Ryan's $34 Trillion Tax Folly - David Cay Johnston

[Donnachaidh]

http://www.commondreams.org/view/2011/05/14-9

If repairing your car cost 18 percent of your income, would you buy a new car? Of course you would.

Now imagine that your mechanic tried to persuade you to keep the jalopy with a clever tax argument: The costs of your annual car tax and registration would decline over time, saving you money. Keep the car long enough and you would save a third of a year's income just in taxes.

That sounds appealing, unless you stop to think about how much more you would pay for repairs as your vehicle ages and breaks down ever more often.

Now imagine that your mechanic's savings estimate relied on data that could be analyzed to determine how much of your tax savings would be offset by higher repair costs, but he did not give you those figures. So you do the analysis and find out that for every dollar of tax you save, you would spend $5 to $8 on repairs.

More at the link --

[louis-t]

1. It's called the "law of diminishing returns".

My father taught me about it while I was still a teenager.