Discourage Business

• When taxes rise, the citizens and businesses of a country pay more of their income to the government. This can create a disincentive to invest in business, as investors will necessarily receive a smaller return on their investment. Businesses, in turn, may be discouraged from expanding, as the profits they make will be curtailed by a high tax rate. This discouragement can have many dire effects on a country related to the retardation of its economy. According to the Heritage Foundation, a conservative think tank, an increase in taxes can often lead to a loss of jobs, a decline in the country's gross domestic product, and a decline in take-home income for citizens, leading to an overall decline in quality of life.

Penalize Hard Work

• In addition to discouraging investment, high taxes can also stifle the motivation of individual workers. In addition to the macroeconomic problems that high taxes can precipitate, an onerous tax scheme can have the effect of penalizing hard work. As citizens work harder and earn more money, more and more of their income is given to the government. This can appear unfair and lead to a decline in a country's morale, but can also provide a disincentive for productivity. This lack of productivity can lead to a competitive disadvantage for the country, dissuading international businesses from hiring from that country's labor force.