First off, they certainly might and likely do in some cases.
The point of this post is that it's not a straightforward relationship.
Here are two talking points you've probably heard before:
- If you tax something, you'll get less of it.
- Thanks to income taxes, wives/moms have to work outside the home too.
See the problem?
What's going on here is that labor is not like pineapples or jean shorts or other goods. We have to produce enough income to sustain our households and quality of life.
When we choose to work, we are sacrificing our free time, for the sake of earning more. Taxes make it take longer to earn more, which can lead to us sacrificing more of our free time to maintain our standard of living.
Leisure is a Normal Good
In economics, we refer to things as "normal goods" if people tend to consume more of them as they become wealthier (think resort vacations). The inverse are "inferior goods", which people consume less as they get wealthier (think crack cocaine).
If we look at history, people work far fewer hours now than they used to. If we look at lifestyles, the wealthy sure seem to vacation more than we do. Signs point to leisure being a normal good.
As a normal good, we actually expect income taxes to drive people to work more than they would otherwise choose to. The other way of saying that is to say if people were earning more they would opt to work slightly less, which would allow them to have both more leisure time and more money.
That makes income taxes a great scam perpetrated by the ruling class on the rest of us. By working more hours, we generate more taxes and corporate profits for them.
originally posted at