home ownership a conflict of interest for politicians in government but they will find a way around it legally. They make the laws and as we know they make them so they don't lose.ACA? I have not viewed any commercial TV for about 30 years. I have never seen ACA. Only ABC TV.Quote from: Leiothrix on May 15, 2015, 12:19:49 pmWe have it better than anyone else? In some cases yes, but not because of the reckless decisions by dodgy politicians. Speak to a commuter who spends 3 to 4 hours a day in a car and see what he says.Salaries of electronics engineers have barely moved in the last 15 years, but in our area prices of houses have quadrulpled. We are a lot worse off for housing affordability now than 15 years ago. And much worse off than we were since 1960 - when there was typically only one income per household.Nothing wrong with women working by the way. They have no other choice.

author: Unknown
author_rank: Unknown
timestamp: May 16, 2015, 01:32:19 am
content: Quote from: VK3DRB on May 16, 2015, 01:03:40 amNo, that's the number of annualplacesallocated in the Migration Planning Programme - not all are filled. The actual number of immigrantsfromin 2012-13 (the most recent official figures available) is 152414, with a net permanant migration (i.e. immigrants - emigrants) of 60653.The highest number of immigrants in recent years? 185099. Guess when that was?(Hint: you can't blame Abbott, Rudd, Gillard, Rudd, Howard, Keating, Hawke, Fraser, Whitlam, or McMahon for it...)

author: zapta
author_rank: Super Contributor
timestamp: May 16, 2015, 02:09:11 am
content: Quote from: Leiothrix on May 15, 2015, 12:19:49 pmIs this an Australian code name for something evil?

author: VK3DRB
author_rank: Super Contributor
timestamp: May 16, 2015, 07:31:31 am
content: Quote from: zapta on May 16, 2015, 02:09:11 amSort of. A defunct political party that was a bit of a joke. The leader, an uneducated fish and chip shop owner said the way to solve economic slumps was to print more money. Simple solution from a simple mind. They were anti-Asian too, which I am not. I'll leave the printing more money arguments to the experts at the US Federal Reserve. One way to solve economic slumps is to tax the filthy rich (including bad corporate citizens like Apple, Google and Microsoft) a lot more and tax the middle classes less. People will then spend a lot more, keeping the employment wheels in motion. It is a bit simplistic though because anyone who does increase taxes for the filthy rich (in the USA), will be thrown out of office.