On this eve of the final due date for taxes, I thought I would post a little blog about the effect of taxes on our productivity and wealth. No, I don’t want to get into the politics of it; but as the mathematician that I am, I did an interesting exercise recently.
I worked out the math for the following scenario: If you take a dollar, and double it every day, how much would you have after 20 days? Now, how about if you tax the same dollar (and its increase)? The math formulas are at a page here at my main site, for your rigorous review. But let me simply hit the numbers: If you double that dollar each day (or year), after twenty days, this is $1,048,000. Tax that same dollar at 30% (and it’s subsequent increase only after doubling) and after twenty days, its value? Would you like to guess? $28,449.
For the most part, we don’t notice this because we are constantly adding to the stream of those dollars, with additional income. But those are the numbers. If that was your last dollar to have work for you, almost the entire substance would be taken up by taxes.
How is this so? Because only substance gets substance. Almost any businessman knows that it’s that last dollar off the top that represents his profit. If he mismanages something only a little bit, the entire profit goes out the window. Conversely, if that last dollar is the first one taken in taxes, it magnifies the inability to grow his resources.
Am I advocating no taxes? No indeed; there are some required needs for such. But the numbers give you an ability to perhaps understand the importance of prudent, only what’s necessary taxation. Take a look at this page if you’re interested in the details.
Happy tax day, everyone.
