At what percentage of taxation, will people's behavior change?
That is, will a business management change its behavior to avoid taxes, if the rate is 5, 10, 50, or 80 percent?
At what level of the taxation of productive investment does the behavior of investors change?
At what point will investors stop investing in anything except tax free government debt?
Well, if the natural rate of taxation is 0%, then any percentage increase from that will change behavior.
So... Taxes, by definition, change behavior.
I think a more important question is *how* are behaviors changed by taxation.
For example, right now the capital gains tax is substantially lower than the top income tax bracket, which encourages people to invest in the stock market. Once upon a time, this may have been a good thing, but with all the shenanigans going on right now on Wall Street, it contributes to economic instability and boom-bust cycles instead.
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