This was originally published at Porcupine Musings.
Bill O’Reilly is disingenuous when he says high taxes might compel him to quit his lucrative job. Although there is a level where taxes can have that effect (why engage in challenging work if taxes limit your income to that of someone flipping burgers), we are nowhere near it. However, taxes and regulation do result in a net decline in businesses and jobs albeit by a different mechanism than “quitting”. The mechanism is attrition. Businesses fail due to normal changing market demands, bad luck, poor leadership or other reasons. New businesses take their place, however as taxes and regulations increase, the rate of business replacement declines. Why? Some business ideas are high risk and some are low risk and both types may have a high or low reward. A graphical metaphor works best here.