The size of the Pie Changes

The province of Alberta is headed to an election.  There are multiple parties but really it is a competition between the 2 main parties.  The NDP led by Rachel Notley and the UCP led By Dannielle Smith.  I doubt either woman is the right person for the job but I do know without a shadow of a doubt that Smith will be far less destructive than Notley.  I can say this confidently for 2 reason.  Rachel Notley was already Premier 4 years ago and she was a disaster.  She hired an army of bureaucrats, ran the province in to debt, and cooperated with every stupid thing Prime Minister Trudeau wanted to implement.

The other reason is the Notley is a dyed in the wool communist.  Like all communists Notley believes in government control of everything including people’s lives.  Also, like every other communist in history, Notley has no understanding of economics.

Of course Rachel Notely does not openly admit to being a communists even though many of her party’s candidates do.  Rachel is smart enough to know that being branded a communist will not work in the province of Alberta; the last holdout against communism in Canada.  Notley knows she must get elected first before she can go full on red army communist.  Since she can’t speak openly about the wonderful communism she has in store, her campaign focuses on bribery.  Rachel promises to be everything to everybody.  She is going to increase government spending to make sure everyone gets a piece of the pie.

Notley’s promises are very expensive and when asked how she will pay for it, her solution is to raise business taxes from 8% to 11%.  According to her math that will raise another 2.3 billion dollars.  Not surprisingly real economists don’t agree with the contrived economics of communism.

In reality, higher taxes limit investment and decrease the overall tax base. Instead of a $2.3-billion increase in revenue, Tombe estimates it will be closer to $1 billion

This is the fundamental problem with socialist ideology.  Communists believe the size of the pie does not change.  In their twisted minds the only way for people to get more is to slice the pie differently by confiscating and re-distributing wealth.  But that assumption is economically moronic.  Economists will tell you the size of the pie (the overall size of the economy) does change and is heavily affected by taxation.

Let’s work the numbers back ward.  If 11% is $2.3 billion more than 8% then the taxable income is $76.7 billion.  The only way increasing taxes to 11% nets only $1 billion more is for the taxable income to shrink by 15% to $64.8 Billion.  Increasing taxation gives government a bigger slice of a smaller pie.  This is hardly surprising.  If taking more from business (or individuals for that matter) does not impact the size of the economy why not take 100%?

Of course anyone with a functioning intellect knows if you took 100% the economy would collapse.  No one would build a business or go to work if they could not profit from it.  Unfortunately communists do not have functioning intellects.  If they did, they would have abandoned an ideology that has always produced poverty and mass murder long ago.

Higher taxation shrinks the economy causing higher unemployment.  The extra $1 billion Rachel does confiscate from business will be completely consumed by supporting more unemployed people.  No one will benefit from this except people in government but that really is the point of communism isn’t it?

A better solution is always to reduce taxation.  Ronald Reagan did this and the American economy grew quickly.  Reagan’s critics said the government could not function with less taxation revenue but lowering taxes did not result in less overall revenue.  The government actually collected more taxes at the lower tax rate because of the economic growth.  Reagan increased tax revenue by taking a smaller share of a much larger pie.

Communism does not work because it cannot work.  It always shrinks the economy and retards growth.  Communism makes everyone equal by making everyone equally poor.  This is a lesson I hope Albertans learn in the next 7 days or they will find out the hard way for the next 4 years and beyond.